You’ve probably purchased something, and then found out all the little things you didn’t think of are now adding up. Nowhere is this more of an issue than when you buy your own home. But there are ways to protect yourself and make sure you understand that your total costs are apparent. The secret? Information. Lots of it. So let’s break it down and see where information can help you make good decisions.
Generally, over time, homes and real estate in general have a history of appreciating in value.
Your life takes on a comfortable rhythm when you have your own home, and it is an important part of raising a family—so your family can establish itself, make friends and really be part of the community.
Buying a home is a huge financial commitment — from getting your down payment and handling closing costs to the ongoing expenses of taxes, maintenance, renovations and general upkeep.
Once you have your own place, there aren’t too many times where you can say “I have nothing to do today”. Just keeping up with lawns, sidewalks, siding, fences and landscaping is time-consuming.
There’s no “calling the landlord” when something goes wrong, and having your hot water tank fails in the middle of the night is one of the inescapable perils of home ownership.
Your home, your choice. From the color of the paint to the size of the bushes, you get to choose how to decorate and maintain your home.
Deciding to buy a house is one of life’s most important choices, but it’s not just about whether you want to own a house — it needs to be more about whether you can afford a house. In this step, you will find a number of simple calculations that you can do to evaluate your current financial situation and the maximum home price that you can afford.
You want to feel comfortable about your home buying decision, and you certainly don’t want any thing popping up that you weren’t aware of. But there are a few simple financial calculation you can make to get the green light you are looking for. They include calculating your net worth, determining your current monthly expenses and what your current monthly debt payments are.
Knowing your net worth is important because you will need this information when you discuss a mortgage with your mortgage specialist. Your net worth is the amount left over once you’ve subtracted your total liabilities from your total assets. It will also give you a snapshot of your current financial situation and show you how much you can afford to put as a down payment.
Next, it’s time to determine your current expenses and debt payments. This will help you see what your actual monthly obligations are and what kind of mortgage payment you can comfortably fit into your budget.
This step will show you how much money you’re spending every month. Be sure to include all your costs so you get an accurate picture.
Completing these two excercises gives you valuable insight into your financial situation. You’re one step closer to knowing whether you really can afford your own home. These completed sheets will also help your mortgage specialist move your application along quicker.
Once you have figured out the home price range you can afford and the type of mortgage you qualify for, you will need to calculate all of the associated costs to make sure you have accounted for all the costs.
You will need to plan ahead to cover the many up-front costs of buying a home. Timing is important to help make sure things go smoothly.
If yours is a high-ratio mortgage (less than 25% down payment), you will need mortgage loan insurance. You can choose to add the mortgage insurance premium to your mortgage or pay it in full upon closing.
We may require that the property be appraised at your expense. An appraisal is an estimate of the value of the home. The cost will need to be paid when the appraiser delivers your report.
This is part of your down payment and must be paid when you make an Offer to Purchase. The cost varies depending on the area, but it may be up to 5% of the purchase price. If you wish to make a down payment of 5% and you give a deposit of 5%, then your down payment is considered to be made.
With mortgage loan insurance from CMHC you can own your first home with a minimum down payment of 5%. At least 25% of the purchase price is usually required for a conventional mortgage.
This applies if you are buying a condominium or strata unit.
We recommend that you make a home inspection a condition of your Offer to Purchase. A home inspection is a report on the condition of the home. It may be more costly to inspect a large home or one where issues such as moisture problems, pyrite, radon gas or urea-formaldehyde are suspected.
This tax is charged on the purchase price at 1% for the first $200,000 and 2% on the balance. In B.C., first time home-buyers may be eligible for the First Time Home Buyer’s Program, which will provide an exemption on this tax.
To reimburse the vendor for prepaid costs such as property taxes.
This insurance covers the cost of replacing your home and its contents. You’ll want it to protect your belongings and we require it because the home is security for the mortgage. Property insurance must be in place on closing day.
We may ask for an up-to-date survey or certificate of location prior to finalizing the mortgage loan. If the seller does not have one or does not agree to get one, you will have to pay for it yourself. It can cost in the range of $1,000 to $2,000.
If the home has a well, you will want to have the quality of the water tested to ensure that the water supply is adequate and the water is potable. You can negotiate these costs with the vendor and list them in your Offer to Purchase. Septic tank. If the house has a septic tank, it should be checked to make sure it is in good working order. You can negotiate the cost with the vendor and list it in your Offer to Purchase.
Must be paid upon closing and your lawyer/notary will also bill you direct costs to check on the legal status of your property.
LVCU requires this on all residential mortgages.
If you feel you cannot cover all of the up-front costs, you can talk to us about a loan. Remember that payment for this loan amount, based on a 12-month repayment period, will have to be included in your Total Debt Service ratio calculation.
Besides up-front costs, there are other expenses to consider: