THUNDER BAY – For-sale signs are up and house hunters are out in full force. Many are first-time home buyers, a group that accounts for about half of all house purchases – more than 250,000 – in Canada in the last two years.
The desire to own a home is strong in Ontario. A recent poll, conducted by Ipsos Reid for the Ontario Real Estate Association, found that 70 per cent of renters in the province would like to buy a home. However, according to the same survey, 81 per cent of Ontario residents believe purchasing a home is more difficult now than it was for their parents.
“A home is, for many, the single largest purchase ever made,” says Al Suraci, CEO for Northern Credit Union. “For first-time home buyers in particular, this can be daunting in terms of understanding expenses beyond the down payment and mortgage. Our goal is to provide financial advice and education that allows consumers to make more informed decisions.”
With new home listings high in spring and summer months, Northern Credit Union offers several tips for first-time home buyers:
Get pre-approved – Before starting to house-hunt, it is a good idea for first-time home buyers to receive pre-approval. This will help determine what is affordable.
Determine Fixed vs. Variable – Ask an expert about fixed and variable interest rates to determine the best option. A fixed mortgage interest rate is a locked-in rate that will not increase for the term of the mortgage. A variable rate fluctuates based on market conditions.
Consider an Accelerated Payment Schedule – Accelerated payments (weekly or bi-weekly) allow home owners to pay off mortgages sooner and save money in the long-term. More frequent payments will reduce the interest paid by reducing the outstanding principal balance more quickly.
Budget for Additional Costs:
Appraisal Fees – An appraisal is an estimate of the value of the home. A mortgage provider may require a property appraisal at the home buyers’ expense. The cost is usually between $250 and $350 though, in some instances, financial institutions may waive this fee.
Land Transfer Taxes – In Ontario, home buyers must pay land transfer taxes/property purchase taxes, which are calculated as a percentage of the purchase price. First-time home buyers may be eligible for a rebate.
Property Taxes – If purchasing a newly constructed home, keep in mind that the initial property tax bill might not be complete. Property taxes may be reassessed based on the value of the home and the new home owner may receive an additional bill.
Legal Fees – These include the cost of hiring a lawyer to review and negotiate the purchase agreement and close the deal. They will also include any costs, as well as out-of-pocket expenses, incurred by the lawyer for such things as title searches and registrations.
Closing Adjustment Costs – These are costs paid to vendors to reimburse them for pre-paid expenses such as property taxes and utilities.
Home Insurance – A mortgage provider may require that insurance be purchased for the property as a security for the loan.
Home Inspection Fees – A home inspection is a report on the condition of the home, outlining whether there are major structural issues or repairs required. This will save money and headaches in the long-term. Consider making a home inspection a condition of the Offer to Purchase.
Maintenance -A home requires maintenance in order to retain its value. Depending on the age of the property, it is inevitable that something will leak or break, so it’s always wise to keep some money aside. For newer homes, maintenance might not be an immediate issue but it is a good idea to budget for landscaping, painting, building a fence, etc.
In addition to the costs associated with buying a home, set money aside for moving expenses, furnishings, and appliances, if they are not included with the home. Keeping all of this in mind will enable new home buyers to buy with confidence. For more information on how to become mortgage-free sooner, visit a Northern Credit Union branch.
Serving 23 communities stretching along the Canadian Shield in northern and eastern Ontario, Northern Credit Union is a full-service, locally-operated financial institution offering personal and commercial banking and financial planning expertise to more than 47,000 member shareholders. For more information on Northern visit www.northerncu.com.