Tips for First-Time Homeowners
How have your dream of home ownership come true
Buying a home is one of the biggest decisions and commitments in your life. But personal finance experts warn that home buyers, especially first-time buyers, need to research, plan and save for their new home in order to realize their dreams of home ownership.
“Buying a home is very exciting but you have to do your homework first. Don’t just look at how much your mortgage payment will be. Make sure you factor in future expenses such as repairs, maintenance, property taxes, utilities and possible commuting costs when making the decision to buy a new home,” says Wade Stayzer, Vice President of Retail at Meridian, Ontario’s largest credit union. “You might be able to afford $1,200 a month for rent, but with the additional costs of owning a home you might not be able to afford a $1,200 mortgage, due to the additional costs associated with home ownership.”
Meridian offers tips and advice that will help you become a successful home owner.
Save up for a down payment: Saving up a significant down payment is extremely important, as it will help to cut down mortgage payments going forward. You should save up at least five per cent of the price of the home for a down payment.
Calculate your initial costs: Besides your down payment, you have to factor in closing costs, moving costs, lawyer fees and taxes. So you aren’t surprised later, the general rule of thumb is to add 1.5-2% of the total purchase price to cover closing costs.
Get pre-approved: Work with a trusted mortgage specialist to make your first home-buying experience easy and well planned. When getting pre-approved, make sure that you are accounting for all your monthly expenses, such as childcare, commuting costs and contributing to a savings account. Life has a way of changing at just the wrong time – it is good to have some financial wiggle room for unexpected events.
Know your options: It’s important to know that a first-time home buyer includes anyone who has not owned a home in the past seven years. The Canadian government is currently offering a First-Time Home Buyer Tax Credit, up to $750, which you can later put towards a mortgage payment. It also allows first-time home buyers to borrow up to $25,000 from their Registered Retirement Savings Plans tax-free to fund their purchase.
Shop around: Different financial institutions offer different solutions so find the mortgage that is right for you. Make sure that your mortgage is flexible and you understand what you are getting. As the saying goes, if it sounds too good to be true, it probably is. If someone is offering you a very low mortgage rate it may be because the service charges on it are enormous or that the mortgage is completely closed and you will be locked in until it matures.
For more information visit meridiancu.ca