Previous...
Get a Pre-Approved Mortgage
It used to be that finding the ideal home came first and trying to find financing came afterwards. Now home buyers recognize the advantages of having that financing in place before hand.
A pre-approved mortgage takes the guesswork out of house hunting. You'll know upfront how much of a mortgage you qualify for and at what interest rate. The fact that you already have your mortgage arrangements in place also indicates to prospective vendors that you are a serious buyer. You can negotiate in confidence, with no time wasted and no last-minute scrambling.
Additional Costs
While a mortgage helps you cover the purchase price of your home, there are some additional costs involved. At a time when every dollar matters, it's important to know what these costs might be.
Some are "upfront costs" necessary to start the process, some are referred to as "closing costs" or "disbursements", while others are simply fact-of-life expenditures that are likely to occur when you're planning to move into a home of your own.
Since these costs can add anywhere from 1.5% to 3.5% to the total cost of your home, it's best to be aware of what they are and which ones are likely to apply to you:
- Appraisal Fee
Since the property you want to buy will be offered as security for a mortgage, the lender/insurer will need to determine the property lending value for mortgage purposes. Lending value may not reflect the market value of the home, or its purchase price.
- Inspection Cost
An inspection of your home is not mandatory, but it's a very wise step to take before making your offer to purchase, or as a condition to your offer. A home inspector provides you with a written report after checking that the building is sound, and will identify potential repairs and their estimated costs. An inspection can cost you several hundred dollars. Since the industry is not licensed or government-regulated, you should check the credentials and make sure the inspector you choose has liability insurance.
- Property Survey Cost
A survey indicates the property boundaries and measurements, position of major structures and any registered or visible easements or encroachments on the property. An easement is, among other things, a right to access your land for a specific purpose such as a driveway or public utilities. An encroachment is any intrusion on your land by a neighbour's fence, structure or over-hang. If there isn't a current survey available from the seller, your lawyer or notary can obtain one for a fee.
- Insurance Costs
If yours is a High Ratio Mortgage, certain upfront fees may apply. There are two fee structures which the insurer offers: a basic fee or an application and appraisal package.
- Home Insurance
Now you're insuring a structure as well as its contents. Your insurance agent or insurer may provide you with the insurance estimate you need.
- Land Transfer Tax
In some provinces, a tax is levied on any property that changes hands. As the buyer, you are responsible for paying this tax, which is usually a percentage of the purchase price.
- Interest Adjustments
Sometimes the closing date of your home and the first payment date of your mortgage leave a gap in interest payments. Since you will be expected to pay any interest owing for this period, make sure you ask ahead of time whether or not there will be any interest adjustments.
- Prepaid Property Tax and Utility Adjustments
If the person selling you the home has prepaid property taxes or utility bills, it's only fair that they be reimbursed by you from the time that you will assume the property.
- Legal Fees and Disbursements
It's in your best interests to engage the services of a lawyer who specializes in real estate deals.
- Sales Taxes
Some properties are sales exempt (GST and/or Provincial) and some are not. Generally, GST is charged on new homes but not on resale properties. Always ask before signing an offer.
- Moving Expenses
Remember to factor in the cost of hiring movers or renting a van. The farther you move, the higher your costs are likely to be.
- Service Charges
Hooking up hydro, gas, phone, etc. to a new address usually incurs additional costs to your regular monthly utility bills.
- Immediate Repairs
If there are any pressing repairs, be sure to have funds available so you can take care of them as soon as you take possession of the house.
- Appliances
Fridge, stove, washer and dryer are major purchases which you'll have to make if the appliances don't come with the house or if you don't already own them.
- Decorating Costs
There are some things you may want to do as soon as you move in... paint or wallpaper, purchase new window coverings, install new carpeting, buy new furnishings. Remember, it doesn't have to be done all at once. Check your budget to see what you can afford.
Next...
