Finally It is time!
After years of putting off buying new toys and other stuff that I've been drooling over, the plan has come together very nicely and one of my major goals is about to be put into motion. First, before I buy my new mansion, I would like to pick the brains of a few of you out there that have already gone through the pleasure/pain of buying a house and what do you have to offer in advice.I've been thinking of getting either a semi or a townhouse, since it will be only me and a jump from a one bedroom to a three bedroom will be a lot. I need a garage, for the bike and a place to fix/restore the Virago. I don't like condos due to the fact that I need my own garage and living in an apartment for 3+ years, a little peace and quiet will be nice!
I already know that a home inspection is a must. A condition of approved financing is also wise. A pre approved mortgage before you shop. I'm just looking for tips from you guys.
posted by Pollcrazy @ 3:09 PM
10 comments
10 Comments:
Tips:
Pre-approved mortgage is a really good thing because then you know what your price range is, therefore you won't be wasting your time looking at places that are out of your marker.
Decide what kind you want, then start searching the MLS website. They have new places added almost hourly, so it's good advice to look as often as possible so you don't miss any good ones.
Getting an agent doesn't hurt. They are the Pros when it comes to this. You can't beat their knowledge, unless, of course, they are stupid. So watch out. Correct me if I'm wrong, but I believe it's the seller who pays for the agent fees? So I think this is almost a 'free' service for you.
Home inspection - def a must as you said for a previously enjoyed home. It makes sure you are not walking into a money pit with lots of problems that are currently invisible to your eye. Those home inspectors have a trained eye for what you and I can't see.
Interest rates: I'm assuming you won't have the dollar bills to pay for this place outright - if you do, rock on Joe. So my adivce is to fIght hard for your interest. Don't be affraid to play different banks against eachother. We had to go back and forth between ScotiaBank, RoyalBank and INGDirect to get the best rate. It was tough, a pain in the ass, but totally worth it because a little bit smaller interest rate, even in the decimal points, can save you thousands.
Thanks James, it will be very handy!
The agent was a definite plus in my case. As a first-time buyer, you don't pay the agent a cent for their time. So why not use the free service? It's awesome. At least my agent was awesome. Told him what I wanted and he would send me some listings every day that would be of interest to me and then he would schedule a visit if I wanted to. Funny enough, I met my agent at an open house of the house I ended up buying. He was also representing the seller. But he showed me a slew of other houses and I ended up going to the one that I met him in.
Hey, here's a tip! Let me refer you to my mortgage broker and I get $100. With that, I'll give you $50. Sound cool? ;-) Anyhow, mortgage brokers are cool also. I was looking into my own mortgage rates for awhile like James did - different banks, yada yada, but then someone said that a mortgage broker was free and they do the research for you and find the cheapest mortgage out there. Anyhow, what they found was indeed the best rate I could find. VOila! Another free service for us first time home buyers.
Other than that, with James' info and your own smart head on your shoulders, you should be fine!
A word about pre-approved mortgages - sure, they are great and all because it saves you the effort of potentially setting yourself up for failure, but you should just really think about what you want to pay for a house in your mortgage payments. Sure, you could probably get a pre-approved mortgage for $x dollars, but that doesn't take into account the fact that you want a little spending money in your pocket, right? I was looking for a house in my pre-approved mortgage range, but then I realized that I can just go lower, have some lower payments and be happy all around. The pre-approved is the max baby. Don't head for the max if you don't need to!
Also, the house needs central a/c for when Palmer crashes it.
I agree with all of James's comments.
shop around for an agent and use them, (when I mean use, I mean learn from them as much as you can, they can be useful). Be cautious of walk in's to a real estate firm because from my experience the ones that are in the office at 7pm are not the best agents.
When looking on your own, the way I see it is you have 3 choices, drive around to find a place, use the MLS, or use grapevine. (grapevine is okay because it has private listings, but not sure what is offered in your area)
I am pretty sure James is correct about the seller pays the commission (I think it is 2.5% each for selling and buying agents), but since it is your dime that is paying for the house...)
My one caution is to be careful of saying buying a fixer upper. It is great to buy something cheap, but if you buy a place with plans of major improvements and then decide to do those improvements yourself you may have a lot of work on your hands (as I am sure Shannon and I can relate).
Pre-approval is great, but once you decide on the place shop around for the best rates as James mentioned. But be careful, the banks will approve almost anything, so make sure you know what you can afford factoring in all the 'other costs'.
MikeG.
Oh ya one more comment.
you can also use up to 20 k of your RRSPS for first time home buyers.
that and used houses have GST tax, used do not.
There is a 1% land transfer tax which is a pain, thank you provincial government,
As ryan said, use the agents as they cost nothing to you and a morgage broker is good, but we talked directly to the banks and got some good rates.
good luck
Uhm, well ultimately the money that goes to the agents comes from your pocket. Otherwise that money would be destined for the sellers pocket.
With that in mind consider looking at grapevine, the seller might be more inclined to waiver on the final price.
I would set aside some time to look through grapevine, then if that didn't pan out, then get an agent.
Mike meant that you pay GST on NEW houses and you DON'T pay it on USED houses (above).
Some other things that you may want to think about are:
1. Lawyer - shop around for prices and be sure to put money aside for lawyer fees.
2. Home Owners Insurance - shop around. Some places give multi-discounts if you have your car/bike with them.
3. Propery Taxes - find out much a year you'll be paying.
4. Condo Fees vs. Freehold Townhomes - find out how much condo fees are if any. Also find out what the condo fees cover.
5. Type of Heating - gas, electric baseboards, water etc... How much a year? Also be sure to have money aside to pay your first bills. One other thing to find out is whether appliances are included or if you'll have to buy your own - if you have to buy your own, put more money aside to cover this expense.
6. Check on: last time roof, windows, furnace, etc. were replaced. Some condo fees cover this... however, if you're not paying condo fees, then you'll have to pay the cost for things that need replacing. You can also use this as a way of lowering the purchase price.
7. Closing Expenses - If the previous owner paid their property taxes for the entire year, then you'll have to refund the owner the difference for the rest of the year. You can either pay as part of the closing or work it into your mortgage payments.
8. Land Transfer Tax - I think it's 1% of the total.
9. Agents are a Scam - They can take up to 5% of the final cost of the house. Usually, 2.5% goes to the selling agent and the other half goes to the buying agent. Watch out for those who represent the seller and the buyer. Nonetheless, the cost gets transferred to you, the buyer. If the agent is nice, they'll take a cut in their share but good luck with that.
10. Inspector - go independent rather than one that the agent refers you to. Agents usually get a kick-back (on top of their 2.5%) for referrals. Also be weary of agency's that have their own home inspectors... it's just another way for them to make money off of you.
11. RRSPs - If you know that you are going to make a certain downpayment and you're going to use RRSPs, my suggestion would be to roll the downpayment into an RRSP (up to $20K) for 90 days and then take it out for your downpayment. Not only do you have a few years to pay it back but it also provides for a tax shelter for the year. Not sure if I'm explaining this clearly so talk to your financial planner or mortgage broker on how this works if you don't understand what I just wrote. Also, as a first time home buyer you only need to put down 5%. Depending on the bank/broker you chose, you may not have to put down anything - if you have good credit.
12. Overall, be sure to shop around for the best price. Whether it's your mortgage rate or insurance take a look around before committing.
Holy crap Mel! GREAT ADVICE GIRL!
Thanks everyone, there are some great tip here!
Wow, this is all really handy information!
Land transfer tax varies by province, and also by the cost of the house. 1% is a safe bet if you're planning on spending less than $300,000, but the actual formula in Ontario is: 0.5% of the first $55000 + 1% of subsequent 195000 + 2% of everything above that.
Also, don't forget about the 2% CMHC insurance, mandatory on all mortgages where the buyer puts less than 25% of the total purchase price down as a down payment. If you have the dough to cover the 25% on a house, it'll save you some serious cash ($4k on a $200k home), plus I'm told that you may be offered lower interest rates for the mortgage.
Expect to pay an additional ~1% of the final price on closing fees. This includes the lawyer, home inspection, etc. Much of which has been mentioned before so I won't bother.
Good point by Mel on the RRSP bit, here's (hopefully) a little clarification. Let's say you had $100k in RRSPs right now - what you could do is start a self-managed RRSP (which costs you money but can be worth it) and then give yourself a mortgage for the $100k.
The gov't won't penalize you for the withdrawal from the RRSP, and essentially you'll be able to pay the interest of the mortgage back into your RRSP. Incidentally, don't ask me why you'd charge yourself an interest rate, but every article I've read mentions it.
To my knowledge there is no preset $ limit as to how much you can take out, nor is there a fixed period of time in which you must pay back the money. This is different from withdrawing funds from the RRSP for a downpayment on a house, which has a maximum of $20k and a required repayment period of 15 years.
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