So, you’re ready to call yourself a homeowner? Buying a home is one of the most exciting and important decisions you’ll make. We’ve got 5 tips to help get you started:
- Get the money stuff sorted out. Before you get too far into the home buying process there are a few things to consider first:
- Get pre-approved for your mortgage. Unless you have the money to buy your first home outright, you’ll need a mortgage. So, this should be the very first thing you do. Start with a visit to your bank to find out exactly what you can afford.
- Know the upfront costs. You’ll need to have money set aside for all the things associated with buying a home like the down payment (minimum 5-20% of purchase price), home inspection ($300-$500), and appraisal fees ($350-$500). You should also have enough cash reserves to cover 2-6 months of regular payments for things like insurance, property taxes, utility set up, and moving costs.
- Don’t forget about closing costs. This includes legal and notary fees, land transfer tax and other fees. The Canada Mortgage and Housing Corporation recommends setting aside anywhere from 1.5-4% of the purchase price to cover them.
- Take advantage of first-time discounts and credits. The government of Canada offers a $5,000 First-Time Home Buyer’s (FTHB) Tax Credit which could save you up to $750 in federal tax relief. There is also the Home Buyers’ Plan (HPB) which allows you to withdraw up to $25,000 from an RRSP to buy a home. Last, but not least, you could qualify for a rebate of part of the GST or HST that you paid on the purchase price of your new home.
- Look beyond the surface. You may have fallen in love with the floorplan, the finishes or the beautiful yard, but that’s not all that matters. Some things can’t easily be changed after you’ve purchased and can have a huge impact on safety, repair costs and even your insurance. It’s good to know exactly what you’re getting into ahead of time by asking the right questions.
- Research the year the home was built. New homes are built based on current standards and bylaws, meaning they should cost less to repair than older homes which could save you on insurance. You can also expect to have better quality materials that save you on things like utilities. New builds may also come with some type of warranty.
- Find out what type of heating system is in use. It’s ideal to look for a home with an electric or gas furnace since this could be safer to use and could help you save on insurance. Oil furnaces, wood and pellet stoves may reduce your utility bill, but expect higher insurance premiums since they’re considered a riskier way to heat your home.
- Know the age of the roof and the type. If the roof looks like it’s seen better days, keep in mind that it may need to be replaced – no small expense. Also, generally, the older your roof, the more you’re likely to pay in insurance and in some cases, a very old roof may not be covered at all. On the other hand, some roofing materials (like concrete or slate tile) could save you on insurance depending on your home’s location.
- Ask about the wiring and plumbing. Steer clear of knob-and-tube or 60-amp electrical systems, often found in older homes, since they’re a serious safety risk. Also, look for pipes made of copper or newer, more durable plastic, which are less prone to corrosion and leakage (meaning less likely to cause water damage). These tips will also help you keep your insurance costs down.
- Get all of the details on any renovations or updates. On the surface, updates may seem like a great selling point, but DIY remodels can quickly turn into a problem for future homeowners. It’s always a good idea to ask for proof that renos were done by a professional and/or for copies of permits for each stage of the project so you know it was done right.
- Don’t skip the inspection. Once you’re serious about a home, you should always do an inspection. You may have already asked about the quality of renos, but an inspection can give you a heads up on any number of other problems that you may not otherwise see. Major flaws, like issues with the foundation, may be cause to walk away. On the other hand, minor concerns could be used to your advantage during negotiations.
- You can learn a lot from the claims history. The history of claims can give you important clues about the problems a home may face in the future. The biggest concerns are water or fire damage. Before you buy a home, consider asking for a claims history report from the seller.
Want more tips on buying your first home? Take a few lessons from those who have been there. Find out what