As a first-time home buyer, you probably already know you’ll need a chunk of cash for a down payment. But lots of other costs can creep up when it’s time to jump into the real estate market, so it’s a good idea to save up for them and be ready for when the time comes to make an offer. Here’s how one first-time home buyer is navigating this exciting time.
Start budgeting early
When Montrealer Kelly Wong decided last summer to buy a two-bedroom condo or small home on her own, she knew she had lots of homework to do, including figuring out what she could afford.
TIP: Using an online tool like our Mortgage Payment Calculator can allow you to see what your mortgage expenses will look like.
Wong also teamed up with Jean-François Gionet, a Broker and REALTOR®, with the Katia Samson Real Estate Group to make sure she was getting the best experience possible. Gionet helped Wong think about saving up for the required down payment, plus other related costs.
“On top of preparing for the biggest purchase in your life, you also have to consider your other (living) expenses, including car payments, home insurance, and more,” says Wong.
Before she was pre-approved for a mortgage, Wong also consulted a financial advisor who helped her with calculations.
“Even when you get numbers saying you can afford a mortgage of $1,000 a month, I know that’s just your mortgage payment; there are still utilities, property taxes, condo fees, and things like Netflix,” she says. “I think it’s good to overestimate what you really need to pay every month, so you don’t have any unpleasant surprises.”
It’s also wise to put money away monthly as part of an emergency or savings fund. If your furnace breaks down, your roof leaks, or you desperately need to upgrade your dated kitchen, those costs are all on you.
Prepare for extra costs associated with buying a home
Beyond the significant deposit on the home, you might have to pay extra for a parking spot if you’re purchasing a condo. You’ll also need to put some cash away for a professional home inspection, which could run between $500 to $1,000 or more depending on where you live. Then there are different closing costs you might have to pay on top of the final price for the property. Some costs are offset by various tax credits, which your REALTOR® can explain.
“Another thing I budgeted for is Quebec’s transfer tax, also known as the Welcome Tax,” says Wong.
Land transfer fees vary from province to province. In Wong’s case, it’s based on the municipal assessment, and can be anywhere from 0.5% to 1.5% of the total cost of your home. You can use the REALTOR.ca Land Transfer Tax Calculator to get an idea of what some costs might be.
Then there are notary or attorney’s fees to pay for, which cover the research and paperwork associated with the transfer of properties. Sometimes, you’ll have other smaller costs, like reimbursing the sellers if they paid for certain utilities in advance or a fee to change the locks if you choose to do so. It’s also important to have a cushion for things like installing a security system, plus fun stuff like buying new furniture or sprucing up your décor, adds Wong.
“You want to have the money prepared for things like notary fees, but you might want a new paint job or a facelift for the kitchen cabinets or to pull up the carpet,” she says..
Let your REALTOR® guide you through the process
Wong says she found working with Gionet extremely helpful because together they talked through her needs, wants, and budget.
“For example, we talked about parking spaces—indoor versus outdoor, one or two—and whether I wanted a balcony; he helped me evaluate what’s really important to me,” says Wong. “He also helped me realize I want a nice place in a nice neighbourhood near public transportation, but perhaps not in a super modern, fancy building where your condo fees could be quite expensive.”
They also discussed which types of properties would be good for resale down the road, plus the option of renting out a bedroom to a student to help offset part of the mortgage cost.
When you’re a first-time home buyer, you’ll have lots of questions. The best solution is teaming up with a REALTOR® who can pave the way for you. For more information, consult the Canadian Real Estate Association’s (CREA) Home Buyers’ Road Map, which features more great tips to make the home buying journey easier.
The information discussed in this article should not be taken as financial or legal advice. This article is for informational purposes only.
Source: realtor.caPosted by Infinity Admin on