Sunday, January 30, 2011
1:35 PM
Buying your first home is a major life event. You will have many decisions to make both before and after you find the right home, including financial decisions. Here are a few tips to make financing your first home a little easier. 1. Get pre-approved for a mortgage. A pre-approved mortgage gives you an edge. Before you even go house hunting, you will know your maximum mortgage amount, the interest rate and the amount of your monthly mortgage payments. A pre-approved mortgage may also put you in a stronger bargaining position when you make an Offer to Purchase because the seller will know that you are a serious buyer. 2. Determine your home price range. With your financing already figured out, you can concentrate on finding the right home within your price range. There are two things to consider when determining how much you can afford to spend on a home.
To help you answer these questions, you can either call your financial institution or go to your branch and talk to your personal banker. Some financial institutions have tools on their websites that can help you calculate what you can afford. Just enter your information in response to a few questions and the calculations will be done for you. 3. Determine your down payment amount. You can buy a home with as little as 5 per cent of the purchase price. However, if you have a down payment of less that 25 per cent it will mean your mortgage must be insured by an insurer such as Canada Mortgage and Housing Corporation (CMHC). The amount of your down payment will determine whether you need mortgage insurance or not. Your insurance premium will depend on the amount you are borrowing and the amount of your down payment. Premiums usually vary between 1.00% and 3.25% of the mortgage amount. 4. Consider tapping into your RRSPs. If you qualify as a first-time home buyer, you and your spouse can each use up to $20,000 from your RRSP savings towards your down payment. This money will not be included in your taxable income, as long as you repay the amount withdrawn from your RRSPs within 15 years. 5. Be aware of additional costs. Your mortgage will cover off the greater part of the purchase price of your home, however, there are other costs associated with buying a home. These are called closing costs and they usually range between 1.5% to 3.5% of the total cost of your home. Here are a few examples of the additional expenses you may incur when buying a home and the approximate costs of each. |
