Article written by Jackie Porter
If you have felt discouraged by rising rental and home prices lately, you are not alone. These days, finding a place to live can seem like an impossible goal to achieve—especially if you are going through a divorce. Finalizing your divorce at a time where the cost of living keeps going up can be overwhelming. Everything from groceries to filling up your gas tank is getting more expensive, meanwhile your finances are being cut in half. With all these financial headwinds, how can you save towards your new home after divorce? Keep reading to find out.
Review your budget and check it twice:
In order to know how much money you have to put towards a new home, you need to know what your finances look like. The first step is to write down all your expenses. To do so, review your credit card statements and banks accounts to see your spending over the last 3 to 6 months. Now record all your expenses in a spreadsheet or in a budgeting software.
When creating a budget, it is important for you to know that there are three types of expenses: fixed, future, and fun. Fixed expenses such as rent or mortgage don’t change from month to month. Future expenses include your savings towards your not-so-distant future. Finally, fun expenses are where you have the most control. This category includes non-essential spending such as dining out or going to a concert. Fun expenses can be adjusted based on what you need to put toward your fixed and future expenses.
To help make your budget, review your expenses and see where you can cut back costs in the fun category. This will leave more of your finances to be put towards future saving goals such as a new down payment for a home or first and last month's rent. You will also want to track your spending each month to ensure you are sticking to your spending plan. If you need budget resources, check out the article The Top 5 budget apps for your Post Divorce Financial Goals.
Meet with a Mortgage Broker to Determine your Eligibility for Credit:
With interest rates going up quickly and mortgage rules constantly changing, there has never been a more important time to understand what your options are when it comes to financing a future property. This is especially true after a divorce where you are qualifying for the purchase on your own.
Start by asking yourself what’s your number? Do you know your credit score and your credit ranking? Keep in mind, to qualify for a mortgage you need to have a minimum credit score of 650. Without this minimum score it will be challenging to borrow for just about anything. Also, the higher your score the lower you will pay for mortgage and interest rates making it easier to put a smaller down payment on the home you want to buy.
A mortgage broker can review your credit score and your overall financial position to give you a sense of how much you will be able to borrow for a new home. Doing this exercise as early as possible will give you a realistic picture of what you can afford so you don’t set your heart on a dream home that is out of your reach. You may not end up living in your old neighbourhood, but we are confident you will find a new place to make a home.
Take a Long Hard Look At Your Net Worth Statement:
Before you meet with a broker, it is important that you understand your financial position. What assets will you be taking with you after the divorce is finalized? What debts do you share that will reduce this number? Finally, what assets and debts do you own and owe personally that you will still be carrying after your divorce? Pay close attention to your net worth as it will offer great insight into your overall financial position. Focus on how much debt you are currently carrying and plan to consolidate this debt to the lowest interest rate you can find. This includes balances you are carrying on credit cards. Transfer this debt to the loan or line of credit to the lowest rate you can find to pay off high interest debt sooner and start saving what you will need for your down payment.
Yes, You can use the Homebuyers Program More than Once:
Most people aren’t aware that they can dip into their RRSPs for a second time if they are looking to make a home purchase again. The key to using this program is ensuring you qualify under the rules of what it means to be a first-time homebuyer. The rules state that for a four-year period prior to the home purchase, you did not own or occupy a home that you or your common law spouse owned. You also need to pay off any balance owing on a previous homebuyer’s program. Should you meet these criteria and do not plan to immediately buy a home, this option can make all the difference. The new home buyers plan also allows you to withdraw $35,000 from your RSP instead of $25,000 under the old program.
Speak to A Trusted Advisor:
If the thought of saving for your next home after a divorce fills you with anxiety and you’re stressing on how you will make it happen, reach out and get help! Find a trusted advisor to help you build a budget, maximize your savings, and help you purchase your next home sooner rather than later!