Homebuying

The 2019 first-time homebuyers guide for Canadians

By: LowestRates.ca Staff on March 22, 2019

You’ve made a big decision this year: you want to buy a house (or a condo, or a townhouse).

It’s an exciting feeling going to open houses and searching for that place that you’ll soon call home. But it can also be a stressful process. From bidding wars to securing a mortgage, actually buying that home is a lengthy process.

So that’s why we created this guide. Our editorial team have all either went through the homebuying process, are going through it or one day hope to, and we’ve done the research for you.

This is an extensive guide that touches on all the major aspects of buying a property: from home inspections, to tax credits, to actually going on the house hunt. And while it’s geared to first-time homebuyers, a lot of this information will apply to almost everyone.

Now, without further adieu, let’s jump into all the information you’ll need to know before you embark on one of the biggest financial journeys you’ll ever undertake!

Mortgage

What is a mortgage?

A mortgage is a loan that is used to purchase property in Canada. It requires regular payments to the lender, consisting of principal payments (paying off the loan amount) and interest. Your mortgage may also bundle in your property taxes or home insurance payments.

Often, mortgages are large loans worth hundreds of thousands or even millions of dollars. Your property — whether a house or something else — is used to back up the loan. Meaning, if you stop making your payments and default, the lender can seize your home as collateral to cover the lost money from the loan.

Mortgages start off having a large amount of the payment go toward interest costs compared to the principal, but over time, more of your payment goes toward the principal.

What is a mortgage term?

A mortgage term is how long certain details about your mortgage are applicable for. For instance, a term will determine how long you’ll be locked into a fixed-rate or variable rate.

Terms are most commonly five years in Canada, though they can range from six months to 10 years. Deciding how long of a term you want will depend on several factors. For instance, you may temporarily want a fixed-rate because you’re concerned interest rates are going up, but believe they’ll start going down in a few years time. In that case, a shorter two-year term will make sense for you.

Different term lengths will come with different interest rates.

What is amortization?

Amortization calculates the amount of time you’ll be required to pay off the principal and interest of your mortgage. The longer an amortization, the lower your monthly payments, but the more you’ll end up paying in interest.

In Canada, 25 years is the longest amortization for insured mortgages, while uninsured mortgages can have lengths up to 30 years. Amortization is different from a term in that it’s the amount of time you are required to pay off your mortgage, while a term dictates certain parameters like fixed or variable over a specific amount of time.

Fixed vs. variable: what’s the difference?

This is one of the biggest decisions you’re going to make when applying for your mortgage. A fixed-rate will keep your rate consistent throughout the term of your mortgage — for instance, if you get a five-year fixed rate of 3.25%, the rate will stay the same for five years. This can be a good choice if you’re worried about the impact of higher interest rates on your monthly payment.

A variable rate, meanwhile, tracks the bank’s prime lending rate and is influenced by decisions made by the Bank of Canada. If the Bank of Canada raises its lending rate, your mortgage rate will increase, and either your monthly payment or the portion of your payment you pay toward interest will rise. (It’s important you ask your broker or lender what will happen in such a scenario.)

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Variable-rate mortgages are great in a falling rate environment, as your mortgage rate decreases whenever the Bank of Canada lowers its rate. Also, variable-rate mortgages have lower interest rates than fixed-rates to begin with.

If you’re comfortable with a rate that can change, choosing a variable-rate mortgage can save you a lot of money over the lifetime of your mortgage — as long as interest rates don’t rise too quickly.

Open vs. closed mortgages

Open mortgages allow you to pay off your mortgage at any time without penalty. Closed mortgages, on the other hand, allow only a specific amount of lump sum payments a year — though some allow none at all.

Most borrowers opt for closed mortgages, because they come with lower interest rates. If you want the flexibility of being able to pay off your mortgage before your amortization is up, consider an open mortgage.

What is an accelerated payment?

An accelerated payment involves changing how often and how much you pay on your mortgage. Accelerating can involve changing your payment frequency from monthly to bi-weekly. Paying every two weeks means you pay slightly more every month, because most months have slightly more than four weeks.

Some lenders also allow you to increase your payment by a certain percentage every month, usually at a cap of 20%. This all goes to your principal, meaning you end up paying less in interest. Accelerating payments is a great way to decrease the total interest cost over the lifetime of your mortgage — often to the tune of thousands or tens of thousands of dollars.

What is a prepayment charge?

Want to pay off your mortgage early? Not so fast. Most lenders only allow you to make a certain amount of payments every year. Pre-payment charges occur whenever you pay more than you’re allowed to on your mortgage in a given year.

Some lenders allow you to make a lump sum payment annually — often up to 20% of your mortgage. This is a great option if you believe you’ll have extra cash in the coming years, whether from a bonus or an inheritance. It’s important to ask your lender or broker if you have this option before applying, as not every mortgage allows it.

How large should your mortgage be?

Having a budget before buying a home is important. Experts recommend that you should devote one third of your monthly income toward paying for housing costs, so make sure you sit down and calculate the total costs of not just your mortgage, but property taxes, home insurance and any maintenance fees. When choosing to give someone a mortgage, the banks follow the Canadian Mortgage and Housing Corp.’s gross debt service ratio (GDS), which states that your monthly housing costs should be no more than 39% of your gross monthly income. Calculating this ahead of time will allow you to figure out what your payments will be. You should not exceed 50% of your monthly income on housing, as this can prevent you from properly saving for retirement and building an emergency fund.

Should I get a mortgage pre-approval?

Yes. Getting pre-approved for a mortgage means that a lender has already looked at your credit history and income and is comfortable with giving you a mortgage for a certain amount. This will allow you to know what you can afford, and prevents you from bidding on a property, only to learn a lender won’t give you a mortgage for the amount you need.

Pre-approvals can also be a huge advantage in competitive housing markets like Toronto. It allows you to make a bid without placing a finance condition, because you know your lender is ready to give you a mortgage.

Banks, brokers and credit unions

Homebuyers in Canada have several options when it comes to getting their mortgage. Banks have traditionally been the most popular option, since many of us already do some form of banking with them. However, their advertised rates are often higher than other options and getting the best rate requires negotiation.

Brokers tend to have lower advertised rates than banks, and often do the work of comparing mortgage rates for you and securing the best rate. Most brokers get paid by taking a small percentage of the loan amount from the lender.

Finally, credit unions also offer loans. One benefit of credit unions is that the B-20 stress test does not apply to them — meaning you can borrow more (there’s more information on this in our section titled “The stress test” below).

Finally, there has been a growth in the number of private mortgage lenders in Canada. These non-traditional lenders — often a single individual or a small group of individuals — lend to those who have been turned down by traditional lenders. They tend to charge significantly higher interest rates given the added risk (and the fact that this industry is not well regulated). Rates of 15% or more are not uncommon. There has been a rise in the number of private mortgage lenders in cities with hot housing markets such as Toronto and Vancouver. We advise against using a private lender to get your mortgage.

Finding the best mortgage rate

The easiest way to find the best rate is to use a rate comparison website. It allows you to see who’s willing to offer you the lowest mortgage rate — all from the comfort of your own home. You can use the LowestRates.ca quoter below to quickly and easily compare mortgages.

The stress test

Beginning on Jan. 1, 2018, the Office of the Superintendent of Financial Institutions (OSFI) required that those who borrow mortgages from the Canadian banks undergo stress tests to ensure they can make their payments if interest rates rise.

This new stress test, known as B-20, means borrowers have to prove they can afford their mortgage if rates rise by two percentage points, or to the five-year Bank of Canada average rate — whichever one is higher.

The stress test has led to a loss of buying power. While under the old rules, a borrower could get a mortgage at seven times their annual income, under the new rules, that number has been reduced to about five times annual income.

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Extra costs

Rising interest rates

First-time home buyers have a lot stacked against them right now. There’s the aforementioned mortgage stress test, which OSFI introduced at the beginning of 2018. There are the five interest rate hikes implemented by the Bank of Canada (BoC) over the last year-and-a-half, which have made variable-rate mortgages more expensive. And there’s the fact that even condo prices — long lauded as the affordable alternative — are on the rise.

All that said, there’s still hope: real estate boards in Toronto and Vancouver are putting pressure on the federal government to revise or even do away with the stress test, which could alleviate a lot of financial pressure on first-time buyers. And there’s growing skepticism from many economists that the BoC will continue to hike interest rates at the once-anticipated rate. In fact, some are predicting only one hike this year. Others are even speculating that the BoC could lower the overnight interest rate at some point.

Land transfer taxes

Once the sale of your new home closes and that property officially becomes yours, you need to pay a land transfer tax to the province. (Every province save for Alberta and Saskatchewan charges a land transfer tax.)

How much you’ll pay depends on how much you bought the property for, as well as any mortgage or debt that had to be taken on in order to buy it. Sometimes, first-time buyers are eligible for a discount.

The City of Toronto charges homebuyers a municipal land transfer tax on top of the provincial one. To date, it’s the only city that does this. So, let’s say you buy an $850,000 house in Toronto. According to the Toronto Real Estate Board’s land transfer tax calculator, you would pay $13,475 in provincial land transfer tax and $13,475 in Toronto land transfer tax, for a total of $26,950 on top of the purchase price. Your $850,000 home just rose to $876,950.

Property taxes in Canada

Once you own a property, you’ll need to pay property tax. If your property is located within a municipality, you’ll have to pay a municipal property tax. If you live outside of a municipality, you’ll have to pay a Provincial Land Tax, which is calculated by taking the current tax rate and multiplying it by the market value of your property.

Property tax is calculated based on a few factors: the general municipal tax rate (if applicable), the education tax rate (determined by each province), and the value of your property. At the start of the year, you’ll get a bill in the mail outlining how much property tax you owe.

You can pay municipal property tax in instalments, or some lenders will allow you to roll your annual property tax payment across into your monthly mortgage payments, across however many you make in a year. They would then pay the municipality on your behalf.

Property tax and utility adjustments

Some costs aren’t always cut and dry. Let’s say you aren’t moving into your new home until the middle of the month. There could be some adjustments that need to be made if the previous owners pre-paid their property tax bill and/or utilities bills.

The previous owner(s) might have used things like water, heat, and hydro, for which they haven’t yet been billed. This might see you picking up the tab when you take over the utility account. Once you take possession of the property, touch base with the appropriate utility companies to let them know if costs incurred for the beginning of the month need to be charged to the previous owner(s).

You should ask your real estate lawyer to keep tabs of any adjustments. Make sure, come closing time, these cost adjustments are reflected and accounted for.

Appraisal fees

When buying a home for the first time, you’re going to need to hire an appraiser. What does an appraiser do, exactly? He or she assess the value of your property.

Having an appraisal done on the home you want to buy is integral to getting approved for a mortgage. Lenders will usually rely on one of their own appraisers (the same way life insurance companies send you to their preferred doctors), but you will still have to foot the bill for the service, which can cost anywhere from $300 to $500.

Title insurance

“Title” is just a fancy word for legal ownership of a property.

While it’s not mandatory, for a one-time fee, title insurance provides you with protection against losses related to title ownership — things like forgery, identify theft, and fraud. There are two types of title insurance: an owner’s policy, which protects the owner, and a lender’s policy, which protects the lender.

You can buy title insurance from your real estate lawyer or from a title insurance company. It could cost you anywhere from $250 to $350.

Furniture

After all the legal stuff is out of the way, the fun of decorating can begin. But whether you’re buying brand new items or hitting up weekend yard sales, furnishing your new home is going to cost money. There’s just no way around it.

In the third quarter of 2015, Canadians dropped $4.49 billion at home furnishing stores.

That said, the size of your new home can make a big difference in furnishing costs. For example, if you’re moving into a condo, how much stuff you can actually fit inside of it is automatically reduced, so this could help save you some money. If you need to fill a house, you’re going to be looking at higher costs in this department.

Even more costs

Once you get approved for a mortgage, you might also be eligible for life insurance from the bank. This can be up to $500,000 that your loved ones can put toward paying your mortgage down if you die before it's paid off. Like any form of life insurance, this benefit is completely optional. If you decide to do it, the monthly life insurance premium would get combined with your monthly mortgage payment.

Something else you’ll need to consider is that a home purchase can be subject to a sales tax. Usually this is for newly built homes — not on resale properties. That said, not every province has a property sales tax. If you happen to be one of the unlucky ones, and end up having to pay tax, you could be eligible for a tax rebate.

Newly built homes come with a warranty, so it’s important to check whether the costs associated with that warranty are folded into the sale price or will come due at closing time. The new home builder might also require enrollment or solicitors fees.

Then, when moving day finally comes around, if you decide to use movers, you’ll need to consider the costs of their labour (this could include moving insurance, which ensures some form of compensation if your items are damaged during the move), as well as the fees you’ll pay for things like setting up the internet, landline, and utilities.

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Down Payment

What is a down payment?

Unless you are very, very wealthy, you’re probably not going to be able to buy a home with one single payment. Homebuyers typically expect to divide their payments into two categories: (1) a mortgage; and (2) money that you pay to the seller upfront (a down payment).

Down payments serve multiple purposes. First of all, they’re literal payments: the sum of money that you put down will be deducted from the total you owe to the sellers. Let’s say you give the sellers a down payment of $100,000 for a house priced at $500,000. The amount you still owe the sellers is now $400,000, which you’ll probably finance with a loan (your mortgage).

Down payments also function as bargaining tools — particularly when it comes to your mortgage. The larger your down payment, the more negotiating power you’ll have with your mortgage lender to secure a lower interest rate, since you’ll be deemed less risky to lend to.

Conventional wisdom says that your down payment should consist of money that you actually have — not money that you’ve borrowed. (In Canada, it’s illegal to pay for a home entirely through your mortgage anyway.) Technically, you can take out a loan to finance your down payment, but this is a risky move, not to mention an expensive one: in addition to paying interest on your mortgage, you’ll have to pay interest for your down payment loan, too. When people talk about “saving up” for a home, they’re typically referring to amassing enough money for a down payment.

What is the minimum amount on a down payment in Canada?

You can’t just put down any old amount! In Canada, you’re legally required to put down a prescribed percentage of your home’s total purchase price. The percentage varies depending on the price of your home. Here are the rules, according to the federal government:

A home that costs $500,000 or less — 5% of the purchase price
A home that costs $500,000 to $999,999 — 5% of the first $500,000 of the purchase price, and 10% for the portion above the purchase price above $500,000
A home that costs $1 million or more — 20% of the purchase price

How much should you put towards your down payment?

The more you can manage, the better. For starters, paying more with cash means paying less with your mortgage, which also means paying less in total interest.

Additionally, when your down payment is 20% or more of your home’s overall price, you’re exempt from buying mortgage insurance and paying monthly premiums. The next section explains how this law, which is typically referred to as the 20% rule, works in Canada.

What’s the 20% rule?

When your down payment is less than 20% of the total price of your home, more than 80% of your home will be financed by a mortgage — and that’s a ratio the government of Canada doesn’t feel great about.

Enter, then, the “20% rule”: anyone with a down payment of less than 20% is legally required to buy insurance for their mortgage from the Canada Mortgage and Housing Corporation. This means that on top of mortgage payments and interest, you’ll be paying insurance premiums for the duration of your amortization period — all before you even get to other homeownership costs like home insurance (which is not the same as mortgage insurance), utilities, and property taxes.

How big should your down payment be?

Given how much you can save on interest with a smaller mortgage, and the 20% rule, the bigger your down payment is, the better.

That being said, saving 20% or more for a down payment is not an easy thing to do — and practically impossible in expensive cities like Toronto and Vancouver. We’re not here to shame you if meeting that goal feels impossible.

The best course of action is to assess your budget, and figure out an amount that will help you meet your homeownership goals without putting too much strain on your finances. How long are you willing to wait to buy a home? Can you put it off a little longer, so you can save up? Or would you rather buy now, given the prices in your local real estate market?

What is the Home Buyers’ Plan (HBP)?

For anyone who plans to buy a home and happens to have a Registered Retirement Savings Plan (RRSP), the Home Buyers’ Plan (HBP) is an important option to keep in mind: the HBP essentially lets you withdraw money from your RRSP to put towards your home purchase — but without any of the tax penalties.

Before we get into the details of the HBP, let’s talk about how RRSPs work. The federal government introduced the RRSP in the 1950s to help Canadians build their own retirement funds. Because your RRSP funds are meant to be used for the future, the government doesn’t want you to take money out of the account for frivolous reasons, so they introduced a tax penalty: every time you take money out of your account, that money counts as taxable income, and you are taxed accordingly. Let’s say you make $45,000 a year and withdraw $10,000 from your RRSP. Come time to file your taxes, your income is technically $55,000 — which means you’ll have to pay more taxes.

The HBP is a way around this. Under this plan, you’re allowed to withdraw up to $35,000 (this was recently updated in 2019 from $25,000 previously) in one calendar year to buy a home, but none of this money will be considered taxable income. $35,000 is the total maximum amount you are able to withdraw, and you have to make all your withdrawals within a single calendar year. That means if you took out $20,000 in 2019, you only had the rest of the year to take out the remaining $15,000.

The only caveat? The money you withdraw will be considered a loan (from your retirement funds), and you have to replace it within 15 years. When considering whether the HBP is right for you, it’s important to think seriously about whether you’ll be able to keep up with the repayment schedule.

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Tax credits

Let’s start with what’s applicable country-wide: the Federal Home Accessibility Tax Credit (HATC) for Seniors and Persons with Disabilities. This non-refundable tax credit is available for homeowners who are aged 65+ before the end of the tax year, or who have a disability. The HATC allows you to claim up to $10,000 on renovation expenses that improve accessibility and safety in your home, like grab bars, hand rails, wheel-in showers, or widening doorways.

There are also a handful of tax credits available to homeowners in select provinces.

In B.C., there’s the B.C. Home Renovation Tax Credit for Seniors and Persons with Disabilities. This refundable tax credit allows you to claim up to $1,000 per year on permanent projects aimed at improving accessibility. As with the HATC, only seniors and people with disabilities are eligible, and you can only claim expenses made on or after Apr. 1, 2012.

Both Ontario and New Brunswick offer similar, refundable tax credits to senior residents — but not to people with disabilities.

Meanwhile, Quebec has the Tax Credit for Eco-Friendly Home Renovation, otherwise known as RenoVert. This refundable tax credit caps out at $10,000, and is available to homeowners who have hired a contractor to renovate their homes to make them more eco-friendly. The biggest caveat? The tax credit is only available until Mar. 31, 2019.

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Renovations and you

Dos and don’ts

Whether you plan to tackle renovations on your own or hire a contractor, the biggest “do” to abide by is research. Do you know which materials will work best for your home? Have you read reviews of the contractors you plan to hire? Will your current home insurance plan cover you in the case that something goes wrong? Could your renovations negatively impact the value of your home? How will they impact your budget?

Our biggest “don’t,” then, is not doing research in advance. Renovations are usually time-consuming, expensive, and hard work. You don’t want to be stuck with changes that you regret — or that wreak havoc on your life and finances.

Hiring a contractor vs. DIY

The most obvious benefit of doing renovations yourself is, of course, the money you save: when you hire a contractor, you’ll be paying for labor in addition to materials, and the costs can quickly add up into the tens or even hundreds of thousands, depending on the project. There’s also the sweet, sweet satisfaction of knowing you finished a renovation project on your own — not to mention the bragging rights.

That being said, there are projects that may require expertise you don’t have. Hiring a contractor will also save you time and effort, and if you hire someone you trust, you can also be assured that the renovations were well-executed. The biggest negative, as mentioned, is the cost. But you may find that not having to do everything yourself is well worth the cost.

Whether you DIY your renovations or hire a contractor, however, you’ll need to think about insurance. Before you start any renovations on your home, make sure to contact your home insurance provider to let them know what changes you’ll be making. They may suggest that you buy additional coverage in case anything goes wrong.

If you hire a contractor, make sure the contractor has a commercial general liability policy. This ensures that their insurer can reimburse you if they accidentally cause any damage to your home.

Impact on resale value

It’s generally agreed that renovations will increase the value of your home. But, because renovations cost money themselves, it’s not always easy to tell whether you’ll actually see a return on your investment.

Different housing markets have different housing trends, depending on factors like local climate and tastes, so it’s important you get a good grasp on what buyers want in your area before you embark on any renovations for the purpose of reselling.

In general, experts recommend focusing on cosmetics if your home doesn’t have any underlying safety or health hazards (which should always be tended to first). When a home looks new, it will generally sell for more. Cosmetic changes are usually the easiest to make, too.

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Home Insurance

What home insurance does

Home insurance protects your home from perils that insurance companies are willing to cover (also called ‘insured perils’ in insurance-speak). These include:

  • Fire (not ones caused by fireplaces, though).
  • Your personal liability should someone injure themselves on your property/Costs stemming from someone injuring themselves on your property; this is personal liability.
  • Wind damage.
  • Damage caused by hail.
  • Some forms of water damage (it has to be accidental; your insurance may cover damage caused by water main breaks or the accidental discharge of water from your pipes or fire sprinkler).
  • Falling objects.
  • Theft.
  • Vandalism and other forms of malicious damage.

Another thing that home insurance can help you with is getting a mortgage. Many lenders (banks especially) won’t give you a mortgage unless you also agree to buy home insurance.

What it doesn’t do

There are a lot of perils that insurance won’t cover. These include:

  • Some forms of water damage. For example, insurance companies don’t include overland flooding as an insurable risk yet.
  • Flooding from burst pipes. Insurers want to see that you’ve taken every precaution to prevent flooding. If you live in a cold climate and know that you’ll be away from home for a while, remember to turn off your water.
  • Damage caused by earthquakes.
  • A standard policy won’t cover damage that arises from a vermin infestation.
  • Damage caused by large amounts of melting snow. Given that spring melts are an annual occurrence in Canada, standard insurance policies usually exclude the damage they cause.

Home insurers do offer extra coverage in the way of endorsements. These are coverages you can add on to your base policy that will protect you against a risk that’s normally excluded in a standard home insurance policy. Flood and earthquake protection endorsements are the most commonly offered, but some insurers offer their own unique add-ons.

Another important thing to know: home insurance doesn’t cover your house for its market value. It only covers the cost to replace the structure using comparable materials.

How do I get home insurance?

If you have auto insurance already, you can contact your insurer and ask if they offer home insurance coverage as well. Bundling your home and auto insurance with one provider will net you a discount on both automatically, too.

Otherwise, going online is the fastest way of getting coverage. With LowestRates.ca, you can start a quote and compare rates from more than ten home insurers.

The different kind of coverages

Now that you have a better understanding of which perils insurance will and won’t cover, you’re ready to figure out how much insurance you need.

Here’s a rundown of all the standard policy types that exist.

Comprehensive insurance guards your home as well as your personal effects from the entire gamut of insurable perils. It’s the most expensive type of home insurance policy.

A broad insurance policy only covers your home from named perils. That means you get to choose which perils you want coverage against. If your home suffers damage from a peril that isn’t covered in your contract, your insurance company won’t do anything about it.

Standard home insurance is a cross between comprehensive and broad insurance. Your house — meaning the physical structure — is protected against all insurable perils. Your contents, on the other hand, are not. Coverage for the stuff inside is limited to the perils that you named in the contract.

No-frills insurance is for houses that have serious structural issues and don’t meet underwriting standards (meaning, there’s a high chance that your basement’s going to spring a major leak because the piping is so old). It’s the cheapest type of home insurance. It’s also perfect for people who are planning a big renovation.

What if I rent out my property?

If you’re considering renting out a suite in your house — or even the entire place — it’s strongly recommended that you get home insurance and ask your tenants to get renter’s insurance.

As the owner, your home insurance policy will cover the physical structure (and any contents that belong to you, appliances for example, depending on the policy you get).

However, your insurance policy won’t extend to your tenants. They will need their own insurance to protect their belongings and personal liability.

What if I’m buying a condo?

More Canadians live in condos than ever before. If you’re buying one, you still need home insurance — or at least a form of home insurance. Condo insurance protects your unit from insurable risks. The condo building management has its own separate insurance to protect the common areas.

How much does home insurance cost?

The price of home insurance varies by individual. Insurers look at a host of factors. The age, condition, and size of your property, for example. They also factor in neighbourhood crime rates, meaning that if you live in an area where break-ins are common, you may pay a higher premium than policyholders who live in an area where this type of event is less common. Your proximity to a body of water or even a fire station will affect your premium as well.

The best way to figure out how much you might have to pay is to get a quote.

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The house hunt

Where do I start?

Take a page from the Type A book of organization and start with a list. Before you can even start looking at actual listings online or in person, you’re going to need to narrow down what, exactly, you’re looking for in a home.

Ask yourself: what’s really important to me when it comes to where I live?

It can help to break things down into two categories: your wants and your needs. As an example, in the “want” category, you might include things like “close proximity to nature” or “furnished basement.” Whereas in the “needs” group you might put things like “near a daycare” if you have young children.

Should I hire a real estate agent?

It’s incredibly valuable to have the expertise of a professional on your side. Real estate agents can make the homebuying experience less daunting; they can find you listings that only real estate circles have access to; they can answer questions you have; and they can offer you informed opinions.

You often don’t end up paying a real estate agent — they take a cut of the final sale price.

But you might just prefer to house hunt unaccompanied. If that’s the case, you can consult online materials and listing websites yourself, or you can do both: hire a real estate agent and do some of your own research, bringing places to their attention that pique your interest.

Choosing the right neighbourhood

If you’re moving somewhere unfamiliar — or even if you’re just moving to a different part of the city or town you currently live in, it can be overwhelming. Relocating requires a bit of on-the-ground research.

To see if a certain neighbourhood is a good match, first refer back to your wants and needs list and see what boxes the new neighbourhood ticks. Then, visit that area and see how you feel walking around it. Maybe you can grab lunch in the area at a local restaurant, or chat up some of the current residents and ask how they enjoy living there.

Some questions you’ll want to ask yourself are:

  • How safe is this neighbourhood?
  • Can I find the type of home I want here?
  • How long will it take me to get to work?
  • How close is the home to public transit?
  • What does the neighbourhood have in the way of schools and daycare?
  • What about access to nature?
  • Are there grocery stores and retail shops close by?
  • Is it a pedestrian-friendly neighbourhood?

Bidding wars

Ah yes, the dreaded bidding war — the activity no first-time homebuyer wants to find themselves in.

Bidding wars happen when the realtor selling the property asks for offers to be made by a certain date and time, causing numerous people to put in offers on the same property. It’s a stress-inducing process in which bidders are kept in the dark about the prices and conditions of the other offers, which can inspire bidders to offer significantly more money than they planned to spend, just in hopes of beating out the next person.

Good news for Ontarians: the province is looking at doing away with bidding wars altogether, as it looks at making changes to the Real Estate and Business Brokers Act, 2002, namely to allow realtors to share with bidders the competing offers from other potential buyers.

Until it does, though, you might wind up in a bidding war, especially if you live in Toronto, where they’re very common. If you do, beware that some buyers could make what’s called a “bully offer” — an offer in advance of the agreed-upon deadline — to persuade the seller to accept without seeing what other offers come in. The best thing you can do is not get caught up in the stress of the situation and blow your budget. Stick to your maximum, and nothing more.

Should I get a home inspection before I bid?

A home inspection isn’t legally required, but it’s a wise investment. An in-person home inspection is your first defense against potential issues that could wind up costing you a lot of money down the line. It’s akin to checking under the hood before you drive away.

Inspectors look at all the major elements of a home, including electrical, plumbing, and roofing, point out any problem areas, give you a rough idea of what it will cost to repair them, and then provide you with an inspection report. Inspections can run anywhere from $300 to $600 depending on the size and type of the dwelling.

Since they’re entirely different dwelling types, condos and homes warrant different types of inspection. Because a condo is just one unit within a larger building, a condo inspection likely wouldn’t include checking the plumbing, electrical, and roofing. Instad, it might include an examination of all the appliances, checking to see if any have been recalled by the manufacturer, and showing buyers where/how to shut the water off in case of an emergency.

What happens after your offer is accepted

If you’ve had your offer accepted, you can breathe a sigh of relief — especially if you’ve just survived a nasty bidding war. Okay. Sigh of relief time is over. Here’s a brief rundown of what needs to happen next:

  • If you haven’t been pre-approved for a mortgage loan, you’ll need to apply for one
  • Get your home appraised and inspected
  • Move your money somewhere where it can be accessed
  • Start shopping around for home insurance
  • Do one final walk-through of the home
  • Sign on the dotted line and consider yourself a new homeowner

If anything seems off to you throughout this final process, make sure you flag it with the seller, your real estate agent or lawyer before it’s too late. The costs you agreed upon should be the same at closing as they were when you made the offer. And if they’re not, this should be explained to you.

The closing costs

Things like home inspection fees and land transfer taxes, which we’ve already touched on, are a big part of your closing costs. So are legal fees.

Once you put an offer in on a house, it’s a good idea to find yourself a real estate lawyer who can help you review the offer, make sense of any legal jargon and be there on closing day to make sure everything looks sound. Lawyers, of course, cost money, including any expenses they themselves have to take on (e.g., mortgage and property registration fees in some provinces), so you can expect to shell out, on average, between $1,000 and $2,500.

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Additional links and resources:

We’ve aimed to make this guide as comprehensive as possible. If there’s a question you still have after reading it, we view the below resources as incredibly helpful. Check them out.

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