> Quick Tips
TIPS FOR THE HOME BUYER
Buying and decorating your new home to suit your style
is part of the excitement. All the decisions that need to be made can
also make you feel nervous. Here are a few tips that can help out the
anxious first-time homebuyer.
How much can I afford?
There are two things to consider when determining how much home you
can afford. How much do you have for your down payment? What amount
can you afford as a monthly payment while still enjoying life? To help
you answer these questions, you can either call your financial institutions,
visit their website or go to your branch and talk to your personal banker.
To shop for a home with confidence, you can obtain a pre-approval certificate
from your financial institution. This document will tell you how much
of a mortgage you can afford.
How much do I need for my down payment?
You can buy a home for as little as five per cent of the purchase price.
However, any mortgage with a down payment less that 20 per cent has
to be insured by a third party such as the Canada Mortgage and Housing
The amount of your down payment will determine
whether you need to insure your mortgage or not.
- Conventional Mortgage: a mortgage where you
have at least 20 per cent of the purchase price as a down payment.
- High-Ratio Mortgage: a mortgage where you
have less than 20 per cent of the purchase price as a down payment.
Your insurance premium will depend on the amount you are borrowing
and on the percentage of your down payment amount. Premiums usually
vary between 1.25% and 3.75%.
How can I save for a down payment?
You can buy a home for as little as five per cent of the purchase
price. However, any mortgage with a down payment less that 20 per cent
has to be insured by a third party such as the Canada Mortgage and Housing
There are a few different methods that can be
used when saving for your down payment
- Setting money aside each month just as if
you had to make a monthly payment
- Opening an RRSP investment account. If you
are a first-time homebuyer you and your spouse can use up to $20,000
each towards your down payment without tax implications as long as
you repay the amount within 15 years.
- A cash gift from a parent or relative ("gift"
means it’s non-repayable)
Should I be aware of any additional costs?
Your mortgage will cover the purchase price of your home, however there
are other costs associated with buying a home. These are called hidden
or closing costs and can usually amount to 1.5 per cent to 3.5 per cent
of the total cost of your home.
Here are a few examples of the hidden costs of
home ownership and the costs associated with each:
||$200 - $300
|Home inspection fee
||$950 - $1,500
|Land transfer tax Toronto
||$2,000 to $15,000 or more
||$1,000 - $2,500 (professional services:
||13% (applicable to all professional fees)
||Homes $400,000 or less: Approx. $325
Also, don’t forget to consider expenses such as moving and home decorating
Source: Real Estate News
Do you dream about owning your own home? CIBC has now made it easier for
those entering the new world of home ownership.
They have formed a partnership with Canadian Mortgage and Housing Corporation
to provide valuable and informative services for the first-time homebuyer.
For more information about finding out how much you can afford, setting
up an RRSP, or simply reviewing your mortgage options, contact your CIBC
personal banker or call 1-800-465-CIBC (2422).