Planning, Making and Maintaining Your Real Estate Purchase
Planning your purchase
- Assess how much home you can afford: Before you start your house hunt, it’s crucial to understand what you can afford. You’ll want to assess how your lifestyle and other financial obligations will affect the size of your mortgage and ensure you can comfortably afford mortgage payments should interest rates rise in the future. If you already own a home, remember to factor in the equity from your current property and how it will fit into your total budget.
- Know the difference between being pre-qualified and pre-approved: While many lenders offer the ability to get you pre-qualified or pre-approved for a mortgage, the two are not the same. When you are pre-qualified for a mortgage, you have a general idea of how much mortgage you might be approved for and have a much clearer picture of the home you can afford and what you'll pay each month. Having your mortgage pre-approval in hand gives you the confidence that you can shop for the right home at the right price, and also lets sellers know you're serious when you make an offer.
Making your purchase
- Plan for upfront costs: In addition to ongoing mortgage payments, it's important to understand all upfront costs above your down payment. Many are one-time expenses at the time of purchase, such as property assessments and surveys; home inspection fees; land transfer taxes; legal and title insurance fees; property tax and utility adjustments; and moving costs. Remember to build buffer into your total budget so you can be prepared if unexpected costs arise.
- Look beyond the rate: While it might be tempting to make a mortgage decision based solely on the interest rate, it's key to understand if your mortgage gives you the flexibility you need. For example, when you need to respond to an unexpected situation, it is great to know that you may have the flexibility to speed up, slow down or even pause a mortgage payment. Not all mortgages are created equal, so it is important to understand your options before making a commitment.
- Know what's new: From changing mortgage rates to the B20 Stress Test introduced last year, a lot has changed in the Canadian housing market in recent years. Whether you've already gone through the home purchasing process, or if this is your first time around the block, a financial advisor or mortgage specialist can help you understand what's new in the market so you can make an informed and confident homebuying decision.
Maintaining your purchase
- Consider the total costs of a new home: The costs of owning a home continue past the day you close on your purchase, especially if you're upsizing or moving from a condo to a house. After paying your closing costs, don’t assume mortgage payments will be the sole home-related expense – you'll also have ongoing financial considerations, such as property taxes and everyday maintenance. Owning a home comes with additional expenses, and an emergency fund can help you be prepared for a rainy day, a leaky faucet or maybe an unplanned lawn mower.
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