Quick Tips for the first-time homebuyer

Buying your first home is an exciting new experience. Attending open houses, putting in an offer to buy and decorating your new home to suit your style is all part of the excitement. All the decisions that need to be made can also make you feel nervous. Here are a few tips that can help out the anxious first-time home buyer.

How much can I afford?

There are two things to consider when determining how much home you can afford. How much do you have for your down payment? What amount can you afford as a monthly payment while still enjoying life? To help answer these questions talk to a mortgage professional.

To shop for a home with confidence, you can obtain a pre-approval certificate from your financial institution. This document will tell you how much of a mortgage you can afford.

How much do I need for my down payment?

You can buy a home for as little as 5% of the purchase price. However, any mortgage with a down payment of less than 20% has to be insured by a third party such as the Canada Mortgage and Housing Corporation (CMHC). The amount of your down payment will determine whether you need to insure your mortgage or not.

• Conventional Mortgage- a mortgage where you have at least 20% of the purchase price.
• High-Ratio Mortgage- a mortgage where you have less than 20% of the purchase price.

Your insurance premium will depend on the amount you are borrowing and on the percentage of your down payment amount. Premiums usually vary between 1.00% and 2.75%.

How can I save for a down payment?

There are a few different methods that can be used when saving for your down payment:

• Setting money aside each month just as if you had to make a monthly payment
• Opening a RRSP investment account. If you are a first-time homebuyer you and your spouse can use up to $25,000 each towards your down payment without tax implications as long as you repay the amount within 15 years.
• A cash gift from a parent or relative.(“gift” means its non-repayable)

Should I be aware of any additional cost?

Your mortgage will cover off the purchase price of your home, however there are other costs and can usually amount to 1.5% to 3.5% of the total cost of your home. Here are a few examples of the hidden costs of home ownership associated.

• Appraisal fee
• Home inspection
• Property survey
• Land transfer tax
• Legal fees
• Sales tax
• Title insurance
• Home insurance

Also, don’t forget to consider general expenses such as moving and home decorating costs.

Always be an informed client.

For more information contact your Toronto Mortgage Broker at 416-920-9931

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