Ontario First-Time Home Buyers: What You Need To Know

11.30.2020 | Articles For Homebuyers

Are you planning to buy a house in Brampton, Caledon, Mississauga? If it’s your first time purchasing a property, you’ll want to ensure that you understand the basics.

Whether you’re choosing the perfect community or setting an accurate budget, having answers to your fundamental home-buying questions is key. This information can help set you up for a smooth, low-stress purchase—and a successful result!

If you’re buying a house in Peel Region, here’s what you should know…

 

FAQs For Ontario First-Time Home Buyers

When it comes to purchasing a home for the first time, many buyers don’t know where to start. Here are a few frequently asked questions to guide you as you embark on your search.

What are the benefits of buying a home?

When you purchase a home that meets your needs, you have more to gain than just a great place to live. Take a look at some of the added benefits.

Home equity

The equity in your home is determined by the difference between what you owe on your mortgage and the current value of your home.. It’s the portion of your property that you’ve paid off, which your lender has no stake in. This amount increases as you make mortgage payments, helping you build wealth over time.

You can use your equity to meet long-term goals (such as funding your retirement or financing your children’s education) or tap into it when you need it.

Price appreciation

Long-term appreciation is one of the primary ways of making money in real estate. As a rule, property prices increase over time—and homeowners reap the rewards when they’re ready to sell. While it’s true that the market fluctuates, long-term appreciation makes a home one of the most stable investments you can make.

More freedom

When you own a home, you have the freedom to renovate it to your taste. Whether you want to replace your flooring or completely redo your kitchen, you don’t need to ask anyone for permission beforehand.

Financial advantages

Believe it or not, owning a home can be less costly than paying monthly rent in the long run. Not only that, but it can help you build your credit—which will be useful when you’re ready to make large purchases or investments in the years ahead.

Who qualifies as a first time home buyer?

If you’re purchasing your first home, there are several government rebates and programs that may benefit you financially. Each one comes with specific qualification criteria, but being a first-time buyer is a requirement for each. That means you haven’t occupied a home owned by you, your spouse, or a common-law partner in the last four years.

Here are some of the major program and rebates available to first-timers:

• First-Time Home Buyer’s Plan – This plan allows buyers to receive 5 to 10 percent of their purchase price through a shared-equity mortgage.

• Home Buyers’ Plan – It enables purchasers to take out up to $35,000 from their RRSP in a calendar year to buy or build a qualifying home.

• First-Time Home Buyers’ Tax CreditThis credit makes it possible for eligible buyers to receive up to $750 in federal tax relief.

• Land Transfer Tax Refunds For First Time Home Buyers – You may be eligible for a refund of all or part of your land transfer taxes (the maximum amount you can receive is $4000).

When should I get pre-approved for a mortgage?

Pre-approval is a crucial step in the home-buying process. Fortunately, the right real estate agent can connect you to an extensive network of lenders, including both banks and mortgage brokers.

It’s worth noting that there are some advantages associated with brokers. These professionals have close relationships with a variety of banks, smaller lenders, insurance companies, and private funds. As a result, they’re well equipped to find you the best possible rate and terms.

If you’re not sure how pre-approval works, here’s what you need to know. It starts with a lender assessing your overall financial situation. From there, you’ll receive a pre-approval letter indicating how much mortgage financing you’ll likely receive.

Being pre-approved helps ensure that you’re taken seriously by sellers. It also provides a great starting point when you’re creating your home-hunting budget! Depending on your lender, your pre-approval will likely be good for 60, 90, or 180 days once you’ve received it.

Should I buy a house with a listing agent or a buyer’s agent?

When you’re ready to start your home search, working with the right real estate professional is key. As a first-time purchaser, here’s what you should know.

A buyer’s agent is there to guide you through the purchase process. Importantly, they’re legally obligated to represent your best interests. In contrast, a listing agent (also known as a seller’s agent) is there to fulfill the same role for the seller.

Some buyers believe there are advantages to working with a listing agent—such as access to a larger selection of properties, and a competitive advantage in multiple-offer scenarios. For the most part, these benefits are exaggerated. In fact, it would be unethical for a listing agent to use all of the information at their disposal to help a buyer in a bidding war.

While the professional you choose to work with is ultimately up to you, you should remember that a buyer’s agent is duty bound to you.

Who pays the real estate commission?

In any real estate transaction, the seller pays the commission. The amount is typically between 3.5 to 5% of the purchase price, which is split between the two agents involved. This is true whether you’re buying a house in Brampton, Caledon, Mississauga, or elsewhere in Ontario.

Will I need home insurance?

Yes, you will need to have home insurance in place in order to secure a mortgage. On the bright side, getting your personal property insured—and having liability coverage for occupants—will help protect you if the worst happens.

Your Finances: Things To Know

Buying a home can be complicated, especially when it comes to tackling the financial logistics. Fortunately, knowing what to expect can help you prepare for a successful transaction. Here’s what you need to know.

How much money do I need to put down to buy a home?

Your down payment (due at closing) is the portion of your purchase price that isn’t covered by your mortgage. The minimum amount you’ll have to pay will depend on your purchase price. Here’s how it works for homes at different price points:

• $500,000 (or less) – your minimum down payment will be 5% of your purchase price

• $500,000-$999,999 – you’ll pay 5% on the first $500,000, and 10% on any amount above that

• $1 million (and above) – your minimum down payment will be 20%

How do I know how much house I can afford?

It’s one of the most common questions Ontario first-time home buyers ask. How much home can I afford? While your pre-approval amount may be a good starting point, it’s important to determine your price range on your own. After all, nobody knows your expenses the way you do.

Conventional wisdom says you should spend no more than 30% of the money you bring in each month on household expenses (including mortgage payments). To calculate what you can afford, take your monthly household income, subtract your ongoing expenses (such as condo fees and property taxes), and determine what’s left over.

What are the costs associated with purchasing a house?

When you purchase a home, you should be aware that you’ll need to cover more than just the sticker price. There’s also an array of expenses due by closing. You can expect them to total somewhere between 1.5 and 5% of your purchase price.

Here are some of the major closing costs you should know about:

Home Inspection fee – If you opt for a home inspection, you can expect to pay at least $400. The precise amount will vary depending on your location, size of property and the professional you choose to work with.

Appraisal fee – If you require a mortgage, you’ll have to get the value of the home you intend to buy appraised. The fee can tally up to several hundred dollars, but there’s a good chance your lender will cover it for you.

Deposit – Your deposit is the amount you submit during the offer process (it also forms part of your down payment). There’s no set amount, though somewhere around 2 and 3 percent is pretty standard. Submitting a higher sum can make your offer more attractive in a multiple-offer scenario.

Mortgage default insurance – Will you be paying less than 20% for your down payment? If so, you’ll need to cover mortgage default insurance. While the monthly premium will be added to your mortgage payments, the PST on it (8%) will be due at closing.

Legal fees – The cost for legal services vary, but you can expect to pay $800 at minimum. Working with a qualified real estate lawyer is crucial, since they’ll ensure that all your paperwork is in order—and your due diligence is done.

Title insurance – This type of insurance covers you in case of title issues, such as challenges to your ownership of your property, or existing liens against it. In Ontario, you’ll typically pay somewhere in the neighbourhood of $250.

Land transfer taxes – Provincial land transfer taxes are due whenever property changes hands in Ontario. The cost will depend on your purchase price (with 0.5% sitting at the very low end of the scale and 2% at the high end—which means homes priced at $2 million and over).

Adjustments – If the current owners of the property you’re buying have pre-paid utilities or property taxes, you’ll need to reimburse them. Your lawyer (and the seller’s) will ensure that these costs are worked out fairly.

Who pays land transfer taxes?

The buyer always pays land transfer taxes. Fortunately, purchasers in Peel Region don’t have to pay municipal land transfer taxes (Toronto buyers have to cover both).

What To Know About Buying In Peel

It’s one of the most commonly-asked home buyer questions: where should I buy a house? While there’s no shortage of incredible communities in Southern Ontario, Peel Region is home to some of the best.

From Brampton to Mississauga to Caledon and beyond, Peel provides a fantastic quality of life. Here you’ll find convenient amenities, beautiful green space, and a great mix of homes. Are you ready to learn what this region has to offer first-time home buyers?

When you’re planning to buy your first home, we’re here to help. Get in touch to learn more about our local buyer expertise!

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