Blog

5 financial tips for savvy first-time homebuyers

According to a survey conducted for CIBC, 63% of millennials aged 18 to 34 who own a home intend to sell their home because they feel cheated by the costs of the mortgage and other expenses associated with the maintenance of the property.

This kind of statistic irritates us a lot. What it tells me is that 63% of the young owners have not been well advised to buy their property. Result: an alarming number of owners are financially caught and suffering from the famous “buyer’s remorse” (regret real estate).

Contrary to general belief, our job as a broker is not to sell properties or find the one that best fits your checklist of the ideal home. Our real job is to use our real estate expertise to help you make sensible decisions that fit your lifestyle and, most importantly, your budget.

Here is a list of five mistakes to avoid if you want the purchase of your first home does not reserve surprises in terms of finances!

First mistake: Underestimating the required expenses

If you are ready to buy your first home, you have probably saved wisely to finance apaymentdown. However, the purchase of a house comes with a skewer of additional fees that total several thousand dollars.

Mortgage Loan Insurance (if your down payment is less than 20% of the property value)

Transaction fees (about $ 500)

Notary fees (X% of the sale price)

The cost of the inspection ( between $ 400 and $ 600)

The costs of other analyzes and studies (if recommended by the inspector)

Taxes: that of transfer (called welcome tax), school taxes, municipal taxes ...

Condo fees if you buy a condo

The amount of these fees varies depending on the property. Allow 2 to 4% of the selling price of the property to cover these expenses.

Concretely, that means that a condo sold for $ 177,000 could actually cost you between $ 180,500 and $ 184,000 on the purchase. The bill could go up to $ 260,000 for a property sold for $ 250,000.

Second mistake: exceeding your budget

You have found the house that fits all your needs. The problem: its price is higher than the maximum budget you had established.

Paying $ 2 or $ 3,000 more could not be a problem depending on the current state of your finances. However, spending $ 5,000, $ 8,000 or $ 10,000 more than planned could put you in a difficult financial position over the medium term. (Remember that the expenses listed in point 1 increase proportionally with the price of the property!)

Third mistake: Getting trapped by thecredit

Buy a Homeis a big investment, but that should not stop you from living.

If your financial institution pre-authorizes you for a loan worth $ 265,000, that does not mean that you should buy such an expensive home. This amount corresponds to the maximum amount that the bank considers you can repay by tightening your belt. Do not consider this number as a realistic indication of your budget!

Give yourself a margin of maneuver that will allow you to cash a possible rise in the interest rate, but also to enjoy life.

Do not forget this: if being a homeowner forces you to place your everyday purchases on the credit card, you can not afford to pay for your home!

Fourth mistake: Underestimating related expenses

Far too many people do not think about the consequences of buying a house.

Does the location require that you have to buy a car? Should you use it every day, with the maintenance and fuel costs involved? And what about parking, a significant expense if you live in a condo or town?

Renovations: you will probably want to paint some walls and customize the space to your liking. Do you have an emergency fund for unpredictable glitches? Can you pay the plumber if the hot water tank drops you 6 months after the purchase?

Electricity and Heating: Your electricity bill could scare you depending on the condition or size of the property. Are the windows and exterior walls well insulated? Have the last owners done work to optimize the energy efficiency of the house?


Municipal costs: There is a good chance your city will charge you for garbage collection, recycling and other municipal operations that tenants do not necessarily pay for themselves.

Fifth mistake: Do not call a broker!

Are you wondering whether to add the broker commission to the expenses to be charged for the purchase of your property? Good news: you do not have to pay a commission when you buy a house!

The state of your finances will not only impact your ability to acquire a home, but also support your lifestyle, properly maintain the property over the years, and maintain your financial health over the long term.

Remember to do business with a broker, or better still, a reputable real estate teamto help you plan financially for the purchase of your very first property.