QUICK 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 Corporation.

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 Corporation.

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: