Buying Tips For Young Families
The time has come. You’re ready to bite the bullet and buy your first home. This is possibly the most expensive purchase you’ll ever make. And most likely, you’ll need a little extra help in the form of home financing.
So, how do you tackle this big venture?
Save for your down payment
The general rule is that you should put around 20% of the overall purchase price toward a down-payment. The rest you may finance with a mortgage.
But depending on how much you are able to borrow, you could put down less. The minimum amount you actually need to put down on a property is 5% on properties that have a value of $500,000 or less. After that you will require 10% on the remaining value up to $1mn and 20% thereafter.
If you’re self-employed or have a poor credit history however, you may well need more.
Overall the more you can put down, the less debt you’ll have, which can only be a good thing.
In Canada, you may be eligible for the Home Buyers’ Plan (HBP) too. HBP is a scheme that allows you to withdraw up to $25,000, tax-free, from your Registered Retirement Savings Plan (RRSP) to help toward the down payment.
As well as a down payment (and an income), mortgage lenders will judge your eligibility for a home loan based on you spending behaviour.
The more spend-happy you are, the more lenders will be wary. As you apply for mortgages be extra careful of what you’re buying. Try not to take out any credit cards, loans or make big purchases before you apply for a mortgage or before you purchase your home. In fact, be as frugal as you can so that the lender will be content you’re able to pay off their loan.
Know what your budget is
Before you go ahead and start browsing the listings for your dream home, be clear on what your budget is going to be.
Apply for pre-approval on a loan so that you have all the information on just how much you can borrow. An adviser that pre-approves you for a loan will take into account all of your costs and daily living expenses. They’ll then provide a figure they believe you will be able to repay comfortably.
Don’t forget the hidden costs
On top of your mortgage repayments are taxes, utility costs, legal fees, service charges, repairs, renovations and maybe other hidden costs too. Your mortgage adviser should help you navigate all these fees and only allow you to borrow what you can afford. But being aware of them yourself will enable you to make sensible decisions of what to buy and how much you can afford.
Also, be aware of junk fees and shop around for the best mortgage deals and terms. Start with a compare service and then see what each one has to offer.
This may be the biggest purchase you’ve been thinking of to date. However, with a little organisation and planning, you’ll be financing it in no time.