Never attend this party
Parties are a fun time. Parties are a gathering of friends and family to celebrate an event or occasion in life. A baby shower, a bridal shower, a birthday and a retirement are some great examples of parties. These occasions are a great time, celebrating, with the underlying nature of the event a joyful one. However there is one party that the underlying nature can cripple someone for life. You should never attend this party; a housewarming party.
Housewarming parties are meant as celebrations of someone or a couple taking the next stage in their lives. The next stage being purchasing a home of their own and facing life. Friends and family are invited to celebrate the new home. We are expected to show up with a gift, smile and say how nice their large home is. The new homeowners will be trying to impress us, with how large their home is, how fancy it is with new appliances, expensive furnishings, etc.
This type of party, underneath, is a giant hole, not a grand home in which the new homeowners are building their lives. Home prices in North America are at an all time high and interest rates are on the sharp rise. Your friends who just bought that house are swamped in debt and will be for the next 25 to 30 years. For one third of their lives they will be paying that debt back and you just showed up to their house to celebrate this!
How to make the party enjoyable
There is nothing you can do to make someone else’s party enjoyable; they took the debt themselves and are asking you to celebrate this monstrosity. You can however make your party enjoyable by purchasing a home you can afford. Here’s how:
Determine whether you can you afford the home
Your housing costs which includes your mortgage payment (both interest and principal), insurance, maintenance and utilities should not be more than 30% of your after-tax salary. If the housing costs are above this you may want to consider the following.
Making a down payment of 20% or more
Making a down payment of 20% of more of the asking price is a great way to reduce the total amount you owe, save you tens of thousands of dollars in interest and will eliminate the need for mandatory CMHC insurance.
Clean up your credit
Your credit may be holding you back from qualifying for a lower interest rate. Cleaning up your credit will improve your score and you will less risky to lenders which in turn will result in a lower interest rate. With a lower interest you will be better able to afford the home you want. I have discovered 5 proven ways to increasing your credit, find out here.
Renting does not involve going into debt and having to pay that debt off for a third of your life. Consider renting it may prove to be more financially viable than buying (check out Rent vs Buy: The Debate of a Lifetime and how to save on your mortgage) and you have more freedom to move if you find a better place!
You have control over your party. Celebrate with your friends and family knowing you made a financially sound decision.