After much speculation and worry about the new mortgage rules that came into effect on January 1, it appears that plenty of hopeful homebuyers still intend to buy a home.
We took to Facebook to ask our followers if they still plan to purchase in 2018, in spite of the new mortgage rules. Eighty per cent said they do, while 20 per cent are delaying their move.
Ultimately, the decision to buy a home is a very personal choice that depends on a number of factors, such as finances, future plans and comfort level. The good news is, professionals like real estate agents, mortgage brokers and even some real estate lawyers are usually willing to consult with you and give you advice before you dive right in.
To help you get started, here are the top 5 questions to ask when buying real estate, to help you determine if you’re making the right move.
Questions to ask when buying real estate
DO I EARN ENOUGH MONEY?
In order to buy a home, you’ve got your up-front costs, which can include things like your deposit, downpayment, home inspection and appraisal fees, property insurance, Land Transfer Tax, title insurance, legal fees and moving expenses. Click HERE to get into the nitty-gritty of these costs.
Then, there are your ongoing costs that include property tax, regular maintenance, condo fees and utilities. If you’re saving some money up-front by buying a fixer-upper, also factor in renovation costs.
Here are some strategies to spend less, and save more.
DO I HAVE TOO MUCH DEBT?
Lenders evaluate your costs versus income to determine your mortgage qualification. Your Gross Debt Service ratio is your housing costs (mortgage principal and interest + property taxes + heat + 50% of your condo fees, if applicable) divided by your pre-tax income. The result should be 32 per cent or less.
Then, lenders look at your Total Debt Service ratio: all debt (GDS + car payments + alimony + other loans + the remaining 50% of your condo fees) divided by your pre-tax income. This should be less than 40 per cent.
Click HERE for to calculate your GDS and TDS.
AM I SECURE IN MY JOB?
Think about this honestly. Is business bustling? Is the industry on an upward or downward trend? Are you comfortable with the financial commitment of home ownership?
Speak to your supervisor to get some additional insight. Mortgage lenders like to see stable employment, and you’ll need to provide proof of income in the form of an employment letter or current pay stub, your position and length of employment, and if you’re self-employed, Notices of Assessment from the Canada Revenue Agency for the past two years.
Click HERE to find out what else mortgage lenders look for.
AM I STICKING AROUND?
Historically, real estate has been a great long-term investment. Ask your parents how much they paid for their home 30 years ago, and compare that to the home’s value today. On the other hand, a quick sale can mean financial losses if the home’s appreciation doesn’t surpass closing costs, which are estimated at 1.5 to five per cent of a home’s value.
Typically, the magic number to stay in the home before putting it back on the market is five years – hence the five-year plan.
DO I WANT TO BUY A HOME?
People buy homes for a slew of different reasons. Home ownership is a method of forced savings for retirement and future generations, while also fulfilling the basic need of providing you shelter. It’s also a great source of pride for many.
It’s a place to live, but also the lifestyle that comes with it. What does “liveability” mean to you? Picture yourself in five years. Do you plan to relocate at some point? Where will you work? What’s your family structure? Then, consider how home ownership fits into that vision.
Click HERE for more on buying versus renting.
Home ownership is a huge financial and emotional commitment, and a decision not to be made lightly. Indeed, there are lots of questions to ask when buying real estate. The key is being honest about the answers. Then, when you’re ready to make your move, work with a team of professionals like a financial expert, lawyer, and a real estate agent you trust, that can help make your dream of home ownership a reality.