Canada has long been an attractive area for investors, both domestically and internationally. And with current real estate prices set to remain low until the final quarter of 2023, those looking to purchase a new home should move quickly to ensure they get the best deal on their home.
That being said, putting in the prep work and getting your ducks in a row prior to finding the house of your dreams is highly advisable to ensure you don’t miss out on the best mortgage rates or offers for you and end up investing in a property that is beyond your capabilities or stretching your finances to the hilt.
So what do you need to know before purchasing a property?
How Much Can You Realistically Afford?
We’ve all seen the memes and questioned mortgage companies’ decisions when refusing home loans for a lower amount than the rent you are paying. However, buying a house is a more complex financial burden than finding rent every month. You need to sit down and look at what you can realistically afford. While you might be able to afford higher rent than your projected mortgage, you also need to factor in other costs, such as taxes, insurance, home repairs, and fluctuating interest rates that can affect your repayments.
You also need to look at your income, how stable it is and what you would do if you lost your primary source of money; how would you afford your mortgage payments? Set a figure you can comfortably afford to repay and then look at if this is realistic for taking on a mortgage.
What Your Debt to Income Ratio Is
One of the most extensive loan agreements you will ever make is taking on a mortgage. As such, it’s imperative that you understand your debt-to-income ratio to ensure complete affordability. This means keeping your debt levels below 35% of your income. You have probably heard of things like the 50/30/20 rule meaning that 50% of your income should be your needs, 30% for your wants and 20% for savings and debt if you have any. While this is an excellent rule to follow, keeping debt levels as low as possible will ensure you are able to focus more on your remortgage payments.
The size of the home you are planning to buy and the cost of the house will dictate exactly how much you will end up paying in property taxes. Typically property tax is 0.5% to 2.5% and will vary depending on the factors mentioned above and the factors set by your municipality. You can expect to pay these taxes each year, so be sure you can afford the cost when looking to buy a new home, especially if you are jumping up in size or value.
Much like anywhere in the world, buying a home comes with many different fees that likely will need to be paid for upfront and not from your mortgage. So as well as needing to find your deposit, you will need to have the funds available to help you cover these costs. Generally, buyers can expect to pay for things like; appraisal fees, closing costs, legal fees, title insurance, property adjustment taxes, and your realtor. You can expect to pay anywhere up to 4% of the value of the home on these types of costs.
Finding The Right Realtor
Your realtor should be your main source of information and support during this time, so it’s essential you pick them well. Then send to have extensive knowledge of the area you are buying in and have a good portfolio of clients and properties to ascertain their ability to help you with buying your next home. Meet with a few realtors to see how you deal with them before embarking on your home-buying journey. You need someone who understands what you want and can find it for you easily without wasting your time. Look online for reviews, ask family and friends, check out reviews and social media accounts and meet with them in person to help you make the right decision on who to go with.
Negotiating Home Repairs
After an offer on a house has been accepted, an inspection may reveal necessary repairs such as hot water tank repair, electrical work or even plumbing work that need doing. Prior to signing any contracts, it is crucial for both parties to understand who will pay for expenses associated with repairs. Buyers should negotiate repairs with sellers prior to finalizing their purchase agreement. Negotiations over repairs costs could result in either a lower selling price, or having the seller perform repairs before closing. Prioritize repairs that affect home safety or functionality as soon as they arise to avoid more significant issues and expenses later on. Negotiating successfully for repairs will save money while guaranteeing you move into an ideal property condition when moving in.
Buying your new home shouldn’t be one without a lot of thought and consideration on your part. You need to make sure you can afford the repayments, you have a good credit score, and you are able to cover all of the costs and taxes associated with one ownership easily to ensure you don’t end up struggling to pay your mortgage down the line.