The most important piece of advice I have for new buyers is that they should talk to their lender, bank, parents, great-aunt Rose, or whoever, and get pre-approved for a mortgage. This will require a review of your net income, living expenses, debts and your credit report. Getting pre-approved is critical!
Once we know what your budget is, including your deposit, we can start the process of narrowing down what kind of home will work for you and your family. The government of Canada has outlined the following guidelines for down payments:
- A home that costs $500,000.00 or less – 5% of the purchase price
- A home that costs $500,000 to $999,999 – 5% of the first $500,000 and 10% for the portion about $500,000
- A home that costs $1 million or more – 20% of the purchase price
If your mortgage is more than 80% of your home’s purchase price, that mortgage will need to insured by the Canada Mortgage and Housing Corporation (CMHC). This is a Crown corporation and by law if your mortgage is more than 80% of your home price you will need to pay insurance premiums for the duration of the mortgage.
What are the extra costs that you will need to budget for?
- Land transfer taxes – this is a provincial land tax and first time home buyers qualify for a discount
- Appraisal fees – this is a charge that your lender (bank) will advise you
- Title Insurance – this offers protection from fraud, identity theft, and forgery – this is not a mandatory cost and you should talk to your lawyer about the benefits of it
- Property Tax – this information will be on the listing and you can choose how you manage this cost (e.g. monthly, quarterly, etc.)
- Utility costs – these are additional costs and if you are buying a resale you can ask for copies of the utility bills to get an idea of what your monthly costs are going to be for heat, hydro and water. New Tecumseth has options to set up preauthorized payments, or you can pay through electronic funds.
- Home Insurance – to protection both your belongings and the physical structure of your property
Wow – you’ve just spent thousands of dollars on your first home….and hopefully you’re still excited about this new phase in your life!!!