Building Real Estate Equity on PEI

A home loan or mortgage is a fact of life for most people buying a home for the first time. It is important to ensure that when we purchase a home and sign on for a 25 year mortgage that we can comfortably pay the principle and interest while still servicing other debts and living an acceptable lifestyle. While it is definitely a less expensive proposition to purchase PEI real estate, nonetheless most of the same elements to home financing apply as would any where else.

Before looking at homes and becoming influenced by our hopes and desires it is important to sit down with our partner and doing a budget. Include all your normal bills such as groceries, car expenses, credit card debt repayment, and any other bills that are regular. Make sure you include a margin of comfort for expenses that come around irregularly and for those "rainy day" issues. You should then deduct these expenses from your after-tax income and that is the money that is available for mortgage, property taxes, insurance etc on your new property purchase. Moneys that are currently being paid as rent on accommodations may also be counted in this amount. Consider the resulting amount carefully as the amount you borrow will result in a payment for the next 25+ years, that's 300 payments. If you can not pay your lending institution will foreclose on the property and your credit history will suffer.

In addition to calculating your current expenses and budgeting, when purchasing a home you need to consider the other costs of home ownership aside from the expense of the mortgage. As a homeowner you will be paying the cost of heating, electricity, homeowner's insurance, property taxes etc. It is important when considering homes to determine these costs as they pertain to each home. Larger homes will generally cost more to run, both for utilities and taxes. Also remember that older homes will generally need more TLC and if you are not capable of doing the work yourself you will need to pay to have it done - however even if you can do some of the home maintenance yourself there are still costs involved for materials.

When you are organizing your finances to make a purchase be aware that there are expenses involved including the lawyer's fees, various expenses such as oil remaining in the tank, and portions of property taxes that the previous owner has paid and you will have to, on a pro-rated basis, pay back the vendor for these. The conveyancing lawyer works out these expenses. As result you will want to ensure that you keep back some of your savings - not using it all as a downpayment. A few extra thousand will not make much difference to your monthly payment so keeping back some savings leaves you a bit of a slush fund in case there are problems down the line, job loss, emergencies and the like. You should of course have cash to pay moving expenses.

Once you have found a home that is in your budget and you have moved in you will begin to make your mortgage payments. Try to ensure that you stay current and up to date on your loan obligations as once you have fallen behind it is difficult to catch up and this will have a negative effect on your credit rating as well as adding substantially to the amount of interest you will have to pay. If you have planned beforehand however you should be well on your way to building equity in your new PEI real estate investment

Ron Wesley is a consultant for PEI real estate. You can get more information about PEI real estate at here http://www.buypeirealestate.com/