Have questions about what you can afford? To view our free Affordability Worksheet:
2. Know Your Expenses
The purchase price of your new home is just one of the costs associated with home ownership. Real estate experts suggest that you budget 1.5% of the purchase price of your home to cover these costs. It depends on the value of your house and your Realtor can provide you the estimated closing close.
- Home Inspection – A home inspector’s job is to examine a home’s condition. Typical issues involve normal wear and tear, but can sometimes include serious material defects. Getting a home inspection before purchasing a property is one of the best decisions you can make.
- Appraisal and/or Survey – In order to provide financing your lender will sometimes require an appraisal or survey of the property, to make sure that the value of the home matches its purchase price.
- Land Transfer Tax – A provincial tax based on the purchase price of your new home. With the current government program, you can get different rebate from the government.
- Mortgage Insurance – If your down payment is less than 20% of your purchase price, you may need to pay mortgage default insurance. The cost of this insurance varies depending on the amount of your down payment. The cost will be rolled into the cost of your monthly mortgage payment.
- Legal Fees – There are a number of legal fees involved in the purchase of a home, such as paying your attorney for the title search, deed preparation and registration.
- Title Insurance – Protects you from situations such as title fraud or flawed surveys.
- Home Insurance – Making sure that your home is insured is a condition of your mortgage. Your lender will require you to have home insurance before they release your mortgage to you.
- Adjustments – Adjustments are made for things that the seller has paid for, but which you now owe part of because the home is now yours. This could include things like property taxes or rental fees for hot water heaters.
- Utility Hookups and Moving – You will be responsible for any utility transfers and costs associated with moving into your new home, such as hiring a moving company.
- GST – for new home or presale, you may need to incur to pay GST on completion.
3. Get Pre-approved
After you have figured out what you can afford, it is a great idea to sit down with a mortgage agent or broker and get pre-approved for a mortgage. This will make your home search easier by narrowing your focus and will prevent you from falling in love with a home that is outside of your price range.
If you’re not sure where to start, visit our Business Partners page for a list of mortgage agents and brokers. Our clients have enjoyed working with them. If you’re ready to get pre-approved, visit our Get Pre-Approved for a Mortgage page.
4. First Time Home Buyer Incentives
As a first time home buyer you are eligible for refunds, benefits and programs not available to other home buyers. For example both the First Time Home Buyers’ Tax Credit and the Land Transfer Tax Refund for First Time Home Buyers are tax breaks that could end up saving you thousands of dollars!
Home Buyers’ Plan
Qualifying home buyers can withdraw up to $25,000 (couples can withdraw up to $50,000) from their RRSPs for a down payment. Home buyers who have repaid their RRSP may be eligible to use the program a second time.
Canada Revenue Agency www.cra.gc.ca
Enter ‘Home Buyers’ Plan’ in the search box. 1.800.959.8287
GST Rebate on New Homes
New home buyers can apply for a rebate for the 5% GST if the purchase price is $350,000 or less. The rebate is equal to 36% of the GST to a maximum rebate of $6,300. There is a proportional GST rebate for new homes costing between $350,000 and $450,000. At $450,000 and above the rebate
Canada Revenue Agency
www.cra.gc.ca Enter ‘RC4028’ in the search box.1.800.959.8287
BC Property Transfer Tax (PTT) First-Time Home Buyers’ Program
Qualifying first-time buyers may be exempt from paying the PTT of 1% on the first $200,000 and 2% on the remainder of the purchase price of a home priced up to $475,000. There is a proportional exemption for homes priced between $475,000 and $500,000. At $500,000 and above the rebate is nil.
BC Ministry of Small Business and Revenue
First-Time Home Buyers’ Tax Credit (HBTC)
This federal non-refundable income tax credit is for qualifying buyers of detached, attached, apartment condominiums, mobile homes or shares in a cooperative housing corporation. The calculation: multiply the lowest personal income tax rate for the year (15% in 2012) x $5,000. For the 2013 tax year, the maximum credit is $750.
Canada Revenue Agency
For more information, click Top Grant and Rebate Oct 2014.
5. Know What You Want & Get Organized
At this point you’ll want to sit down and figure out exactly what type of home you’re looking for. A simple way to do this is by making 2 different lists: a list of what you need from a home, and a list of things that you want from your home. The list of things that you need will include all of the features that are necessary for you and your family to function comfortably during your daily life. Things such as the number of bedrooms you need for the size of your family, or a one storey home if accessibility is a factor. The list of things that you need will include features that you would like to have but that aren’t absolutely necessary, such as a pool or a den.
It’s also a good idea to make sure you are organized for your home search by doing some research on what area you’d like to live in. Look at all of the aspects of the location you are considering and the surrounding area: is it attractive based on your proximity to work, schools and amenities such as grocery stores, parks, commuter routes, etc.? Keep a detailed map on hand and highlight your areas of interest. Knowing what you need and what you want from a home, as well as what area will suit your lifestyle best will make searching for your new home easier and less stressful.
6. Get a Professional on Your Side
The purchase of your first home is one of the biggest and most exciting investments that you will make. This purchase will affect your family, your finances, and your lifestyle. For a decision this important you want to make sure that you have an experienced professional on your side who can guide you through the process and protect your best interests along the way.
Best of all, as a home buyer the professional services of your Buyer’s agent are completely free to you! As is the industry standard, your buyer’s agents fees are paid by the home seller. A licenced agent will protect your interests by making sure that you are fully informed about your purchase and by handling the legalities and negotiations.