Costs & Considerations
In the excitement of beginning a search for a home or cottage, many people jump right in without considering all of the elements that make a home truly right for them. It is a complicated and personal process and making the wrong purchase can be costly in many ways: you could lose money, waste time and effort relocating, or even put your family’s happiness by the wayside.
The following are some things to consider when identifying your ideal home or cottage and planning a successful purchase.
LAND TRANSFER TAX
When you acquire land, you pay a Land Transfer Tax to the province when the transaction closes. It is normally based on the amount paid for the land, in addition to any mortgage or debt assumed as part of the agreement to buy the land.
Land Transfer Tax is generally calculated using the following formulas based on your purchase price:
- on the first $55,000: 0.5%
- from $55,000 to $250,000: 1%
- from $250,000 to $400,000: 1.5%
- over $400,000: 2%
Please note, if you are a first-time homebuyer, you are eligible to receive an exemption of up to $4,000.
You’ll need to hire a lawyer to review your Agreement of Purchase and Sale, as well as any documents like Status Certificates or requisitions. The lawyer will make arrangements for Title Insurance, mortgage statements, any adjustments, ownership changes, payment of fees, keys, etc.
Lawyers’ rates vary from practice to practice depending on many factors such as disbursement fees, mortgage type, etc.
HOME OWNERS’ INSURANCE
All mortgage companies require you to carry home insurance. The costs vary depending on your coverage and the company you use (just as with car insurance). Some companies offer a discount if you insure your home and automobile with them.
You may wish to have the home inspected as part of the buying process. Check out my Home Inspections page to learn more.
MOVING COSTS & UTILITY HOOK UPS
Moving costs are something to consider, whether you’re making the move across town or across the country! You may choose to rent a truck and move everything yourself, or you may want to hire a reputable moving company to do the heavy lifting for you.
Make sure they are insured and bonded, and that they come with the gleaming recommendation from people you trust. You don’t want to leave all your belongings with people you don’t know!
Once you have purchased a home, you can begin setting up your utilities at the new property. Often this can (and should) be done in advance of closing, so don’t wait until the last moment to get these accounts set up.
CHOOSING A NEIGHBOURHOOD
Improvements can become expensive if you’re not sure what you’re getting into – this is where a knowledgeable home inspector and REALTOR® can help!
When searching for a home to renovate, try to focus on the areas that will provide the greatest return on investment.
These renovations have been found to have the greatest payback: kitchen 70%, bathroom 68%, interior painting 65%, exterior painting 62%.
When you find a locale you like, spend some time in that neighbourhood (walk around, shop, go for lunch, etc). It’s often a good idea to visit the neighbourhood at different times of the day.
This will give you a good idea of how busy the area actually is. During your time have you noticed if the people are friendly? Are there stores and recreation facilities nearby that suit you and your family’s needs?
You may wish to also look for a neighbourhood close to the school(s) you want your children to attend.
SPEAK TO A PROFESSIONAL
Speaking to a financial expert is the best way to start off on the right foot. Mortgage specialists or financial planners are excellent resources to give you accurate numbers on what you can comfortably afford without being “house poor”.
Taking this initial step will benefit you and your family prior to searching for the perfect home. Often when people are unsure of what they can afford, they inevitably end up with feelings of “being let down” and “disappointed” when they find the homes they love are out of their price range.
This refers to documents from a financial institution indicating that you have the financing to purchase a home. Pre-qualification is free and most lenders are happy to sit down with prospective buyers and figure out how much they can afford.
Having an accurate idea of price range will save time in the bidding process. If there are several people making offers on your dream home, being pre-qualified can make your offer more attractive since financing is not in question.
It is important to note, however, that lending institutions will base their final decision about a mortgage on the ability of the buyer to service the debt as well as the property.
Most lenders state that the two components go hand in hand – the buyer with the ability to repay a mortgage and the property as security in the event of default on payment.
It is important to note that a pre-qualification is highly dependent on the accuracy of the information provided by the buyer. No credit report is pulled and lenders often do not look in depth at a person’s financial situation during this stage of qualifying.
By taking all these points into consideration, you can worry less about the process of buying and get busy finding your ideal home! For more information on the costs and considerations of buying a home, please contact Todd Sayles at BALL Real Estate Inc., Brokerage.