How big is your down payment?
You want as small a mortgage as possible, which means making the biggest down payment possible. Just remember to set money aside for all the fees associated with buying a home. Not to mention moving, repairs, renovations, new furniture...think ahead.
The RRSP Home Buyers’ Plan – A little sweet relief.
If you’re a first-time homebuyer with money in an RRSP, you can withdraw up to $35,000 without paying any income tax. If your spouse is also eligible, that’s $70,000. Ask your REALTOR® how to best take advantage of this plan. Note: Budget 2019 increase the HBP withdrawal limit to $35,000. This applies to withdrawals made after March 19, 2019.
Lock into an interest rate - for how long?
It’s a tough question. What if you ‘lock in’ for five years and rates go into a period of decline? That could mean you’re stuck paying more than you had to for a long time. But if rates were to steadily climb over the next five years, locking in for five years now would be a great move. For many, a long-term mortgage offers peace of mind in knowing that their mortgage payments will stay the same for several years. Your REALTOR® will have a lot of good advice.
What you need to apply for a mortgage.
- Letter of employment confirmation – Ask your employer for a letter that confirms your position, your pay and how many years you’ve been with the company.
- List your assets – Your car, stocks, bonds, GICs. Show which assets will be used for your down payment.
- List your liabilities – Car payments, student loans, credit card debt. List all the money you owe, and note how you’re paying it off.
- Social Insurance Number – And your chequing account number, and your lawyer’s contact information
- Information about the house you want to buy-The home is your security on the mortgage, so the lender wants to know all about it.
Face your new financial responsibilities head-on, and you may even dodge some of them. And then won’t you look smart!
Application fee – Some mortgage lenders charge a fee to process your application. Many lenders will agree to waive this fee, so make sure you ask!
Appraisal fee – Your mortgage lender may need to have your new home appraised by a professional, and they often pass the bill on to you. Sometimes your lender will also waive this fee. Again, it doesn’t hurt to ask.
Mortgage broker’s fee – Your mortgage broker may charge a fee that’s payable on your closing date. Ask your broker, to avoid surprises.
Land survey fee – Lenders may require a survey of your property. Lenders will often accept an existing survey. There can be a substantial cost for having a new survey done on the property.. Get your lawyer on the case.
Home inspection fee – A home inspection is so important, we devoted an entire Step to it. Avoid surprises and protect yourself...this is money well spent.
Home Insurance – Mortgage lenders require you carry fire and extended-coverage insurance because your home is the security deposit on the mortgage. Often you can have these payments added to your monthly mortgage payments. Shop around.
Fire Insurance- Mortgage lenders require a certificate of fire insurance to be in place from the time you take possession of the home. The amount required is generally the amount of the mortgage or the replacement cost of the home. This cost can vary on the property size, amount of coverage, the insurance company and the municipality. The cost can vary anywhere from $250-$600 annually for most properties.
Provincial Sales Tax on Mortgage Insurance- If your mortgage is insured, you will be required to pay the applicable taxes on the insurance premium on closing. While the insurance premium can be added to the mortgage amount, the tax must be paid at closing.
Title insurance – Not mandatory, but it protects you from all sorts of fraud and potential errors surrounding the title to your land. It’s normally a few hundred dollars. Ask your lawyer for details.
Legal fees – Your lawyer is vital to the home-buying process. You’ll pay legal fees for their time and “disbursements” which are the costs involved in title searches, drawing up the title deed, and preparing your mortgage.
Maintenance and utility costs – Just a reminder, you now have more regular monthly payments in the form of property tax, utilities, repairs etc.
Land Transfer Tax – Most provinces charge a land transfer tax payable by the buyer, and is based on the purchase price. First time home buyers purchasing a new home may qualify for a refund. Ask your REALTOR® or lawyer to calculate the payment.
The HST and new homes – If you have decided to purchase a resale home, you successfully avoided paying HST. Nevertheless services associated with the property, such as a home inspection, will still be subject to a HST. When buying a new home, however, you will come face to face with that 12% HST rate of a combined 5% federal and 7% provincial tax. Make sure you confirm who is expected to pay this tax, you or the builder. On the housing offer, the purchase price will state "Plus HST" or "HST included" as well as the recipient of any HST rebates. For new properties at $350,000 one can expect a rebate of $23,800 and for properties worth $525,000 or more, one can expect a rebate of $26,250.
Closing Adjustments – The previous owner may have paid property tax or utilities in advance, and they want to be credited for those payments. Any bills after the closing date are the responsibility of the purchaser. A lawyer will let you know what they are once the various searches have been completed.
New Home Warranty- In most provinces new homes are covered by a new home warranty program. The cost to the purchaser for this warranty is calculated according to purchase price. Should the builder default or fail to build to an agreed-upon standard, the fund will finish or repair the deficiencies to a maximum amount. For more information on Ontario new home warranty visit http://www.tarion.com.
Find a Home Inspector.
When walking through a home you’d love to buy, it’s hard to put aside your emotions and really ‘see’ what kind of shape it’s in. Now that you are buying, it’s time to see everything. Home inspections rarely cost more than a few hundred dollars, and their service can save you from unpleasant surprises when you move in.
Your offer to buy may be conditional upon a satisfactory home inspection.
This is an increasingly standard condition on any resale home. If the seller doesn’t want you closely examining the home before you take possession, you have to wonder why.
Go with a qualified professional.
Make sure your inspector is a member of a provincial association of home inspectors. It’s your guarantee they have the training and experience for the job. Your REALTOR® can recommend several home inspection companies to choose from.
What will they check during the inspection?
Lots of stuff. Plumbing and electrical systems, the roof, visible insulation, walls, ceilings, floors, windows and the integrity of the foundation. They check for nasty stuff like lead paint, asbestos, mould, outdated and dangerous wiring, and they’ll look for evidence of pests like mice or termites. A good inspector should make you feel like you’re watching a CSI detective.
Join the inspection.
There’s no better way to get familiar with your new home than being part of this checkup. If any problems are detected, you’ll see them firsthand, and you’ll also learn some maintenance tips from a genuine pro.
You’ll get it in writing.
Their report will summarize the condition of your home. If there’s anything that needs work, the home inspector will provide an estimated cost for the repairs.
Home inspection for a new home?
New does not equal perfect, and construction quality can vary greatly from builder to builder.
Repairs and corrections will probably be covered by a provincial new home warranty program like Tarion, so bad news doesn’t necessarily mean it will cost you.
Close the Deal.
Your offer has been accepted and you can’t wait to move in. These are exciting times, but don’t break out the bubbly just yet. You have to close the deal. Your REALTOR® and lawyer will do most of the closing work, but here’s your checklist.
- Immediately begin satisfying any conditions of the agreement that require action on your part. Your REALTOR® will fill out the documents stating that the conditions have been satisfied.
- Have your lawyer begin searching title to the property. This can take a while, so make sure you give ample time.
- We recommend a home inspection to avoid any unpleasant surprises on move-in day.
- Well before closing, get your homeowner’s insurance. Your insurance broker will give you a ‘binder’ letter certifying that you’re covered. You can’t get a mortgage without this letter!
- Contact your lender and have them finalize your mortgage documents. Have your lawyer review them before you sign.
- Your lawyer will transfer essential utilities like hydro and water, but you’ll have to make sure telephone and cable companies switch their services to your name.
- If you rent, you must give notice to your landlord, or sublease your apartment.
- Begin planning your big move! Where are those cardboard boxes? Book your moving service early to avoid scheduling problems.
- Send out your change of address information and fill out a card at the post office.
- Contact the Ministry of Transportation about changing your driver’s licenses.
- A day or two before closing, you’ll meet with your lawyer to sign the closing documents.
- Your lawyer will tell you in advance what certified cheques you’ll need to seal the deal.
The big day arrives
Deliriously happy and emotionally exhausted, here you are on closing day. You made it! If your lawyer has arranged everything well, closing day can be surprisingly low on drama. Before you know it, you’ll be handed the keys you new home.
Moving day will come sooner than you think, so get planning now.
‘Closing date’ often means moving date.
Unless you have major repairs or renovations planned, you probably want to move in the day you take possession. If you intend to move at the end of the month, contact a moving company or truck rental company now. Most people move during this time and there aren’t trucks and movers for everybody. If you can move mid-week or mid-month, a moving company might cut you a deal. Keep in mind, the closing process might not have the keys in your hands until early-to-mid afternoon. Verify with your lawyer and schedule your moving times accordingly.
Go with a reputable moving company.
We’ve all heard moving horror stories. Go with an established, insured mover, so your items are protected. If any damage does occur by the movers, call the moving company immediately to notify them.
Pack it yourself, and pack early.
Nobody will take the same care you will. Start early and spread it out over many days. Label all your boxes by room so the movers know where to put them, and label anything that’s fragile. Smaller breakables should be driven to your new home by you to ensure they are safe from breakage.
Do you really need to take that with you?
A new home is a new lease on life, and a chance to liberate yourself from stuff you simply don’t need. If you haven’t used it or worn it in the last year, you don’t need it. Have a garage sale to make some extra cash for your move, or give your items to Goodwill or United Way. You won’t have to pack and unpack it, and it will become someone else’s treasure.
Once you move in.
The boxes are mostly unpacked and you’re settling in nicely. You will now feel a strange urge to begin making changes and improvements right away. That old carpet has to go; a bigger deck would be great for entertaining...slow down! Take time to get a feel for your new home, and more importantly, your new budget. Take a deep breath and enjoy what you have, your new home.