Don’t make these first-time homebuyer mistakes
Note that this article has been written from our partner Ratehub.ca where you can get great mortgage rate or credit cards insight. I rarely let third party add content on Kondos.ca but be aware that I carefully select them before.
You’ve decided to take the plunge and buy a condo, congratulations! The process of buying a property can be complicated but with a little bit of additional knowledge, you can avoid some potential headaches in the future.
Here are some first-time homebuyer mistakes to avoid:
- You don’t know your credit rating/score
Having good credit means you’re more likely to get a mortgage. Lenders like to see borrowers who always pay their bills on time, don’t use up all of their available credit, and have various types of credit (for example, a credit card, line of credit, and car loan). If your credit is good, it’s more likely that you’ll qualify for the best mortgage rates. If you want to find out what your credit rating is, contact one of the two major credit reporting agencies, TransUnion or Equifax.
- You don’t get pre-approved for a mortgage
There’s nothing worse than finding a property you love and then being disappointed after finding out that it’s out of your price range. That’s why you should get pre-approved for a mortgage. Once you know how much you can afford, it’ll give you some peace of mind. Also, most lenders will guarantee your pre-approved rate and hold it for 60, 90, or 120 days even if interest rates rise. With that extra time, you should be able find a place you can afford.
- You don’t shop for the best mortgage rate
Everyone likes a good deal! Most people don’t walk into a store and buy something they like right away. They often do some research and see what retailer has the best price. The same goes for mortgage rates. You should shop around (be sure to check RateHub.ca while you’re at it!) and see who has the lowest rate. If that sounds like too much work, you can also get a mortgage broker to do the haggling for you. Best of all, it won’t cost you a cent.
- You don’t take advantage of the Home Buyers’ Plan
Under the Home Buyers’ Plan (HBP), you’re allowed to withdraw up to $25,000 from your RRSP to purchase your first home. If you buy with a spouse or partner, you can withdraw a total of $50,000, which you can use for your down payment or to help cover additional costs. But keep in mind that you need to re-contribute that amount to your RRSP over a 15-year period; the first payment is due two years after you made the withdrawal. If you don’t, it’ll be considered taxable income.
- You spend too much
Just because you can afford a bigger condo doesn’t mean you should stretch your budget. You want to be able to afford enjoy life and not be house poor. You also want to be prepared for unexpected costs, which brings us to our last point…
- You don’t budget for additional costs
When you purchase a property, there are additional expenses you’ll have to take care of on top of the mortgage. Those are called closing costs and include title insurance, land transfer tax, adjusted property taxes, and legal fees. You can expect these to be between 1.5% and 4% of the total purchase price. Also, condo fees tend to rise over time and will usually increase at a much faster rate if it’s a newly built development. You should always be prepared for unexpected costs.
RateHub.ca is a website that compares mortgage rates, credit cards and deposit rates with the goal to empower Canadians to search smarter and save money.