Disclosure: This is a partnered post with Tangerine Bank. However, all opinions and views on this post are 100% my own.
Looking to buy a home or switch your mortgage? We’ll be moderating the
#MortgageSavvy Twitter Chat on May 29 from 8pm-9pm ET. Follow @TangerineBank & tweet with #MortgageSavvy to participate!
Date: Wednesday, May 29, 2019
Guest: George Kibalian will be available to answer your questions
Time: 8:00pm – 9:00pm ET
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How much money do you really need to purchase a home?
You will need more than just a down payment if you want to get into home ownership game. Here are some things you should consider.
What type of home is best for you?
What type of home is best for you? Would you prefer a home, a townhome or a condo? If you don’t like to maintain a home, then a townhome or condo might be best for you. It might also be easiest to get onto the property ladder by purchasing a condo. Don’t forget that condos have expenses of their own. You will have to pay a monthly condo fee – that will most likely increase every year. Additionally, you may get “special assessments” at any time. These can be in the hundreds to the thousands. A friend of mine purchased a condo and was hit with a $10,000 special assessment in his second year. Ouch! Good thing he had an emergency fund! Don’t get me wrong, traditional homes require new roofs and new furnaces, plumbing etc. You just might not think that you will get slapped with a special assessment if you own a condo, because you assume that the monthly condo fees will cover those costs.
How much home can you afford?
What can you really afford? As I drive by some neighbourhoods, I dream of living in the big beautiful homes. Those homes are a dream. You need to find a home that you can afford. You need to find a home that you will be able to afford over the long term. The best way to start is by using a mortgage calculator. You might have to start with a “for now” home versus a “forever home”. You need to consider all of the things that can go wrong. What will you do if you fall on hard times? According to Canada Mortgage and Housing Corp,, 31% of mortgage consumers wish they had more information on what to do when faced with financial difficulties.
How much down payment will you require?
The larger the down payment the better. In Canada, you need a down payment of at least 5% on a home that is priced up to $500,000. If you want to purchase a home between $500,000 and $1,000,00 then you need to put down a minimum of 10%. If you want to purchase a home that is over 1 million dollars, then you will need to put down a least 20% of the value of the home. The minimum is not always enough. If you want to buy a home with a down payment of less than 20%, you’ll need #mortgage default insurance. This protects your lender in case you can’t make your payments. This insurance will also add more to your monthly payment.
Will you have enough for all of your closing costs?
You also need to think about your closing costs. Legal fees and disbursements are due at closing. They can cost between $1,000-$1,500. Have you considered the land transfer tax? Do you know what it is? Depending on where you buy a home, land transfer taxes or property and #mortgage registration fees can range from a few hundred dollars to thousands of dollars and are payable at closing.
Don’t forget about other costs of home ownership
If you buy a home, you have to think about all of the “other costs” of home ownership like utilities, property taxes and home insurance? If not, you may be house rich, and cash poor. Extra expenses may include repair and maintenance costs, snow removal and alarm monitoring.
If you are thinking about home ownership, The Canada Mortgage and Housing Corporation released facts from their 2018 Mortgage Consumer Survey.
Mortgage Provider – Til Death Do You Part?
Have you kept the same mortgage provider since day 1? Have you ever considered switching mortgage providers? You don’t have to stick to the same mortgage provider. I wasn’t aware of the fact that you have the option to switch providers. I shop around for daily items, so I think it is prudent to shop around for the right mortgage provider. Don’t be put off by the extra effort that it may require to switch. It could pay off handsomely in the long run.