Purchasing a new home can be a smart and satisfying financial goal that requires a lot of thought and planning. Whether you’re becoming a homeowner for the first time or finding your next dream home, consider these six steps before making an offer!
First and foremost, it’s important to have a clear picture of your finances. Calculate how much you can spend on a mortgage to determine a target price range. Next, calculate a realistic monthly payment based on your budget. There are also federal incentives for first-time home buyers that could potentially help reduce the monthly mortgage payments.
The down payment is the amount of the purchase price that is paid immediately and must be at least 5% of the purchase price for the first $500,000, and 10% for the amount over $500,000. If the down payment is less than 20%, the financial institution must take out mortgage loan insurance with an organization like Canada Mortgage and Housing Corporation (CMHC), and insurance premiums will be added to your mortgage payments. There are many ways to accumulate the money for the down payment. Liquid assets, investments, gifts and inheritances are all acceptable down payment sources, as well as RRSPs through the Home Buyers’ Plan (HBP).
Buying a property comes with additional expenses, including property inspection and appraisal fees and fees charged by the legal professional. These fees are all charged before you even receive the keys. It’s also important to budget for insurance premiums (home insurance, mortgage loan insurance), property tax and any public utilities to be paid in advance, as well as federal and provincial tax on the sale price (for a new home). You will also need to consider the taxes on the mortgage loan insurance amount (if your down payment is less than 20%), and municipal, school and welcome taxes.
A mortgage advisor can help you find the right financing solution for your situation and guide you through the process, from pre-approval to purchase.
Get pre-approval before you start looking for a property. It will help establish a price range of homes you can afford; it guarantees your interest rate for 90 days and an expert can help you finalize the process. Pre-approvals are also free and there’s no obligation to take out a loan if you no longer want to buy property.
Have you made an offer on the home of your dreams? There are a number of steps involved in the mortgage process, like choosing between a loan and a line of credit, or assessing the property value.
Advisors can look at every detail at your first meeting and provide guidance and support throughout the process.
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