The 6 Most Important Things You Need to Know to Buy a Home in Canada
Are you in the market to purchase a home in Canada? This will be the biggest buying decision you will make in your lifetime, and not something to be cavalier about. Make sure to equip yourself with the knowledge, resources, and experts who can guide and support you along the way. While buying a home can be a taxing experience, it is also a highly rewarding one! Check out this list compiled by RE/MAX Canada
Have More Than A Down Payment
Do you have a down payment for the home of your dreams? Congratulations. You are one step closer to achieving home ownership.
But if you are still working toward accumulating a minimum down payment in the Canadian real estate market, you should know some of the specifics. Federal regulation now dictates designated percentages in relation to the purchase price.
In other words, the federal government wants you to have some skin in the game.
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
Get Pre-Approved For A Mortgage
Trying to buy a home without a mortgage pre-approval is kind of like trying to hit a target in the dark. You do not know how much you can spend when shopping the market. Furthermore, who knows how long the current record-low interest rate will be in place – although the Bank of Canada (BoC) said it will not be raising rates in the near future.
Our advice on the matter of mortgage pre-approvals is don’t delay! One benefit of getting a mortgage pre-approval is that your lender will lock in the current interest rate for up to 120 days. If rates increase, your lender should honour the current rate. If they fall, so too should your guaranteed rate.
Shop Around For The Best Rates
Interest rates have never been lower. The BoC has brought its benchmark rate to 0.25 per cent in response to the coronavirus pandemic, and the central bank lowered the five-year mortgage rate to below five per cent.
Why does this matter? It will determine how much you will pay on your mortgage every month, in principal, and in interest.
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
Work With A Real Estate Agent
Homebuyers do have the option of going solo in their search for a property, whether detached, semi-detached, townhome, condominium or otherwise. But without the benefit of experience and expertise on your side, the process can be complex and you risk missing some potential red flags. Working with an experienced real estate agent can significantly ease the stress associated with buying a home in Canada’s competitive markets, and could potentially even save you money!
So, what are the advantages 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.
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.