For people who have never owned a home, but want to, the real estate market may seem a bit mysterious.
We at the Newbigging-Pearson Real Estate team are very good at solving mysteries!
For families who come to see us and are in the first stages of home ownership – we call it the “just looking” stage – we advise them that making a budget will tell them what they can afford, which often helps them make the decision to put in an offer.
For families who are upsizing, or downsizing, they already have a good idea what home ownership costs – with financing; costs associated with the purchase; insurance; transferring a mortgage; utility costs, and costs associated with maintenance.
Whether you are new to the game or an old hand at it, making a budget is still a really good idea.
It’s pretty simple. On a sheet of paper, make three columns: One for money that comes in; one for all expenses, and one for money that goes into savings or investments.
In the expenses column, list all expenses related to your family. Don’t forget incidentals, like lessons for children; recreation fees; allowances and fees associated with medical equipment or charitable donations.
Once you have subtracted your investments, like RRSP contributions, from the remainder, you have a working budget for your home financing and housing costs.
Most financial institutions recommend spending no more than 25 per cent of your monthly take-home funds on your mortgage. You may need to do some shopping around at financial institutions to find out what kind of mortgage suits you best. Don’t be afraid to apply at more than one: They may even compete for your business.
Once you have been approved for your mortgage, you need to know exactly what costs will be associated with the home purchase.
Budgeting for these ahead of your closing date will make things go much more smoothly – and will take the mystery out of the whole transaction.
- In addition to your mortgage, there will be the costs associated with the down payment, which can be as much as 20 per cent of the purchase price, depending on the type of mortgage you are purchasing and on the price of the home.
- Mortgage insurance premiums can be paid at time of purchase, or added to the principal amount of the mortgage at most financial lenders. Some financial lenders also require you to have mortgage life insurance.
- Proof of home insurance is a requirement for closing your purchase; it’s good to apply for this ahead of your closing date. You will need proof of your policy and paid premiums, which can be sent to your lawyer’s office.
- Closing costs are sometimes a surprise to new homeowners. These may include an appraisal fee; survey or home inspection fee; wire transfer fee; costs to process financial applications; legal fees like a document preparation fee; costs to obtain a credit report; costs for title insurance; government fees for processing new property owner records (such as putting you on the tax roll); land transfer tax; GST or HST, and finally, the realty team’s commission. If you are selling a home, you’ll know the seller of a home pays the Realtor his or her commission, which can be negotiated, but usually sits at about six per cent of the sale price.
- If you are purchasing a co-op or a condo home, don’t forget to include the fees you will be paying each month for shared spaces and maintenance.
- Some utility companies require a down payment from new customers. If your legal team is handling this, the down payment may be due ahead of your closing date, so services can be connected in your name from the day you take possession.
- Don’t forget to budget for other costs associated with moving: Packing materials; moving company; gratuities for any service providers; address changing costs from Canada Post; food on moving day; your first trip to the grocery store, and redecorating supplies required for your new home.
We know all of this seems complicated, but that’s why you need to trust your real estate team. At Newbigging-Pearson we are experts at knowing exactly how best to navigate your mountain of paperwork!
Between our expertise and that of your financial and legal teams, we can take the mystery out of any real estate purchase.
But really, it all begins with a simple budget.
Are you ready?
Call our office at 289-686-1552, or send us a message HERE.