Buying your first house is a big step in your life.
A big investment, so you don’t want to miss your shot.
The project can really be tedious. There is a lot to consider and we normally have little or no knowledge about the subject.
I got my first experience with my parents. My parents had no contacts and no knowledge on the matter, so they really needed help.
This first experience made me realize that not many people know how to prepare for the purchase of a home.
Elements to consider for your first house:
- Goal:
You need to decide whether your goal is to keep the house for a few years or for many years. This will have an impact on your choice of mortgage term later on.
Is it because everyone is telling you that it is a better option than throwing your money out of the window? Because as you will see below, renting and saving could be a better option.
- Location, Location, Location:
Where your residence will be located is very important. Things to consider in relation to the location are:
–Growth: Not all neighborhoods increase in value at the same pace and some may even lose value. For example, it may be riskier to move to a new neighborhood that has no growth history compared to one that has been growing well for years. Obviously, you are just interested in the housing and you don’t care about the plus-value, you don’t need to consider this criterion.
–Schools: Maybe you have children or plan to have them. In this case, the school can become an important criterion. If you are very much in favor of private schools and you decide to choose an area that offers top public schools, this can be a good alternative, especially economically.
–Socio-demography: You want a neighborhood with young parents or a neighborhood of young professionals without children.
–Etc...There is probably many more personal criterion related to each person but I believe this small sample gives you a good start on the topic of location.
- Style:
If the plus value is important to you, you have to understand that as fashion changes, house styles popularity changes also. So do you want something that’s trendy right now and then might not be later? Colonial or Tudor style homes are relatively timeless. This will have an impact on the growth of its value.
- Down payment:
Normally, you should already have an idea of how much the house might cost you. If you don’t, I invite you to go to the real estate company website to find out how much the kind of house you want can be worth.
Once you have the price, you will be able to plan the savings needed for your down payment because at least 5% is needed.
I often suggest my clients plan this at least 3-5 years in advance because it gives them enough time to raise all the money needed to achieve their project.
For example, take a house of $ 300,000.
$ 300,000 times 5% is $ 15,000. It’s easier to save it in 3 years than in 1 year.
- CMHC (PMI):
If your down payment is below 20%, the bank will require you to have the mortgage insurance from CMHC.
This insurance protects the bank in the event that you are unable to pay your mortgage. The rate can go up to 4% of your mortgage.
This insurance is added to your mortgage, so it will be part of your mortgage payments.
One important point to remember is that it may be worthwhile to increase your down payment only if you are able to reach another 5% threshold. Otherwise, it has no effect on the rate.
For example, at 10% the rate decreases to 3.10%.
- Inspection:
Besides checking to see if the seller was honest about the condition of the house, this step also helps to gather ammunition for negotiating.
- Evaluation:
This allows you to see if the price is fair for the condition of the house. If it’s not, you have more ammunition to negotiate.
- Welcome tax:
The amount is roughly 1% of the larger amount between the municipal assessment and the market value of the house.
- Notary:
The deed of ownership, which constitutes the contract that demonstrates the transfer of the property to your name.
Plan at least $ 1,000.
- School and municipal tax:
Unfortunately as an owner, you must contribute to ensuring that your municipality is well maintained.
Usually, if you look at real estate websites some of the property listings, will show the costs otherwise you can always ask the owner to provide it to you if you are really interested in the purchase.
- Home insurance:
When you are a tenant, home insurance is not mandatory but for homeowners, it is. The bank requires it.
What will they cease if you can’t pay? Probably not the wreckages.
- Mortgage insurance:
This insurance covers you in the event of death, disability, or critical illness. So if, for example, you have an accident or an illness and you have to stop work, you can be relieved that your mortgage will pay itself.
The same if you pass away.
Something important to remember about this product is that it is much more advantageous to have it with an insurance company than to take it with the bank.
Have you already taken it?
No problem, it can be canceled at any time and at no cost!
I hope this little guide will help you get your ideas clearer and get started on your project more easily.