Home Buyer's Guide
It’s an aggressive marketplace, so make sure you have all of your ducks in order before you start house hunting. Here are a few tips on how to prepare for buying a home in Hamilton, Ontario.
Create your wish list
Consider the features that are most important for you to have in your new home. Be specific and think about your current as well as your future needs. Are you a growing family that might need more space as kids turn into teens? Would you prefer a rural or an urban setting? Are you set on a specific neighbourhood? Do you require easy highway access or grocery stores within walking distance?
Your real estate agent will be able to help narrow down your list to the absolute essentials and show you what is realistic for your budget.
Determining your budget
Before you start searching for your dream home, complete a financial review to see how much money you have to work with. This involves meeting with a mortgage representative at a financial institution to get pre-qualified for financing.
Calculate your current household budget and estimate a budget for your prospective home. If you're renting, keep in mind that you'll have some new expenses as a homeowner, such as costs for general maintenance and repairs, property taxes and home insurance.
The mortgage representative will ensure that your estimates are realistic and present you with a preliminary figure for pre-approval.
Now that you have your budget, stick to it. Make your wish list but don't be unrealistic. By staying within your means, you'll ensure that you still have money left over to contribute to savings, vacation funds and other expenses.
The Hunt Begins
Here’s where your REALTOR® starts to shine. Your agent will scour the marketplace to find houses that match your needs and criteria. Your agent will send you relevant listings and stay hot on the trail of newly listed properties. Essentially, your agent will weed out the bad from the good to lessen your workload. When she finds a house worth viewing, your agent will book showings for you to take you through the houses, acting as your guide and pointing out the pro’s and con’s of each house.
Making an Offer
This is the exciting part! Once you've found the perfect fit, you and your agent will draw up an offer on your potential new home. Sarit Zalter's negotiating experience will make sure you come in with a realistic number so that you don't bid more than the house is worth but also don't come in insultingly low to offend the sellers. Sarit will help you see the larger picture. For example, some houses might be within your price point, but will require too much maintenance or will depreciate in value over the long run. Sarit will help you look long term to create a realistic view of your potential new home.
When you've found your dream home and decided to make an offer, you'll have to put down a deposit, usually in the form of a certified cheque. The deposit amount is different for each property and generally depends on the price and location of the house. The deposit will be held in trust by the listing brokerage. If the deal falls through, then the deposit is returned to you. If your offer is successful, your deposit will be deducted from the total purchase price of the home and is considered part of your down payment.
This is the total amount of cash payment you make for your home. The more you pay up front, the less you will have to borrow. However, you don't want to spend all of your money -- you should ensure that you still have enough to cover the other costs of buying a home (explained below). The minimum down payment is 5% of your purchase price. For example, if you're buying a home for $400,000 then you would need to make a down payment of $20,000. Mortgage insurance is required for down payments that are less than 20% of the purchase price.
Mortgage Loan Insurance
Should you default on your mortgage payments, this insurance protects the lender so that they are not responsible for paying the balance of the purchase price. If your down payment is less than 20 per cent of the purchase price of your home, you are required to have mortgage loan insurance. The cost depends on the price of the house and how much money you put down and is built directly into the mortgage.
Land Transfer Tax
Properties that are changing hands are subject to land transfer taxes and are the responsibility of the buyer.
In Ontario, the land transfer tax is calculated based on the price of the property using a tiered system:
- Up to $55,000 X .5 % of total property value
- From $55,000 to $250,000 X 1 % of total property value
- From $250,000 to $400,000 X 1.5 % of total property value
- From $400,000 up X 2 % of total property value
For example, if you buy a property for $260,000, 0.5 per cent is charged on the first $55,000, 1 per cent is charged on $55,000 - $250,000, and 1.5 per cent is charged on $250,000 - $400,000. The total land transfer tax would be $2,375.00.
You may be eligible for a refund of all or part of the tax if you are a first-time homebuyer.
To ensure that your new home is worth what you're paying, your mortgage lender usually requires an appraisal to assess its value. The cost for an appraisal is usually between $250 and $350, but is typically covered by your financing institution.
A home inspector will assess the condition of the home, identifying any repairs or maintenance that need to be completed. This is also a good opportunity for you to learn about the various systems in the house such as plumbing, electrical, roofing, and furnace. Home inspection costs start from about $350 and vary depending on factors such as the size of the property.
Upon closing, your mortgage lender will require you to have property insurance for your new home. The costs depend on the value of the property and thus vary greatly. You can use the same company that you have other insurance policies with or try using a broker, who will search the options of all companies to find you the best deals.
Lawyers & Legal Fees
You will need a lawyer to handle some of the paperwork. Legal fees vary widely. Legal fees for condominium purchases are usually more expensive since they require more paperwork.
This protects you from any problems with the title to the property. For example, if the previous owners renovated the house without first getting the proper permits, you would not have to pay any costs associated with bringing the house up to code. Your lawyer will help you with choosing title insurance.
Moving Expenses and Service Connection Fee
Moving expenses vary widely depending on how much furniture you have and from where you’re moving.
If you decide to hire the services of a professional moving company, ensure that you ask for referrals and take some time to research rates, levels of service and insurance coverage.
Another option is to rent a truck and move your furniture with the help of family and friends. Again, ask for referrals. The cheapest options are not always the most reliable! Book your mover or truck in advance; most people move at the same time of the month.
Remember that you’ll have to hook up all your utilities such as internet, electricity, cable TV, phone, and other connections. There may be service fees to have these done.