Everybody dreams of owning a home at some point in their lives but rarely does one have the money to buy it straight away and that is where lenders come in. They help you secure a loan that is given on basis of the value of the house you plan to purchase. This is executed based on a promise to return the money over a period into the future. The number of years and the amount sanctioned will depend on your credit history, the value of the house and your income.
Here’s a concise list of the most important things to consider before you purchase a home.
Mortgage: Seeking a mortgage is a huge aspect of buying a house and it can be extremely intimidating especially if you have never approached any institution for a loan.
- Mortgage terms will typically range from 6 months-10 years. Like it was mentioned previously this will depend on a few factors. At the end of the term, you can extend the term by refinancing your loan.
- Amortization refers to how long you have before you must pay off your loan (different from your remaining term of the loan). In Canada, the Amortization is capped at 25 years.
- There are various kinds of mortgages to choose from like fixed/variable or open/closed. The terms and conditions will vary for each of those and you should study them well before choosing one.
Down payment: A down payment refers to the amount you will pay up front to purchase a house. The balance will then qualify for the mortgage. There are rules regarding the same for houses purchased in Canada. For instance, where the value of the house is less than $5,00,000 then a minimum of 5% must be paid as down payment. Where the value is between $5,00,000 and $ 9,99,999 a minimum of 10% had to be put down. Where the value is over $1 million, 20% is the minimum down payment.
In addition, where you are putting down lesser than 20% as down payment for a house valued more than $1 million, you must take out insurance on the mortgage.
Tax Credits: There is much information that can be shared with regards to tax credits and how you can use it to save some money.
- HBP or Homebuyers plan allows you to withdraw up to $ 25,000 from your RRSP (Registered Retirement Savings Plan) every year to build a home without this affecting your taxable income. Another advantage to this is the facility to pay back within 15 years without the fear of penalties or charges.
- GST/HST rate- This is a housing rate available for those planning to make this residence your primary place of residence.
- There are quite a few other credits which may be claimed but it should be done with the guidance of a person who knows the law. This will help you save some money in the long run.
Search for your Home: If it is your first home, then the best suggestion that you will get is to contact a real estate agent. Not only are they privy to the local listings and the houses available, but they are also the best people to navigate through the tons of paperwork you will have to process. The best agents will be able to understand your needs and get you the right house by negotiating well for you. The agent will be the one to help you once you have found the right place. Putting in an offer, negotiating and finalizing the deal will be a success if your agent is adept at his/her job.
Other costs: Most people make the grave mistake of not planning for other costs- while insurance should not be taken lightly, other costs such as appraisal costs, repairs if any (eg. New Wooden Windows Installation) , modifications if needed, property taxes, furniture and getting the home ready are some that go unaccounted for in the planning stages. You will do well to keep some money aside for this so that you have a house that is ready to move in.
It does not matter how long the process of buying a house is, what matters is how happy you are with the purchase. This can be turned into a pleasurable experience if you are prepared for the work that needs to be done.