Few things in life are as exciting as purchasing your first home. While it’s going to mean parting with a sizeable chunk of change, the right living space is worth every penny. Having said that, it’s important to enter the buying process with a thorough understanding of the costs involved. Armed with this information, you can start the search for a beautiful home within your price range—and avoid budgetary strain later on.
If you’re a first-time home buyer, here are five financial considerations that should be on your radar…
1) New expenses
As part of your home purchase, you’ll be taking on several ongoing expenses. Some of the biggest include monthly mortgage payments and property taxes. That said, there are also a number of smaller costs that you should factor into your home-hunting budget. Utilities, home insurance, WiFi—these items can add up. The best way to prepare is by doing your homework. Talk to a mortgage lender about your financing options, and (if you’re buying a resale house or condo) speak to the homeowner about what kind of monthly bills you can expect.
2) Closing costs
It’s not just future home expenses that you should keep in mind. It’s also the costs associated with the buying process. The most significant will be your down payment, which typically ranges from 5-20 per cent of your home’s purchase price. Provincial and city land transfer taxes are another major cost. The amount you’ll pay will depend on the value of your home, but it usually falls somewhere between 1.5 and 2.5 per cent. You’ll also be responsible for an assortment of smaller expenses, including legal and property-appraisal fees.
3) HST
If you’re buying a newly-built home, your purchase will also be subject to HST. This tax is equal to 13 per cent of your purchase price (which includes a 5 per cent federal tax and an 8 per cent provincial tax). Fortunately, there are rebates available. At the provincial level, buyers are eligible for up to $30,000. Federally, this amount could be up to $6000. To learn more, speak to a qualified financial expert.
4) New home improvements
While most home buyers dream of finding their absolute perfect home, the reality is that you may find a space that checks off most (but not all) of your boxes. You may also find a fixer-upper that has enormous potential. Whether you’re thinking of swapping out a few light fixtures, replacing your flooring, or doing a full-scale remodel, it’s important to budget for upcoming home improvements. In addition to thinking about potential upgrades, plan for future repairs. Your agent can ensure that you ask homeowners the right questions to determine the general condition of each property you’re considering.
5) What are you entitled to?
While knowing about upcoming expenses is crucial, so is being aware of the financial help available to you. In addition to the HST rebate mentioned above, you may be eligible for several other refunds. First off, look into the federal First-Time Home Buyers’ Tax Credit (which could provide you with up to $750). The municipal and provincial Land Transfer Tax Refunds offer more substantial amounts. Combined, you could be looking at over $8000.
Ready to buy your first home? We can help you navigate the process. Get in touch today—we’d love to discuss your needs!
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