May 5, 2018 Buying your first home will inevitably be complicated and unfamiliar territory. For many of us, it’s a goal we work towards for most of our life. And while it’s always been a future goal, it quickly creeps and becomes a reality. With so many factors to consider, it can be overwhelming and daunting. So where do you start? As a first-time home buyer, there are several things you should start thinking about much before you’re actually ready to purchase your home. Below, we’ve outlined our top tips to make your first home buying experience as smooth as possible. Mortgage Buying a home is expensive – it will likely be the largest purchase you ever make. It’s rare that anyone has enough money to actually buy it all at once, which is where a mortgage comes in. When you’re applying for a mortgage, it’s important to shop around for the best rate. While several Canadians often go with the first place they’ve consulted, which can end up costing them several thousands of dollars over their lifetime. Whether it’s through your bank or a mortgage broker, always weigh your options and don’t be afraid to negotiate. Doing your research to decide what type of mortgage will work best for you is essential. Do you want to play it safe with a fixed-rate mortgage, which will stay at a consistent interest rate, or do you want to take a chance with a variable mortgage, which reflects current market trends? The same goes for a closed versus open mortgage. With a closed mortgage, you’ll pay a fixed amount every month until your mortgage is over, whereas an open mortgage allows you to pay it off faster. The downside of an open mortgage is the higher interest rates. Finally, getting pre-approved is always recommended, especially for your first home. It will help you know how much you can actually afford, and will also show that you’re serious about making a purchase. Down Payment The amount you put down up front will determine your monthly payments while you pay off your home. Being smart about it can save you a lot of money in the long run. In Canada, the minimum downpayment is a percentage of the home’s price. If the home is under $500,000, the minimum is 5 percent, if it’s under $1 million, it’s 10 percent, and if it’s over $1 million, it must be at least 20 percent. Ideally, your down payment will be a higher percentage to decrease monthly payments, however, it’s important to be realistic about how much money you actually have. Don’t forget there will be additional and unexpected costs that come with owning a home. Real Estate Agent Having a real estate agent is not required, but it is definitely recommended. Not only do realtors have access to exclusive listings, they bring their expertise to the table and can help you navigate the industry. Neighbourhood If you’re considering buying a home, you’ve likely already thought about where you want it to be in relation to your career, family, and friends. To help narrow down exactly where to invest, things to consider include: Type of home you want Proximity to work Proximity to transit Access to schools and daycare Access to trails, parks and outdoor space Access to retail and grocery stores General walkability Overall safety Closing Costs Before you make an offer, make sure you think ahead to the closing and after closing costs you’ll be faced with. While it’s not legally required, it’s definitely recommended to get a home inspection so you’re aware of the home’s condition and potential issues that could arise. There will always be unexpected costs that come up, and as a homeowner you need to be prepared to cover these. Another cost you might not be aware of is a land transfer tax. Depending on the province, land transfer taxes are calculated as a percentage of your home. As a first-time buyer, you may be eligible for a partial refund. You’ll also need to account for legal fees from a real estate lawyer. Hiring one is important as they’ll help review your offer and explain it in plain terms, and deal with legalities on closing day. Home Insurance Once you’ve made such a large investment, you should be prepared to protect it. Most lenders require that you have home insurance, and even if it is optional, it is highly recommended. Without home insurance, you risk the chance of losing both your home and your investment. Home insurance protects both the physical home itself as well as the contents inside; if an unexpected hazard strikes or someone breaks in, your insurance will help cover the repair or replacement costs. We currently have several homes for sale in the Greater Vancouver and Toronto areas. Contact us to inquire about these opportunities, or to learn more about buying your first home.
