What Are You Looking For In Your Next Home?
For most people, owning their own home is a lifelong dream. It brings with it pride of ownership, security and the feeling of control over improvements and how much they cost. There's also the chance your home will increase in value, making it a sound financial as well as a lifestyle investment.
Location, Location, Location
Your choice of location depends primarily on where you work and how far you want to commute, and also on your family lifestyle.
Do you want to live near recreation facilities such as a golf course or skating rink? How close are your children's schools? Is public transportation available?
If you are considering moving to an unfamiliar neighbourhood, take time to drive or walk around it, both during the day and in the evening. Make some notes. It is also a good idea to travel the route to and from your work.
There are many other factors you should consider when choosing the location of your home. For example, have property values risen or fallen in the neighbourhood?
Future development can also affect property values and property taxes, so you'll want to consider whether there are any changes to zoning proposed or any major developments planned. Is a high-rise office tower going in next to your home or a new highway? Zoning bylaws may also affect your own plans, such as conducting a business from your home.
If you are considering the future resale value of your home, it is wiser to buy a modest home in the best neighbourhood you can afford rather than the most expensive home in a modest neighbourhood.
When trying to decide what style of home to buy, it is a good idea to draw up a master list of all the features you want your new home to have. Try to be honest about what you are looking for. Your visions will likely change based on what is available.
This may not be the dream home you'd buy if you won the lottery, but rather the home that you and your family can afford now and that will meet your needs for the next few years.
Consider such questions as:
- Are you starting a family or having more children?
- How many bedrooms will you need?
- Will a home office be required?
If you think you'll need more space, consider buying a larger home now or one with the potential for renovation or an addition.
Consider compiling this list with the help of your real estate consultant, who can help you decide which features are important and suggest ones you have overlooked. Make sure your real estate consultant keeps a copy of your list to help pre-screen the houses you'll look at.
This list should be revised as you look at houses and see what is actually available in your price range and preferred locations.
Buying a home involves many financial considerations. Some home buying expenses are one-time costs and others are ongoing commitments. In addition there are other costs that you may not be aware of or that you may forget to factor in to your budget.
How Much Can You Afford?
The shortest and best answer to that question is, it depends. The important factors are your gross household income, your down payment and the mortgage interest rate. Lenders also consider your assets and liabilities. Your own lifestyle and debt comfort zone also come into play.
A mortgage is security for a loan on the property you own. It is repaid in regular mortgage payments that are blended payments. This means that the payment includes the principal (amount borrowed) plus the interest (the charge for borrowing money). The payment may also include a portion of the property taxes.
This is a letter of commitment from a lending institution that states the amount of money you can borrow to buy a home at a guaranteed interest rate for a fixed period of time. In a competitive market, it is in your best interest to be pre-approved for a mortgage. Then, when you make an offer to purchase, you have more negotiating strength. The seller knows you will qualify for the loan payments required to purchase that home.
The Down Payment
If you have a down payment of 25% or more, you may qualify for a conventional mortgage loan that does not require mortgage loan insurance. A minimum down payment of 5% is required for a high-ratio mortgage. These types of mortgage loans require mortgage insurance.
One way to help you raise a larger down payment is through the Home Buyers Plan for First-time Buyers. This federal government plan lets you withdraw up to $20,000 from your RRSP, without being taxed, if you apply the money to buy your first home.
You may want to start a separate maintenance fund – particularly if you are buying an older home – by setting aside $500-$1,000 and adding to it regularly. This reserve can be used to cover the costs of anticipated or unexpected repairs or replacement of such things as the roof or appliances.
You may find a "fixer-upper" – an inexpensive home in need of repair. One general rule is that renovation always takes longer than, and costs more than, you think.