Are you planning to buy a home in Canada? This will be the most important purchasing decision you will ever make, and not one to be taken lightly. Make sure you have the knowledge, resources, and experts to guide and support you throughout the process. While buying a home can be an intimidating experience, it can also be a very rewarding one! Don’t know where to start? We’ve compiled a list of the top six things you need to know when buying a home in Canada.
#1 More than a deposit
Do you have a down payment for your dream home? congratulations. You are one step closer to owning your own home.
But if you’re still struggling to make the minimum down payment for the Canadian real estate market, here are a few details you should know. Federal law now requires a certain percentage of the purchase price.
In other words, the FBI wants you involved.
That said, here is what you need to know about how large a down payment you’ll need (at minimum):
- $500,000 or less: Five per cent
- $$500,000 to $999,999: Five per cent for first $500,000 and 10 per cent of any amount exceeding $500,000
- $1,000,000 or more: 20 per cent
#2 Get pre-approved for a mortgage
Trying to buy a home without pre-approval for a mortgage is like trying to hit the mark in the dark. You don’t know how much you can spend while shopping at the market. Also, who knows how long current interest rates will last, even though the Bank of Canada (BoC) hasn’t announced any rate hikes anytime soon.
When it comes to mortgage pre-approval, our advice is don’t hesitate! One of the benefits of a pre-approved mortgage is that your lender locks in your current interest rate for up to 120 days. If interest rates rise, your lender must adhere to the current interest rates. If they go down, your guaranteed interest rate should go down too.
#3 Look for the best price
Interest rates have never been lower. The Bank of Canada cut its policy rate to 0.25% in response to the coronavirus pandemic, and the central bank cut its five-year mortgage rate to below 5%.
Why is that important? It determines how much you pay in principal and interest on your mortgage each month.
#4 Check Out First-Time Homebuyer Incentives
The Canadian government offers the First Time Home Buyer Incentive (FTHBI) , which is a loan to encourage them to achieve the home-ownership dream. First-time homebuyers can borrow:
- Five per cent of the price of a resale home,
- Five or 10 per cent of the price of a newly constructed home, and
- The loan is interest-free and repaid at any time within 25 years or when the home is sold.
Do you qualify? Well, you must be a first-time homebuyer, have a household income of less than $120,000, and the mortgage is capped at four times the maximum household income of $120,000.
Let’s be honest: in today’s ultra-competitive and expensive real estate market, many Canadians are struggling to finance their purchase of a home, particularly for those living in the major urban centres. This program could help lessen some of that financial strain, making housing a little more accessible to those with no current equity.
In addition, there’s the federal first-time Home Buyer’s Plan which let’s each first-timer borrow up to $35,000 from their RRSP, interest free, to boost their down payment or to put toward other purchase-related costs. Provincially, some regions also offer a Land Transfer Tax rebate
#5 Work with a realtor
Homebuyers can choose to search for properties individually, whether it’s a single family home, semi-detached, townhouse, apartment, or something else. But if you don’t have the experience and expertise, the process can be complicated and you could miss some potential red flags. Working with an experienced real estate agent can make buying a home in the competitive Canadian market stress-free and even save you money!
So what are the benefits of working with a licensed real estate agent?
- You have better access to homes in and out of the local market.
- Realtors know the neighbourhood and the market conditions.
- An experienced real estate agent has advanced negotiating skills.
- Real estate agents understand the incredible amount of paperwork that is associated with buying a home.
- Realtors offer the guidance and support you need for the biggest buying decision you will ever make in your life.
#6 Do a Home Inspection
Unfortunately, due to bidding wars and strengthening demand, many homebuyers are ditching home inspections out of fear of losing out on the property. This may have various consequences that could hit your pocketbook. From moisture and mold in the basement to foundation issues, you could be on the hook for costly repairs and renovations once you receive the deed to the house.
No matter what the situation may be, we always recommend getting a home inspection before you acquire any property. This could save you money in the long run, and provide you some assurance that you made the right decision.
Home ownership is a dream for most people. It provides a place to plant roots and raise a family, but it is also an investment that could fund your children’s college tuition or your future retirement. The Canadian real estate market is booming, but that does not mean you’re too late to enter the market! Ensure you’re equipped with everything you need to know to buy a home in Canada, by working with an experienced real estate professional.
Have more questions about the home-buying process, or ready to move forward with your purchase? Contact a RE/MAX agent today, or download the RE/MAX Home Buyer’s Guide, for everything you need to know about buying a home.