Introduction
The cost is a significant consideration when purchasing your first house in Canada. According to recent data from the Canadian Real Estate Association, owning a home is getting more and more expensive with time (CREA). Many prospective home buyers aren’t sure if they should stick with their plans to buy a house after the recent price increase. Because everyone’s decision-making process is unique, here are a few things to remember when buying your first house in Canada, as advised by Save Max.
An income-producing property can be found by purchasing property in the real estate market. Especially for first-time investors, this could be a little intimidating. A wide variety of circumstances and scenarios exist in this field, all of which can have an impact on your financial success. Even if the profits are substantial, it is prudent to use prudence while setting the price. Most of the information provided by real estate agents has proven to be highly beneficial to many investors in managing and acquiring real estate. They have invested substantially in single-unit condos in Vancouver and Toronto, where the supply and demand are pretty high.
Property management companies are an option after you’ve invested in these properties. Still, many people prefer to handle things independently, especially if the property is nearby and easy to go to. Here are the most important things to remember when choosing the ideal real estate investment.
Employment opportunities
People are more likely to visit places with a strong market trend. Renters will flock to this location as a result of this development. Statistics Canada is a good place to look for such a location. As a result, you’ll access more accurate information on the area you’re considering. More people are likely to follow if a major corporation does so. College towns can also help you grow your population. Due to the excellent demand for off-campus accommodation, this is an option worth considering.
Safety
Every person’s dream is to live in a safe area. Because of this, it is critical to determine the crime rate before making a purchase. In most cases, the police department can provide this information and data. This can help you determine if a location is safe and secure.
Its Location
Its location will directly influence the renters. There are a wide variety of likes and preferences among renters. The walk score, closeness to colleges and institutions, and the proximity to hospitals and transit are some factors you should consider when searching for a new home.
Schools
This is yet another important factor on which tenants may place a lot of weight. It’s a good idea to look into all the options for a school. The rental pool can be expanded in this manner.
Social amenities
This entails taking a look at the neighbouring sights. Things to keep in mind when looking for a new place to live include parks, retail malls, gyms, and transportation routes.
Be Careful! As the main market rates may turn down
In the past, many people invested in property in Canada and are now reaping the benefits of increased property values. Paul Anglin, a real estate expert at the University of Guelph, argues that home prices might sometimes fall. “The rising aspect is what most people get excited about,” he explains. “They overlook the fact that they’ll tumble.”
In some cases, the prices of properties fall, so buyers should take their time before rushing to acquire a property and spending more money than they need to. Canada’s market values have declined during the past decade. The Bank of Canada and Moody’s have warned that a financial crisis is possible in Canada, significantly if the economy slows down.
Hazardous to purchase an unbuilt home
Pre-built homes are seen as advantageous and sensible because they only require a certain amount of renovation to be transformed into something brand new. However, this may be an impulsive decision.
“You don’t know what will be there if you buy from a plan,” adds Anglin. It’s impossible to tell who else will be living in the building when you buy a condo from a plan, for example, according to this expert.
Having a lot of tenants in one apartment might be disruptive and distracting to the owner. After a building has been operational for a few years, condo costs become more predictable, according to Anglin. Simply put, this element should be considered rather than the discounted price.
Markets depend on the type of Gepgraphic Area
According to CREA data, the housing market varies significantly from city to city. Over the past year, prices in Calgary have risen 9.5 percent, while in Toronto and Vancouver, they have risen 8.3 percent. But in Saskatoon, Ottawa, Montreal, and Moncton, they remained unchanged, while in Regina, they dropped 3.4%.
Toronto and Vancouver’s prices are soaring through the roof due to the high demand for housing and the consequent scarcity of available properties. Despite this, Calgary’s oil extraction economy has increased prices. When purchasing a home for the first time in Canada, it’s important to remember that prices might vary greatly depending on where you live.
Lines of transportation could be enhanced their value in money
It’s more convenient for people to live near places where public transportation is readily available and rapid. The property’s value may rise as a result, given that most buyers choose properties with as few road trips as feasible.
It’s important to be at a location that’s easy to get to or will be easy to go to in the future. In addition to looking at existing routes, it’s also essential to consider the potential locations for new routes. SmartTrack in Toronto and the Broadway Subway in Vancouver are two examples.
“But you also need to figure out how much inconvenience there will be during construction,” explains Anglin. There is always a trade-off for each advantage. When purchasing a home in Canada, purchasers should be aware that if they purchase a property next to an airport or a market, they will be subjected to high noise and pollution.
Decide on how long you intend to stay
When purchasing a home in Canada, this is a critical consideration. Determine the length of time you intend to stay in your current residence. They won’t be pressured to sell the property at a loss if they want to stay for a while if the market value declines.
“Maybe you should be renting if you plan to be in some place for a year,” adds Anglin.
“The monthly wiggles on the average price don’t matter if you plan to live there for 10 years,” he says, “since economic conditions will be substantially different 10 years from now.”
Purchasing a Home in Ontario in 2022
For many, buying a home is one of the most significant decisions of their lives. Stress and uncertainty might sometimes accompany the process. Exactly what you’d expect! Navigating this uncertainty and maintaining a positive outlook are essential to a successful purchase. To allay your fears, we’ve put together this handy guide that walks you through each step of the house-buying process in Ontario in just ten easy steps. When making a purchase, it’s crucial to consider both the benefits and the costs of doing so.
Be sure that buying a home is the correct move for you before you start the process and make a commitment to that journey. For instance, comparing the costs of renting vs. purchasing
Becoming familiar with the emotional ups and downs of the home-buying process, as well as setting up money for a down payment and other expenses.
Step 1- Saving for a Down Payment
The first and most critical step toward becoming a first-time homeowner is having enough money set aside for a down payment. A down payment of at least 5% of the purchase price is required in Ontario for purchases of less than $500,000. The minimal down payment for houses between $500,000 and $1,000,000 is 5% of the first $500k and 10% of the remaining amount. Finally, a 20% down payment is required for homes costing $1,000,000 or more.
| Purchase Price | Minimum Down Payment (% of Purchase Price) |
| Under $500,000 | 5% |
| $500,000 – $999,999 | 5% of the first $500,000, then 10% of remainder |
| $1 Million and up | 20% |
You’ll have more wiggle room in the home-buying process if you put down at least 20% as a down payment, no matter what. Additionally, you’ll be able to save thousands of dollars in interest payments and mortgage insurance premiums. The CMHC premiums, in most cases, can add a significant amount to the overall cost of your loan.
| Down Payment (% of Purchase Price) | 5-9.99% | 10-14.99% | 15-19.99% |
| CMHC Insurance (% of Mortgage Amount) | 4.00% | 3.10% | 2.80% |
A down payment can be vital in today’s market when the average sale price in Toronto is expected to rise above $1 million by 2021 and in Ontario. Many government initiatives are available to help first-time homebuyers, including:
Up to $35,000 can be borrowed from your Registered Retirement Savings Plan (RRSP) as part of the Home Buyers Plan.
The Government of Canada’s First-Time Home Buyer Incentive, which provides shared home equity of up to $25,000, and
Rebates of up to $4,000 in Ontario and $4,475 in Toronto are available for people who purchase a home in the city.
STEP 2: Stabilizing Your Financial Situation and Increasing Your Credit Score
Since lenders base their decisions on your credit score, having a strong one is crucial if you want to get a mortgage for your new house. A credit score of at least 600 is ideal to be eligible for an insured mortgage loan. Your mortgage interest rate, lending alternatives, and the mortgage lenders who are prepared to lend to you can all be affected by a higher credit rating.
As soon as you start thinking about buying a house, start taking proactive efforts to improve your credit rating, such as:
The goal is to avoid late fees.
Credit utilization, or the percentage of your available credit being used, is a good indicator of your financial health.
Your credit history and the number of inquiries you make on your account should be kept in check.
You’ll find it easier to get a mortgage with good credit as well as a steady source of income. Homeownership comes with several costs, including pricey repairs and maintenance, annual property taxes, and home insurance premiums. You should be in a situation where your income permits you to deal with unanticipated problems when they arise. Your lender may need a letter of employment from you to verify your income. It’s having an emergency fund in place is critical if your income is unpredictable due to being self-employed or working under a contract. Apply for home insurance online as well.
Step 3: Checking your Affordability
The amount of your down payment, credit score, and income all work together to determine how much house you can afford once you’ve completed stages 1 and 2. The cost of housing is influenced by a variety of factors, such as:
Regardless of the size of your initial deposit,
If your gross income splits your annual housing costs plus debt service costs, you have a Total Debt Service (TDS) Ratio.
Current monthly spending does not exceed after-tax income (GDS ratio), which is the annual housing expenses divided by your gross income.
The WOWA affordability calculator streamlines the process of determining how much money you can afford. Finding a home you love doesn’t just require knowing what you can afford; it also necessitates knowing how much you are willing to spend. A budget will help you keep track of your monthly housing expenses when you finally buy a home and decide how much you can afford to spend on a home.
Step 4: Determining Where to Buy
Where to buy a property is the next step after figuring out your budget and what you’re comfortable spending. Many new homebuyers prioritize factors such as commute times, public transportation, neighbourhood amenities, safety, and school rankings.
A good school’s catchment area is an essential consideration for many young families and prospective parents. Even though it’s critical, it’s worth mentioning that living near some of the nation’s best schools can be expensive.
In terms of commuting, finding the right location means having a pleasant experience. You may be able to acquire more space for your money if you choose a neighbourhood outside of the city, but it will add time to your daily commute. If you’re looking for a new place to live, you must consider the neighbourhood you’ll be living in before making a final decision.
Even though urban residences may be smaller than those in the suburbs or rural areas, they are generally more costly. Comparing locations and finding the most room for the best value can be done by looking at the price per square foot.
Step 5: Estimating the Closing Costs
When purchasing a home in Ontario, it’s a reasonable rule of thumb to allocate 3-5 percent of the purchase price for closing costs. Close-out expenses include Land Transfer Tax and Attorney & Legal Fees.
| Type | What is it? | Estimated Cost? |
| Land Transfer Tax | Provincial & sometimes Municipal tax on the transfer of property. | Calculated using a marginal tax bracket system based on your purchase price. |
| Lawyer & Legal Fees | Lawyer acts on your behalf in the purchase and mortgaging of the property. | Varies depending on the work; can cost between $500 & $1,500. |
Step 6: Obtain a Pre-approval for a Mortgage and Shop Around for the Best Rates
Before looking for a property, securing a mortgage pre-approval will give you the security of knowing your interest rate for up to 120 days and an idea of how much you can borrow. As a documented agreement between you and your lender, a pre-approval serves as an agreement. On the other hand, getting pre-approved does not preclude you from comparing prices. A pre-approval gets you a head start in your mortgage search by revealing your maximum borrowing capacity, your available options for interest rates, and the amount of your monthly payment.
Shopping for the best interest rate while looking for a mortgage lender could result in significant monthly savings.
For example, you buy a $600,000 house. You didn’t require mortgage insurance because you put down $120,000 as a down payment. After pre-approved, you took out a $480,000 mortgage over five years with a 25-year amortization at a 3.2% interest rate. Over the loan’s term, you’ll be required to pay $71,110 in interest.
Interest rates are typically lower when you get pre-approved for a mortgage than when you need the loan. Mortgage rates at 2.6 percent were referred to as “similar” mortgage rates. Instead of paying $57,530 in interest, you would have saved money by looking for and selecting a similar rate. You paid an additional $13,580 because you didn’t look around for a lower deal! This exemplifies the significance of comparing prices at all times.
Step 7: Find a Good Real Estate Agent
This entails locating an agent knowledgeable about the region you’re interested in and a suitable fit for the services you need. An experienced agent may bring much-needed clarity to a completely unfamiliar environment, especially for first-time homebuyers.
Step 8: Search for Homes in Your Price Range
While it may be tempting to broaden your search and increase your budget, sticking with your original plan of looking for a home you can afford and enjoy is critical. To begin your search, you’ll use websites like your local MLS page and your real estate agent’s recommendations.
Making a list of “must-have” and “nice-to-have” qualities before you begin searching for a new home is an excellent way to narrow your search. As a result, you’ll be able to focus your search while being adaptable. Remember that the home-buying process can be iterative; if specific features or neighbourhoods don’t fit your expectations or are overly competitive, you can constantly adjust your search parameters.
Step 9: Make an Offer
You might be wondering how to purchase a home in Toronto, the most competitive housing market in Ontario, with its short supply, high-interest rates, and low policy rates maintained by the Bank of Canada. As a result, your hunt for a new home will likely continue after you accept the initial offer. Even in Ontario’s quietest property markets and the province’s cheapest regions to buy a house, demand makes the process extremely competitive. As a result, you must act fast.
Your real estate agent can guide and offer specifics, such as price and conditions, if needed.
Step 10: Your Closing Date Has Arrived!
You must take a minute to relax and savour this wonderful occasion. Purchasing a home is a significant life event.
Here are a few more things to think about as you get ready to move in:
- Painting is part of the pre-move-in renovations.
- Changing the locks, and thorough cleaning of the entire house
- Notifying your service providers and sharing this information with close family and friends
FAQs
What are the six most important things to consider when choosing a home?
Take a look at your money.
Organize your offensive plan.
Location is important.
Make financial plans for your family’s future.
The condition of the real estate in your area.
Analyze the maintenance costs.
What should I know before purchasing a home in Canada?
The Top 6 Things You Must Know Before Buying a Home in Canada
#1 Have More Than A Down Payment.
#2 Get Pre-Approved for a Mortgage.
#3 Shop Around the Best Rates.
#4 Check Out First-Time Homebuyer Incentives.
#5 Work with a Real Estate Agent.
#6 Do a Home Inspection.
What are the top five qualities of the perfect home?
The house should have good ventilation and airflow.
The interiors should be ergonomically designed.
Construction materials must be of high calibre.
The ceilings should be between 10 and 12 feet tall.