Insider Advice For First-Time Home Buyers
Nearly two-thirds of Canadians own their homes, which is the highest figure in the western world. This means Canada is a great country for homeowners and has a lot to offer new buyers, creating a dynamic real estate market. However many individuals find the process of buying a new property overwhelming and confusing; consult these five tips to help alleviate some of that stress.
- Don’t Waste Time
Things move fairly quickly in the real estate world so it’s important to get organized and remain focused on the end goal. It’s crucial to adopt realistic expectations and be decisive. Don’t expect to find a large cottage in the area you want, if you’re budget allows only for a townhouse or condo. Sit down and take into account all of your finances and determine what your budget is, so that you can focus on properties that are within your reach.
If you’re really unsure about your budget, apply for a pre-approved mortgage from a recognized financial institution, which determines how much money the bank is willing to loan you.
- Scope out the Neighbourhood
New home buyers should think proactively about the future. Are you going to start a family soon? If so, pick a location and neighbourhood where there are schools and parks nearby so you won’t have to relocate in the near future. Select a neighbourhood that also suits your personality and lifestyle. You don’t want to be woken up by raging street parties outside if you have to be at the office by 8 am.
- Hire An Inspector
Here in Quebec, it’s mandatory to have an inspector visit the property before signing all the legal paperwork. At this stage, it’s important to hire the best inspector with the most experience and the strongest work ethic; you don’t want them to miss anything. Ask your agent or consult your social network for a proper referral. You can also check online reviews to find out the best options in your area.
- Be aware of all the Costs
Owning a home is quite costly and it’s important to be both financially stable and savvy. New home buyers will discover there are a lot of initial fees that are associated with purchasing a property, such as the down payment, closing costs, possible commissions, welcome taxes etc…
If you consult the Canadian Mortgage and Housing Corporation, they recommend the following guidelines to see if you’re ready to purchase a house:
1) Your housing costs should be less than 32% of your monthly income
2) Your debt load should be 40% less than your monthly income.
If you do the calculations and the values fall within the guidelines of these rules, then you’re in good financial standing to purchase a home.
- Understand your Mortgage
Most Canadians have a mortgage, meaning they don’t fully own their homes until they’re done paying back the bank. Without the option of a mortgage, most people wouldn’t be able to purchase a home, forcing them to rent instead. Many home buyers are confused by the complexities of a mortgage and some individuals will even sign on the dotted line without fully understanding the terms of the agreement.
It’s important to sit down with a representative from your financial institution and really hash out all the details. Look out for the amortization period, which refers to the length of time it takes to pay off your mortgage (it’s typically 25 to 30 years on average). You should also ask about the type of interest rate, and whether it’s fixed or variable. A fixed interest rate does not change for the entire duration of your mortgage; while, a variable interest rate fluctuates depending on the market.
A new home buyer is likely to choose between a conventional and a high-ratio mortgage. The conventional mortgage refers to the bank giving you a loan that’s 80% or less of the value of your home but requires you to put down a 20% down payment. The latter refers to the bank giving you a loan that’s more than 80% of the value of your home, meaning you don’t have to put a 20% down payment. It’s important to note that with high-ratio mortgages, you’ll usually have higher interest rates and require mortgage insurance.
Purchasing a home is one of the best investments one can make, especially here in Canada where there are many real estate opportunities. If you’re a first-time home buyer and are feeling a little overwhelmed, consider these five useful tips. For more real estate options consult DevMcGill and check out their latest property developments in Montreal and Ottawa.
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