First Time Buyer
Buying a Home? Make a Plan. Make It Easy.
The time to buy your first home is finally here. This property is more than an investment - it's going to be your own piece of the neighbourhood. Take the time to investigate all available options to make the right decision for you and your affordability. Start by learning about the hidden costs of the home buying process.
1. Make an Affordability Budget
Buying a home is a huge investment, but the cost of the property is not the only expense you’ll encounter. Map out all the expected (and unexpected) expenses when buying a home such as utilities, property taxes, insurance, and the “just in case” expenses. As a rule of thumb, have at least 1.5% of the purchase price saved aside for closing costs. Saving up that little more past the down payment amount will make your transition into your new home that much more stress-free and enjoyable!
2. Get Some Advice
You’ll need to assess the strength of you credit score, the size of your down payment, whether or not Canada Mortgage and Housing Corporation (CMHC) or Genworth insurance is required, or if you can take advantage of the Home Buyers’ Plan (HBP). Book a free session with a financial services representative. They can help you navigate the entire home buying process as well as help you build a savings plan for the next big dream.
3. Find Your Best Mortgage Rate
Shop around to find the best rate. Did you know that a half percentage point less on your rate can save you a few thousand dollars per year? Often locally owned credit unions have great rates and are worth exploring.
4. Property taxes
You know those nice roads, street signs and schools by your new home? Well, it’s there because you pay for it. You pay property tax based on the value of your home. It’s due once per year, but it’s a good idea to save for it every month so you aren’t surprised with a big bill in the mail later.
5. Home Insurance
Now that the big purchase is nearly final, think about where you live and the potential hazards. Has there been localized flooding? You know now that every dollar counts, and fortunately as a Chinook Financial member, you get an excellent rate on home insurance.
6. It’s moving day!
Moving is a tough job. The cost can vary greatly on the number of friends you have and the number of friends you want to keep! If you decide to hire a moving van without movers, they can range per hour.
- Average moving cost with friends: pizza
- Average moving cost with movers: $300+
7. Save For the Future
Saving doesn’t stop once you’ve made your down payment. Factor your monthly savings needs into your budget. Cut unnecessary costs, look for low insurance rates, and make your money work harder for you by starting up an investment portfolio. Your new home shouldn’t stop you from saving for your next “big dream”.
Expenses You Should Expect.
As part of the down payment, this is paid when you make an Offer to Purchase. Initial deposits are usually around $10k for a $350k home – to assure the seller that you’re serious.
Own your home with as little as a 5% down payment with mortgage loan insurance from CMHC/Genworth.
Mortgage Loan Insurance Premium:
If you have a high-ratio mortgage (less than 20% down payment), you may need mortgage loan insurance. This premium can be added to your mortgage or paid in full upon closing.
Visit www.cmhc-schl.gc.ca for current insurance premiums.
Your mortgage lender may require a property appraisal with 20% down payments. The appraisal is an estimate of the value of the home and can cost anywhere from $300-500.
Home Inspection Fee:
A home inspection is a highly recommended report on the condition of the home and may cost over $500. The peace of mind alone is worth every penny.
Prepaid Property Taxes:
If property taxes are prepaid by the previous owner, they must be paid back.
The lender requires active property insurance by closing day as security for the mortgage. This insurance specifically covers the cost of replacing the structure of your home.
Mortgage Life Insurance:
Special insurance coverage to cover the cost of discharging your mortgage in the event of death or severe illness. It may sometimes be a condition of your
mortgage. Premiums will vary based on factors including mortgage amount, age of insured, etc.
Legal Fees and Disbursements:
Must be paid upon closing and costs around $1500, depending on the price of your property. Your lawyer or notary may bill you direct costs to check on the property’s legal status. While Alberta does not levy a land transfer tax, there are nominal registration fees.
Your lender or lawyer/notary may suggest title insurance to cover loss caused by any unknown defects of title to the property. Title Insurance premiums can range from $350-$400.
If you don’t have previous history with a utility or phone company, they may require a deposit to activate your account. This is credited later on providing your payments are up-to-date.
Condo or Strata Fees:
If you are buying a townhouse, condominium, or gated community, you may be charged a monthly fee to cover the costs of common area maintenance.
The calculation of interest from the closing date to the date the first mortgage payment is calculated from. Let’s say you close on July 17, the interest adjustment date would be from July 17 to August 1, the day when your first full mortgage payment is due.
Water Quality Inspection:
If you’re moving to a property with well water, you need to know if it’s potable by having it tested. These tests will cost around $250.
It’s recommended that you set aside between 3% and 5% of the value of your home for maintenance every year to save for a new furnace, roof or other upkeep fees.
This cost is to cover the pizza for your helpful friends, and/or moving truck rental.
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The Legal Stuff: