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The process of purchasing a new home is a combination of many financial commitments. If you are a potential buyer it is important that you and your family are well aware of the monetary responsibility the process entails. To ensure your full understanding of the economic commitments included, read on for a detailed explanation of the financials of purchasing a new home.

Build Your Credit

One of the prerequisites to purchasing a home is building a good credit rating. In Canada, there are two organizations that keep track of your credit score. Equifax Canada, and Trans Union Canada are responsible for tracking any of your loans, and payments associated with those loans. A credit score is then generated on a scale between 300 and 900. The higher your credit score is, the more likely you are to receive approval for a mortgage on your home.  

Save Your Down Payment   

The down payment on a home is one of the most significant financial commitments to save for. In Canada, a mortgage rate can be anywhere from 5-20% of the total value of the home. Prior to purchasing, CIBC Mortgage Centre recommends having a minimum of 5% saved, with extra savings for unexpected costs. Ensuring that you have extra will protect you from financial struggle, and allow you to appreciate the value of your new home.

Other Expenses Associated with Purchasing a Home

The cost of purchasing a home is predominantly rooted in the down payment and mortgage loans, however, there are also many other fees associated with purchasing a home that you should be aware of. Here is a list of some other fees you should prepare yourself for:

1. Home Appraisal: In order to determine the final monetary value of the property, a home appraisal must be done. The fees associated with this process can range between $250 and $350 dollars. The appraisal may or may not allow you to negotiate the initial listing price down.
2. Home Inspection Fees: Many homeowners will make a home inspection a mandatory condition on their offer to purchase. The home inspector is responsible for evaluating the structures and systems of the home, and provides the buyer with a written report. Inspection fees can range between $250 and $500.
3. Insurance Fees: Although home insurance fees are the homeowner’s decision, and therefore vary in price range there is a mandatory one-time insurance fee for down payments of less than 20% of the total cost of your home.
4. Land Transfer Tax: The land transfer tax is a fee that is paid to the Ontario government whenever a property changes ownership. The amount owed is calculated based on the final cost of your new home.
5. Legal Fees: Purchasing a new home requires a lawyer to ensure there is clarity and simplicity in the agreement between the buyer and the seller. Real estate lawyers often charge an initial fee of $800.00 plus an additional 400-500 dollar disbursement fee.

Prepare for Mortgage Rate Fluctuation

Prior to purchasing your home, do some mortgage rate comparisons, and find the one that caters to your lifestyle and your needs. To ensure that you and your family are financially secure, always be prepared for fluctuations in mortgage rates. Depending on your interest rate, fluctuation in a mortgage can result in a financial struggle. Always ensure you are up to date on your mortgage rates, and keep small saving for yourself, in the event that rates do rise.

Save For the Move

Once you have secured a mortgage, had the home inspection, and paid all of the fees associated with purchasing a new home, you will need to consider the costs of moving. Moving fees can vary, depending on how far you are moving, how many items you bring with you, and whether you hire a moving company, or do it yourself. Mymovingreviews.com suggests saving approximately $4000.00 for a move, as it will help cover any expenses incurred, and leave you with a bit of extra financial flexibility once everything has been relocated.

Overall, the financial commitment of purchasing a new home is not only about having the down payment but also having enough money for the other expenses you will incur. In order to ensure your move into your new home is stress free, ensure you have enough to cover all costs, so you can enjoy your new life as a homeowner. For more information about the financials of buying a new home, visit the Falconcrest Homes Website.