Mortgage Pre-Approval…Down payment…Deposit…Mortgage Insurance…Closing Costs…Land Transfer Tax…huh? Are you ready?! Here’s a quick guide to help get your finances in order before you start shopping!
Don’t end up house poor, before you take the plunge find out what you can afford.
- Visit your bank or mortgage broker. They will pre-qualify you which will determine your home buying power.
- If you have less than 20% of the purchase price, the mortgage will need to be insured. The premiums can be rolled into your mortgage however the GST on the premiums will need to be paid on closing.
What happens with your money?
- The ‘deposit’ accompanies your offer of Purchase and Sale and will be held in the listing brokerage’s trust account until you take possession. It will then be credited against the purchase price.
- Typically a 5% deposit of the purchase price is a sign of good faith (Yes, it might very well be your entire down payment! The deposit amount may differ by city).
- Your deposit should be readily available; if you need a few days to access your funds be sure to arrange for this before you start your search!
Factor in closing costs which are in addition to your down payment.
- This includes lawyer fees and associated disbursements such as mortgage and deed registration.
- Any adjustments such as prepaid water or property taxes.
- Provicial and City of Toronto land transfer taxes (See here for first-time home buyer rebates)
- Title Insurance.
- Count on roughly 2% of the purchase price for a first time buyer in the city of Toronto, 3% for previous home owners.
Have a question about whether you are ready to buy a home? Post here?
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