BUYING A HOME
Experts advise you keep some guiding principles in mind when trying for a mortgage
While gradually rising interest rates are expected to take some of the steam out of housing activity in 2016, Montreal may be the exception to the rule. In fact, the moderate gains seen in the local market last year are likely to continue, as better economic conditions and demographic movement help offset rising rates. These factors are leading a number of renters to consider buying property for the first time.
Purchasing a home is the largest investment most Canadians will ever make. If you’ve decided now is the right time for you and your family to take this step, the best course of action is to do your research and seek professional advice.
“It’s important to keep a few guiding principles in mind,” said Jean- François Laurin, regional director, Eastern Canada, TD Canada Trust.
“Think about what kind of lifestyle you want to lead, and make sure you have an accurate budget.”
Determining what your budget is can be a complex process, as a variety of expenses come along with home ownership.
“A lot of my clients think they can afford a property because they calculate their monthly mortgage payments to be equal to their rent, but there are so many other factors and expenses that go into home ownership,” said Tiffanie Rothwell, real- estate broker and co- founding member of Keller Williams Prestige.
“You need to take into account property taxes, special assessments, insurance, ongoing maintenance, closing costs, condo fees in the case of a condo, and so on.”
One of the best ways to go about establishing a budget is to have a rough sketch of your situation and meet with a mortgage broker to ensure that you’ve included all fixed expenses in your calculations.
Once you’ve decided to begin the home- ownership process and set your budget, the next step is to get a pre- approval.
“A pre- approval provides the confidence you need when embarking on your homebuying journey as it measures your qualifications and how much house you can afford,” Laurin said.
“When armed with a pre- approval, you can ensure that you are seeing homes you can afford — and keep in mind there’s no obligation to use the full pre- approved amount.”
In addition to formulating a budget and getting pre- approved on a mortgage, there are a few other key points to understand before visiting open houses — chief among them: the benefits of a big- ger down payment. The minimum down payment is five per cent of a home’s value. The larger the down payment, however, the less you’ll need to borrow, which saves money in interest payments over the long term.
“With a larger down payment, buyers may also qualify to save on mortgage insurance premiums upfront,” Laurin said.
“If home ownership is a goal, start saving up now.”
Understanding the mortgage options available to you is crucial as well.
“Picking the right mortgage is just as important as choosing the right home,” Laurin said.
“Look at your choices for the term, interest rate, repayment schedule and other flexible features; then pick a mortgage that works for you.”
Through the Canadian government, the Home Buyers’ Plan is another option to explore. The program allows you to withdraw up to $ 25,000 in a calendar year from your registered retirement savings plans.
“It’s especially convenient for first- time homebuyers who do not have a down payment but have good paying employment,” Rothwell said.
“This plan lets you borrow your down payment and pay it back slowly over 15 years. The payments only begin two years after you’ve made the purchase, so you can breathe for the first couple years while getting adjusted to home ownership.”
There are also many subsidy programs for buyers who would like to renovate, including many city subventions where up to 50 per cent of the cost of renovating is covered by the city if conditions are met, she added.
Once you’ve worked through all of these details, Laurin recommends taking the concept of mortgage payments and expenses for a test drive.
“Make an automatic transfer of that amount into a TFSA or other high- interest savings account,” he said.
“This two- fold approach allows you to see how comfortably you can pay off the monthly mortgage, while also helping you save for a larger down payment.”
With interest rates still low, this is an ideal time to invest in Montreal’s real estate if, in recent months, you’ve been considering purchasing your first property.
“Buying a home is one of the most important investment decisions Canadians will make,” Laurin said. “So take the time to talk to an experienced professional and help ensure the most positive experience possible.”
Picking the right mortgage is just as important as choosing the right home.
JEAN-FRANÇOIS LAURIN