Buying a home is most likely the most important financial decisions you will ever make in your lifetime. The Minhas Group has over 20 years of experience in real estate sales. We understand the value and importance of both protecting and educating home buyers from the beginning of the process to the end. The Minhas Group is dedicated to ensuring that buying your home will be a positive and rewarding experience.
Should you rent or should you own? This is one of the most important financial decisions a Canadian will make in their lifetime. Both have pros and cons, and with the average home sale price continually increasing in the Lower Mainland, this decision is becoming intensely pressing.
One of the best reasons to buy is the fact that you can expect your home equity to increase over time, as your mortgage is paid down. Furthermore, regular property appreciation means your net worth easily accumulates. Renters, on the other hand, have no property investment and hence no wealth change. Renting, does however, usually means lower living expenses and the opportunity to put that saved money into other ventures. If you have a love of travel, for example, renting may be a better option for you as you can free up larger sums of money for extended vacations.
If you are interested in home ownership you need to know exactly how much you are spending each month on housing. You should also know exactly how much debt you are carrying to figure out whether you are financially ready for home ownership. If you decide to buy a home, mortgage lenders will be asking for this information. The Canadian Mortgage and Housing Corporation advices that your monthly housing costs shouldn’t be more than 33% of your gross monthly income. Housing costs include your monthly mortgage payments (principal and interest), property taxes and heating expenses.
There are pros and cons for both renting and buying. Everyone must make the decision that is best for them and their loved ones. You must not underestimate the non-monetary value and enjoyment of owning a home and being able to have the freedom to decorate and enhance your living space to match your sense of style.
Get a mortgage pre-approval
A buyer who has obtained a mortgage pre-approval signals to the seller that the buyer is serious, and that the sale will be efficient and problem-free. It will also lock in a favourable interest rate for the next three to four months of your search.
Before applying for a mortgage pre-approval, check your credit score and credit summary (you can get these for free). Reviewing your credit records will allow you to know if lenders see you as credit-worthy and give you a chance to correct any inaccuracies before a lender takes a look at it.
Contact a few lenders to see which one can give you the best rate and terms. Assemble the following documents for the lender that you choose. Start with a couple of identification documents such as a driver’s license or passport. Also some employment verification and proof of income, such as your income tax assessments, pay stubs, or a letter from your employer. Documents showing your current rental/lease papers are extremely helpful as well as a list of any valuable assets with corroborating documents proving their purchase and value (e.g., your vehicles). Finally, your recent financial statements from all your bank accounts; statements of any debt you might have including credit cards, car payments, and other loans; documentation showing any long-term legal financial commitments such as child or spousal support payments.
Down Payment
The down payment is the money you put forward toward the price of a home. It is often the most challenging part of buying a home. The larger the down payment, the less the home with cost in the long term. At the same time, it is important to be realistic about exactly how much you can afford as a down payment. Over stretching your finances to make a larger down payment can lead to you being cash strapped in the future. It is best to think long-term when making this decision.
Fixed Vs. Variable
Your own risk tolerance plays a big part in making the decision of whether to choose a variable or fixed rate. Your own cash flow availability is a key to your decision. Taking a variable mortgage rate can lead to savings because with a fixed rate, the banks charge a premium to accept the risk that money may not be so cheap in the future. However, you are accepting the interest rate without any guarantee. It is important for you to speak with a mortgage expert to make the right decision based on your unique situation.
Mortgage Payments
When most people think of their mortgage payments, they think in terms of monthly instalments. However weekly or bi-weekly mortgage payments are also an option. Making weekly or bi-weekly payments can be advantageous to those who receive their income on a weekly or bi-weekly schedule. Your budget can be simplified if you similarly schedule your mortgage payments.
Payment options are an essential component of a mortgage. These payment options allow the mortgage holder to make lump sum payments, usually on an annual basis. A privilege payment of 10%, for example, means you can pay off 10% of your mortgage per year, in addition to your regular mortgage payments. It may not sound like a lot but paying off an extra $1000 a year will shave off a lot of interest over the lifetime of the loan.
Knowing what to look for with a home inspection before you purchase a home is essential to avoid potentially costly repairs and necessary upgrades. Becoming familiar with the process of home inspections allows you to determine which homes are in the best condition for you and your family, before making a purchase.
Foundation
Conduct a thorough walk through of both the exterior and interior of any homes you are interested in purchasing yourself. Check the base of the walls along with the ceilings in each room. Check the condition of the exterior walls as well as the base of the foundation of the home; pay particular attention if the home is sitting on a raised foundation. Search for potential cracks, leaks, and other holes that may signify a deeper and more problematic issue related to the overall structure of the house or dwelling itself. Take note of any large trees that may have roots encroaching on the home’s foundation, as this may lead to devastating consequences.
The Roof and Attic
Inspecting the roof of a home for sale is extremely important, as installing an entirely new roof can range anywhere from around $10,000 to more than $25,000, depending on the size of your home and the materials used. Inquire about the overall quality and condition of the roof in addition to the date it was last replaced and repaired. Take photos of the roof to be able to further inspect the condition by zooming in and using close-ups. Always inspect the attic of a home you are interested in buying. Check the attic itself for potential leaks and cracks from the roof to ensure that the roof itself does not need any serious repairs or replacements. Verify that your attic is fully insulated with proper material to keep your home as warm or cool as you desire without worrying about the risk of increased energy bills and overall energy usage. Be aware that some homes do not have attics.
Home Exterior
Check the exterior of the home to compare the overall condition of the walls, paint, and tile or brick that is currently in place. Are there issues with dangling wires, loose paneling, or loose siding on the exterior of the home? Enquire about the use of asbestos anywhere inside or outside of the home, as this requires replacement and is a health hazard.
Lot/Yard
Does the home you are interested in have curb appeal? Is the landscaping updated and well-maintained? Take notice of any drainage that appears near the home along with soggy areas which may ultimately mean that there are drainage and sewage issues linked to the home itself.
Basement Inspection
Check the basement of any home you are interested in to ensure it is not extremely damp, showing signs of leaks, or showing evidence of flooding in the past. Be sure to ask about the potential of flooding and whether or not the basement currently has proper drain setups in place to handle heavy rains and flooding if it occurs.
Heating and Cooling
What type of heating and cooling system does the home you are interested in currently have in place? Are you interested in an energy-efficient setup that requires an additional investment? Does the home offer central heating and cooling or do you require additional air conditioners during the hottest months of the year? Inquire about the age of the furnace and cooling system of the homes you are eyeing to avoid having to invest large amounts of money shortly after completing the purchase.
Electrical
Always test electrical switches to ensure they are all in working order. Pay attention to any odd malfunctions related to the electrical setup of a home. Are all of the outlets throughout the home currently grounded? How updated are the electrical panels in the home and do they require upgrades or replacements before moving in?
Major Appliances
Inspect the appliances thoroughly. Inquire about the option of keeping appliances upon making your purchase, while also learning more about the age and features of the appliances. Would you prefer stainless steel appliances for your new home? Keep your personal preferences in mind when comparing all of the homes you are interested to determine the best way to go about getting the most out of your investment.
Plumbing and Oddities
Take note of any odd or strange noises you notice from the plumbing throughout the house you are interested in purchasing. Flush the toilets and turn on the sinks. Ask about the type of plumbing that is currently in place and whether or not the home or neighbourhood has a history of sewage and drainage problems associated with the plumbing. Anytime you are completing a walkthrough of a home, it is important to keep any odd scents or odours in mind. If a home smells damp, musky, or “old”, it may have flooding, plumbing, or leakage problems. It is also essential to check for potential air flow problems to determine whether or not the home is the most suitable for you.