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Loans and borrowing

Why talk to an advisor when buying a home?

February 7, 2022

Moving to a new country often means new plans and goals, like buying a home! This is a decision that’s usually made after careful consideration, and you’ll want to talk to an advisor at a financial institution early in the process. Your advisor can help set you up for success to achieve your homebuying dream.

Planning: Don’t overlook this important step

From the start, your advisor can help you identify your needs, understand what’s involved in this major decision and maybe avoid unpleasant surprises.

Their role at this stage is crucial, since the rules and legal framework around buying a home vary from country to country. You’ll learn how to develop a budget, calculate the actual cost of a home and prepare for the buying process.

What are your goals?

First think about what matters to you. Simple, but thorough planning is key to achieving your goals. Even at this stage, your advisor can help you identify your priorities ahead of time, regardless of your financial situation.

Together, you can begin to develop an action plan based on your means and ambitions, so you can buy your home with complete peace of mind.

Managing expectations

By discussing your goal with an advisor, you’ll have a better idea of how long it will take to achieve it. This will help you adjust your expectations.

For example, you need to have enough money for a down payment and start-up costs. You must also have the income, financial situation and credit rating to qualify for a mortgage (real estate loan). That’s where a good budget come in.

Review your budget

Your budget should take into account your assets, income, debts and recurring payments. This will give you a better idea of how much leeway you have to meet your day-to-day needs, what you’ll have to save and how big of a cushion you need to cover unexpected expenses. You’ll also have to add other expenses, like the down payment and start-up costs (such as inspection and moving costs).

When the time comes to buy, you’ll need to evaluate what you can afford. This is the maximum price you can pay for a home. This price will depend on multiple factors, such as how much you’ve saved for a down payment. It’s always best to aim for less than your maximum financial capacity, so you have some freedom to enjoy life’s little pleasures—or for other goals.

What is a down payment?

A down payment is a percentage of the value of your home that you have to put down at the time of purchase.

In most cases, the minimum down payment is 20%. For a $300,000 property, that’s $60,000.

If your down payment is less than 20%, you’ll have to take out mortgage insurance, in which case you’ll have to pay a premium of up to 4.5% of the amount of the loan.

The amount of the down payment can also vary depending on the application. For more information, please take a look at the steps to follow when buying your first property External link. This link will open in a new window..

What are start-up costs?

Start-up costs are all the related costs that come with buying a home. Depending on the situation, these start-up costs are estimated to be anywhere from 3% to 5% of the home’s value. For a $300,000 property, that’s $9,000 to $15,000.

Here are some examples:

  • Inspection fees
  • Appraisal fees
  • Sales tax on new homes (15%)
  • Notary fees
  • Premium of 0.6% to 4.5% (if you need a mortgage insurer - CMHC or Sagen)
  • Transfer tax (municipal tax to be paid after purchase)
  • Moving and set-up costs
  • Improvements or renovations
  • Insurance

With so many details to consider, don’t wait: contact one of our advisors External link. This link will open in a new window. to make your dream a reality!