Category Archives: Money Tips

I’m Thinking of Buying a House How Much Does It Cost Per Month On Top of the Mortgage?

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I read an interesting discussion recently about the costs of owning a home. A person was surprised that his friend had to pick up a second job to pay the bills after buying a house and wanted to know if the cost his friend quoted per month was normal. It led me to go back through our bills to find out how much we pay a month to run our house on top of the costs to pay off the mortgage.

How Much Do You Budget to Pay for Hydro, Natural Gas, Water, Property Taxes and Insurance per Month for a Detached House?

We live in a large city in Ontario but we don’t live in Toronto. Our house is detached, fairly old, but not particularly large.

The costs for things like electricity vary quite a bit from month to month, so I’ve taken our annual costs and divided them by 12, rather than report an actual month by month number. Most companies won’t annualize your costs, though, so be prepared to have some months where your bills are much higher than others.

In 2017, our home cost us

  • $124 Electricity / Hydro
  • $48 Water (including Storm Water and Waste Water charges)
  • $94 Natural Gas (including to burn for the water heater and for the pilot light in a seldom used fireplace insert)
  • $405 Property Taxes
  • $82 Home Insurance

How Much Should I Budget Per Month to Run Our House?

So our total costs for heat, hydro, water, property taxes and insurance add up to:
$ 753 per month.

Add in a typical cost for cable TV, internet, home phone and cell phones and you’re easily at almost $1000 per month. I didn’t include those because it would be easier to reduce or eliminate those costs than the ones I’ve included.

You can compare our costs to those reported by others for 2017 for homes around the GTA on this RedFlagDeals forum post.

What Else Do I Need to Budget For?

Other costs that might have been included in your rent are for:

  • Cable TV
  • Internet and Home Phone

Other common costs for home owners include:

  • Annual and perennial plants and shrubs
  • Landscaping consumables like wood chips, mulch, yard waste bags or bins, new soil, fertilizers, bird seed, insecticides for lawn grubs, ants or wasps
  • Gasoline or Transit, if you need to start commuting to work
  • Household Tools and Consumables, including snow shovels (which break and get stolen), yard work tools, building and repair tools, vacuum cleaners, ladders, lightbulbs, mops and brushes, buckets
  • Minor Decorating On-going Costs, including for re-painting, draperies or blinds, area rugs, furniture, art work
  • Big Ticket Maintenance, including a new roof, new windows or doors, a new furnace and air conditioner, new appliances
  • Big Ticket Renovations, including re-tiling and re-fitting bathrooms, the kitchen, new flooring (carpets, hard wood or tiles)

You need to estimate each of these costs, divide it by how many years you have to save up to pay it, and then include that amount of saving and spending in your monthly budget.

For example, you won’t necessarily have the $7000 for a new roof every 15 years if you haven’t saved the $40 a month for 15 years to pay for it.

What Other Home Expenses Do Some People Pay for?

  • Lawn and yard maintenance, including annual aerating, fertilizing
  • Snow removal
  • Gutter cleaning
  • Driveway sealing
  • Window washing

Can I Carry a Home For the Same as My Rent Payment?

Unless you are renting one seriously over-priced place, you probably can NOT expect to own a home for the same monthly cost as you pay for rent. I enjoy owning a home but I do not think it saved me any money!

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Do you know someone who bought a home without understanding the full costs of ownership? Please share your views with a comment.

Why is BMO Offering Me a Personal Line of Credit at a Lower Interest Rate Than My Mastercard?

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I’ve had a personal credit card with BMO since I graduated from university just slightly after plastic was invented. I almost never use it because I pay cash for most purchases and we usually use another card for our hotel and airline transactions. When Costco switched to Mastercard a year or two ago, though, I dug out my card and used it once or twice for large items for which I wanted a double record of the purchase. Then suddenly I get an offer in the mail from BMO for a pre-approved personal line of credit at a lower interest rate than my Mastercard and I wondered why?

Should I Get a Personal Line of Credit as an Emergency Fund?

I see people asking this question a lot on financial chat lists. They have been offered a personal line of credit and they ask whether they should accept the offer or if the rate is good enough.

Personally, I don’t see why most people should accept a personal line of credit. What’s the advantage of having another potential source of debt?

But then, I don’t believe most people should make purchases using credit unless they are for exceptionally expensive items like a house, or unless it’s just as a convenience and they will pay the cost in full when the credit card bill arrives. I believe you should save up for that home renovation, new-to-you car, electronic wonder, or vacation trip.

When you save up in advance, *you* get the benefit on the interest on the money: it helps pay for your purchase. When you buy on credit, you lose because you have to pay the lender interest as well as the cost of the item.

And no, I don’t think having a loan from an institution is a substitute for having a true emergency fund. The last thing you want in an emergency is to incur more debt AND have to pay interest on that debt. Set money aside ahead of time to cover emergency expenses. Or figure out who among your friends and relatives could be trusted to help you get through an emergency.

Is It a Coincidence That I Got a LOC Letter Just After Using my BMO Mastercard?

I found the timing of this LOC offer interesting. I’ve never had an offer of a LOC from BMO before, despite having a bank account with them since I was attending university. So why did I get this letter now?

My suspicion is it’s because I used my Mastercard several times in the last year after not using it for a decade.

I’m doubly suspicious because the amount of the PLOC is the same as the credit limit on my BMO Mastercard.

Why Would BMO Offer Me a Line of Credit With a Lower Annual Interest Rate?

I’m not interested in having a line of credit, so I will be shredding this letter from BMO. But I wondered to myself why they would even offer me a loan at their “competitive rate” of 7.2% when my Mastercard has a rate of 17.5%. Wouldn’t they make more money if I had to pay them 17.5% on an outstanding balance than 7.2%.

Then I remembered something I read in the Globe and Mail. The writer said that many people think they will get out of credit card debt by getting a loan, usually a home equity line of credit. But as soon as they pay off the credit card with the HELOC, they start using it again. And before they know it, they have used up the credit limit on their HELOC *and* the credit limit on their credit card. And the bank then makes high interest off the HELOC and even higher interest off the credit card. Double your debt: double their profits.

Is that the strategy behind this BMO offer? I’ll never know. But if it is, they’ll be disappointed in me. I’m still paying off my credit card each time the bill arrives. And I’m not getting a line of credit. And I’ve got an emergency fund that could last me over a year, if I needed it to.

Sorry BMO.

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Do you have a personal line of credit? Do you use it as a chequing account and never pay more than a few dollars of interest? Why do you find a LOC useful? Please share your views with a comment.