A home is the largest purchase most people will make in their lives. That should reinforce the importance of planning ahead, doing your research, relying on the advice of experts and not rushing through the process.
While our mortgage broker can help you avoid many of the pitfalls commonly encountered during the home buying process, it’s still important to be informed even before you start looking for that perfect home.
Here are just a few examples:
- Not checking your credit report before applying for a mortgage – simply, not knowing your credit score prior to applying for a mortgage is the same as not brushing your teeth before visiting the dentist. Your credit score can have a huge impact on the best rate you’ll be able to secure. Knowing this information beforehand gives you time to improve your score, or address any errors that may appear on your report. You can easily check your score through Equifax.
- Thinking it’s all about the rate -Let’s be honest, who doesn’t want the lowest mortgage rate possible? And indeed it is important to find the best deal that meets your needs. However, don’t be too quick to jump at the cheapest rate without making sure it has all of the features you need/want. Some people are OK with a large penalty if it saves them money upfront on the rate. Just remember that penalties on certain “no-frills” mortgages can end up costing many thousands of dollars, nullifying any rate savings.
- Not understanding the importance of the down payment- Many first-time buyers see a down payment as a big obstacle to home ownership, particularly in regions where prices have skyrocketed. But when you get into the nitty-gritty of it all, there are many more considerations beyond simply coming up with the money.
Things to consider:
- How big of a down payment will you/can you make? Of course you must meet the federally mandated minimum down payment: 5% for all mortgages up to $500,000, and 10% on any portion above $500,000 up to $1 million. It goes without saying that as you increase the size of the down payment you reduce the amount of interest over the lifetime of the mortgage.
- The source of your down payment funds. About 10% of first-time buyers withdraw up to $25,000 tax free from their Registered Retirement Savings Plan (RRSP). This can be a great tool for supplementing a down payment, so long as you’re aware of the rules and the payback requirements.
- Transferring the funds. No matter where your down payment funds are coming from, be sure to leave yourself plenty of time for the funds to clear and for a certified cheque to be produced before the closing. So be sure to confirm with your bank or financial institution in the event of a tight deadline.
- Not setting (and sticking to) a budget. You’re probably thinking, “But budgets can be boring and tedious.” This is not entirely incorrect, you need to ensure you can afford all hidden costs (and not so hidden) with buying a home. It’s important to plan both the short and long term.
Short-term costs include everything from:
- Land transfer taxes
- Legal fees
- Home inspection/appraisal fees
- Down payment (the BIG one)
- Mortgage insurance (remember, the provincial tax on your insurance premium can’t be rolled into the mortgage like the premium itself, so expect this hefty expense at closing time)
The On-going costs of home ownership. First-time buyers may be caught off guard with sudden expenses after moving in, such as:
- Appliances and furniture
- Condo fees/Property taxes/Property insurance
- Utility costs
- Renovations/repairs (furnace replacement, new shingles, etc.)
- And everything else, down to tools (yes, thee expenses can add up)
As for long-term planning—and this applies especially to today’s buyers—just because you scored a great rate for your purchase, be prepared for the possibility that rates will rise and that you may need to renew into a higher rate in the future.
- Not Shopping Around
Whether you plan to find your own mortgage or enlist the help of our broker, it’s still important to shop around in both cases. Most people don’t buy the first car they test drive. They give themselves adequate time to research and compare their options. So why would a purchase worth many times the cost of your vehicle be any different?
As mentioned, our mortgage broker can help you wade through these issues, plus much more. If you need help finding a qualified broker near you, look no further contact Noble Mortgages@ 416-241-2227 or email us at email@example.com