Shopping for a mortgage.

In the market for a new home? There are many considerations you need to make before diving straight in. Most Canadians are unaware of the closing costs associated with buying a home. This guide will get you up to speed with the world of home ownership.

Shopping for a mortgage.

Ask yourself the big question: How much can you afford?

Choosing your home comes down to affordability. You need to be honest with yourself, and understand that paying a mortgage on an ongoing basis is a huge commitment that requires planning. Use this general rule of thumb to help you decide if the house you're after is really right for you. If you can put 32% of your gross income towards your housing costs, including property taxes, heating and strata fees, you can take the next steps and start planning for a down payment.

The down payment.

If you need to borrow money to buy a house, you have to chip in some money with a down payment. The rest of the money you need to buy the house forms your mortgage. Home buyers in Canada need at least 5% down for homes that cost less than 1 million, and at least 20% down for homes more than 1 million, but you shouldn't aim for the minimum. Putting as much as you can towards the down payment will put you in a better financial position for the future, allowing for a smaller mortgage, less interest, and less of your monthly income going towards paying it back.

One-time costs.

While the sticker price of a home is large enough, keep in mind there are more costs to buying a home. This includes costs associated with closing the sale, legal fees, home inspections, moving expenses, and appraisal fees which can all cost well above $3,000. Property transfer taxes are is calculated at a rate of 1% on the first $200,000 of the fair market value of the property, and 2% on the rest. Make sure you're not just budgeting for offer price of your home, and that you're well prepared for these one-time expenses.

Ongoing costs.

Once you've successfully moved into your new home, you'll need to make some adjustments to your monthly budget to accommodate new expenses. Make sure you can afford your mortgage payment in addition to the ongoing costs associated with your home. Home insurance and utilities are easy to plan for, but things like repairs and maintenance aren't. This is where a smart down payment strategy really helps you out. Use the money you're saving on a lower mortgage by setting aside funds for ongoing costs, both predictable and not.

Start shopping for a mortgage the smart way.

  • Know how much you can afford.
  • Put as much in your down payment as possible
  • Don't forget to factor in one-time costs associated with homebuying.
  • Consider ongoing costs when budgeting for a new home.
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Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment and borrowing advice. All examples are hypothetical and are for illustrative purposes only. We cannot guarantee and will not be liable for their applicability or accuracy in regards to your individual circumstances. Other fees and costs may be applicable. Please contact us for full details. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.