Everything You Need To Know As a First Time Buyer
First of all, be excited!!! Buying your first property is one of the most nerve wrecking and stressful things you will experience but it is so rewarding. You have worked very hard to get to this point so I am going to give you some tips and tricks you should know about when looking to buy your first place.
The first one should be quite obvious….
In order to get started on your search you need to know what you are working with. Let me warn you in advance the finance part of buying is the most stressful and uncomfortable part about this process (close second is actually making an offer). You need to show and prove everything about your finances. A huge trend I have noticed with friends and clients alike is many people just go to their bank. This is not the worst thing but I really believe you should get a second opinion when it comes to financing. A lot of people feel like if they don’t deal with their bank they are taking a risk. This could not be further from the truth. Trust me when I tell you, go see a mortgage broker. Mortgage brokers are the agents of financing. They will shop around and find you the best deal. They will also spend the time to advise you properly on the different options. Mortgages are complicated. There is A LOT of fine print. If you think the bank cares about your mortgage, they don’t. You are just another number to the bank but to a mortgage broker you are a client. Mortgage brokers want to build long term relationships and they become an invaluable member of your team if you are looking to buy multiple properties. It does not cost you anything to speak to them or for them to preapprove you. You have nothing to lose.
Yes! Being a first time buyer comes with savings!! You get a big break on taxes for your first purchase.
However, I have a few tricks for you.
As a first time buyer you receive a tax credit on your land transfer taxes.
Don’t know what those are?
Well, every time you move, you pay a tax. You know the government has to get their piece. It is a big piece though.
In Ontario, you can claim up to $4000 for your provincial land transfer tax as a credit. In Toronto, we are also subjected to a municipal tax (We are the only city in Ontario that has 2 taxes, lucky us) and for that tax first time buyers receive up to $4475.
Be careful if you are buying a property with your parent. You will lose your tax break if you buy a property with someone else who has already bought. This is a big deal.
Who likes paying tax? Your lawyer can structure the deal so you are 99% owner with your parent as 1% for financing purposes that way you can retain 99% of your tax savings.
If you are a first time buyer and thinking about moving to Toronto, I would encourage you really consider it from a tax benefit standpoint. If your first purchase is in the city you will have almost double the savings. Whatever you buy in the city you can always keep as an investment if you decide the city is no longer for you. If you choose the suburbs with only one tax and then purchase downtown second you will pay the full double tax. It is really expensive.
Manage your expectations
This is your first property so the likelihood that you may not get everything on your wish list. Really prioritize your needs. Paint colour, flooring, counter tops- all can be changed. Focus on what cannot. Location, size and overall build. Everything else can be changed.
Know that this is a stepping stone. Getting in the market sooner than later is always a better idea long term so don’t wait to save, wait for the perfect property, wait for the market to crash. Waiting in real estate is always an expensive lesson.
You can make changes over time, in this society we have such a belief that everything needs to happen NOW. Taking your time to make your space what you want is fine. Do renos as you can afford them. Prioritize what you want done and do it bit by bit. Time goes by faster than you think and before you know it everything will get done!
Making The Offer
This is when it gets real. Do not be afraid to ask questions. Your realtor should be able to explain every step, every clause and every concern you have. This is what we are here for so do not be shy or feel silly. I promise you someone had the same question at some point. The worst part of the whole thing is the waiting but it is well worth it.
All The Costs You Might Not Know About….
There are a few additional expenses that you’re going to have when you get into a transaction.
Depending on your market and what you are purchasing the first thing you will likely pay for in a home inspection. This can range from $350-$500.
In a condo purchase you may have to acquire the status certificate. This will run you $120.
Then you’ll need insurance. This varies case to case. Adulting is all about insurance so get ready.
Then you’ll need to pay for your lawyer. $1600-$2000.
You will need title insurance on your mortgage. $200.
Your land transfer taxes (remember from above).
If you are buying new construction there may be HST and closing costs.
Your lawyer will give you a breakdown of all these costs before your closing so you can go and sign your life away with a bank draft ready.
When Do I Get The Keys?
On the day of closing, the lawyers will transfer the funds they receive from the lenders. Once the transaction has been closed your lawyer will be instructed to release the keys. Legally, they have until 6pm day of. Here is a tip. If you can book an inspection visit a couple days before closing.
Hope this helps!!