Home ownership may be the biggest investment you’ll ever make. That’s why it’s important to go into it with your eyes wide open.
The first thing to keep in mind is that buying a home is never a simple proposition. Not only do you need to consider your budget, lifestyle and location, you need to look at the many housing and mortgage options. Do you want a new home or a resale property? A detached home, a condo, a townhouse or a mobile home? Is it freehold or leasehold land? What about your mortgage? Do you want it open or closed? Long or short-term? Fixed or variable? Special features like pre-payment options, portability or assumability? What about mortgage insurance? What should you expect from your real estate agent, lender, lawyer, notary, home inspector and builder?
If it sounds complicated, it is. But by doing your homework and carefully looking at all of your options, you can make an informed decision about home ownership. Whether you decide to buy now, later or not at all, the more research you do, the more certain you can be that you’ve made the right choice.
Don’t Forget the Extra Costs
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TIP: Don’t forget ongoing maintenance and other costs must be factored into your budget after you move into the house.
Keep in mind there’s more to buying a home than the down payment and mortgage. You’ll need to budget another 1.5 per cent to 4 per cent of the price of your home for extras associated with the original purchase such as:
Survey fee: Lenders will want proof that the property complies with all relevant by-laws and that additions fall within the property’s boundaries. A survey of the property can cost around $500 and may be required. See if the seller has a recent survey; the lender might accept it and you could save yourself some money. If you are obtaining title insurance, it may be an acceptable alternative to a survey – title insurance is an insurance policy you can purchase to protect your investment in your property if there is a problem with title.
Inspection cost: With resale homes, make sure you’re making a wise investment with a thorough home inspection to check plumbing, electrical work and any structural flaws. It will cost anywhere from $150 to $500.
Mortgage Default Insurance: If you have a down payment of less than 25 per cent, you’ll have to pay for this.
Fire Insurance: You can’t obtain a mortgage without a fire and damage policy that will cover the replacement cost of the property. Costs will vary by property and insurance company.
Provincial fees: Most provinces charge a fee ($100 or more) for registering a mortgage. These registration fees are usually added to your legal bill.
Land Transfer Tax: Depending on the province you live in, you may have to pay a land transfer tax. The cost, which varies by province, is based on a percentage of the total cost of the property.
Legal fees: To protect your interests, it’s a good idea to use a lawyer or notary to handle the purchase of your home. Legal fees vary widely.
Goods and Services Tax: If you buy a newly constructed house, you’ll have to pay GST.
Moving expenses, new appliances and service hook-up fees: Costs vary widely for these. Shop around and budget for them.
Closing or adjustment costs: These are expenses for any necessary adjustments to be made between you and the seller, like property taxes and utility bills.