10 Steps to Buying a Home in Ontario
Congratulations! You’ve started thinking about buying a home. From being thrilled to being nervous, it’s normal to experience a spectrum of feelings when making life-changing decisions such as this one. Whether you plan to raise a family here, retire, or rest, a new home is the place to form many beautiful memories.
You want to live in the home of your dreams, and you’ve narrowed the location down to Ontario, but you’re confused about how you can get a property that meets all your housing needs in the perfect neighborhood. Worry not, we are here to help!
These 10 steps will show you the right sequence in planning for buying a house:
1. Save Money for a Down Payment
A property’s minimum down payment depends on its purchase price.
According to government regulation: if the purchase price is less than $500,000, you pay 5% as the minimum down payment; for a purchase price between $500,000 to $999,000, the down payment will be 5% of the first $500,000 plus 10% of the remaining amount. A property with a purchase price of $1,000,000 or more requires minimum down payment of 20% of the purchase price.
You will be required to buy CMHC insurance for houses less than $1,000,000, but if you can ramp up your down payment to above 20% of the home price, you can avoid paying it. You can calculate your minimum down payment and your required CMHC insurance by using the WOWA Mortgage Down Payment Calculator.
If you are a first-time home buyer, you might qualify for the Home Buyer Plan which allows you to withdraw up to $35,000 tax-free from your registered retirement savings plan (RRSP) to buy or build a home, repayable within a 15-year time frame. It is a good idea to contribute to your RRSP if you are a first-time home buyer as the $35,000 tax-free amount can be allocated to your total down payment later on!
2. What is Your Budget Like?
Following a realistic home purchase budget can help you buy a house in Ontario more quickly than anticipated. Take your numbers seriously! Your budget needs to account for all costs including the mortgage down-payment, land transfer tax, legal fees, and possible renovation.
Mortgage down payments affect affordability as larger down payments typically lower your mortgage payments while smaller down payments accrue expensive mortgage insurance. The major mortgage lenders in Canada are the big banks: RBC, BMO, Scotia Bank, TD Bank, and CIBC. Mortgage affordability is calculated based on the following criteria:
- Down-payment amount
- Insurance premium (if down-payment is less than 20%)
- Household income
- Property taxes
- Monthly debt payments (student loans, credit cards, car loans etc.)
- Property location
- Choice of home type (detached/condo)
- Condo fees/heating costs
More information on the specific criteria used by top Canadian banks for mortgage affordability can be found on WOWA’s Mortgage Affordability Calculator Page.
Save between 1.5-4% of your home purchase price for future closing costs; some of these costs include legal fees, land transfer tax, property tax, title insurance, and inspection fees.
3. Check Home Prices to See Which Locations You Can Afford
Although an overview of the Canadian Real Estate Market as of June 2020 showed the average home selling price in Canada to be $538,505, Ontario’s homes are usually more expensive than the average: homes in the Greater Toronto Area, for example, were sold for an average of $930,000 in June 2020.
Some cities in Ontario are more expensive to live in than others due to home costs. This means that you should check the average home prices across different Ontario cities like Toronto, Windsor, Hamilton, and Oakville to determine your affordability. Some of the prices in these cities are accessible on realtor.ca.
4. You Need a Good Real Estate Agent
Choosing a good real estate agent might be a daunting task, but it’s very important when buying a house—especially if you are a first-time buyer. How do you choose a good agent who is an asset and not a liability to your home-buying process?
The best real estate agents typically have a blend of experiences in the local real estate market, have closed multiple deals of the type of home you want to buy in Ontario, pay attention to your specific ideal home requirements, have an excellent track record that deems them trustworthy, and have great communication and negotiation skills. And don’t discount the importance of personal chemistry between yourself and the agent! Like anything else, it is best to compare your options before making a decision. The best place to do this is no other than WOWA, our online marketplace that provides you with an easy way to choose from the best real estate agents in Canada.
5. Get Your Mortgage Pre-Approved
The next step is to get your mortgage pre-approval process rolling. What does it mean for your mortgage to be pre-approved? It simply means a potential mortgage lender has gone through your finances and decided on the maximum amount they are willing to lend you at a certain interest rate. The advantages of getting mortgage pre-approval include knowing how much mortgage you qualify for, proper estimation and scheduling of mortgage payments, and locking in interest rate for between 60 and 120 days.
Before getting your mortgage pre-approved, ensure that you’ve checked your credit report for errors and that you have a good credit score as this can determine if you get pre-approved at all or if your mortgage is pre-approved for a lower amount.
Factors considered during the mortgage pre-approval process include your down payment, income, debts, and current assets.
Some smart questions to ask your lender during the pre-approval process include the possibility of a pre-approval extension, whether the pre-approved interest rates are affected by changes (increase/decrease) in interest rates, and how long the pre-approval rate will be guaranteed.
6. Visit at Least 20 Properties Before Deciding
Can’t decide whether you want a condo, townhouse, or detached house? It is expected that you will have a lot of questions, especially if you are a first-time home buyer. What better way to answer these questions than comparing the features of various potential homes?
Even if you think you’ve fallen in love with the first house you view, resist the urge to put all your cards on the table—visit as many homes as possible before making a choice. Open houses along with incorporating the advice from your real estate agent will help you properly evaluate potential homes and choose the one best suited for you.
7. Negotiate Home Prices at Slightly Lower than Market Value (If you can)
When you’ve found a property that ticks all the right boxes for you, negotiating the home price is the next step which is done through your real estate agent. This may be an uncomfortable process if you aren’t familiar with the housing market, so here are a few tips to help you negotiate like a pro and get the best prices:
- Remember that the seller wants to sell at the highest possible price, so you can get a price lower than the asking price if the market is not too hot
- Research your market: is it a seller’s market (less homes on the market) or a buyer’s market (more homes on the market)? A buyer’s market gives you more power, use it.
- If you know that the seller is moving due to a time-sensitive issue such as divorce or job relocation, leverage on this information to negotiate for a lower selling price
- Conduct comprehensive research on home prices in the locality of your home purchase and price the home at a little lower than the market value (although not too low!)
Following these tips should help you get a good bargain in the real estate market.
8. Ensure That Any Renovation Plans Are Clearly Stated and Planned For
After getting a good bargain, ensure that any renovations to be made are clearly stated and plan to carry them out in earnest. Try to get estimates from reliable contractors and assume an error in both the quoted budget and time frame. For example, if they tell you the renovation would take 2 weeks, work with a time estimate of about 3.5 weeks.
9. Preparing for Your Move: Tie All Loose Ends
When you’re finally ready to move, expect to be busy all the time! Understandably, it’s easy to forget important things like redirecting your postal packages to the new address. Canada Post provides you with a mail forwarding service that helps solve this problem and can be put in place starting from the move-in date. This way, you wouldn’t be missing any important personal or business mailings such as licenses, tax slips, and health card renewals. There are two options provided: mail forwarding for moves, and mail forwarding for temporary relocation. Since you are moving to a new home and wouldn’t be returning to the former address, the first option is more suitable.
As of July 2020, Canada Post has put out a disclaimer to customers to anticipate possible delays as measures necessitated by the COVID-19 pandemic means that it now takes longer to process parcels. However, you can track items by using referencing numbers and delivery notice cards.
You can also save yourself from the extra stress by working with a reliable moving company that provides a moving truck, book movers, moving boxes, junk removal service, and more. This way, you simplify the moving process and can move-in through a smart, economic, and quick manner.
Lastly, don’t forget to check quotes for car and home insurance for your new home location and get internet access immediately after moving in.
10. Change All Addresses
Changing your address for all necessary records may sound like a no-brainer right now but note it down as it is one of those things that can completely slip your mind! You don’t want to have your driver’s license, cell phone, credit cards, bank accounts, OHI,P and utilities linked to a wrong address after you’ve moved, so change all addresses as soon as you move!
Moving to a new house can be associated with a lot of stress, but having a plan makes the process easier. Saving for your down payment and closing costs, having a workable budget, working with a good real estate agent, getting a mortgage pre-approval, visiting various homes, proper negotiation, having clearly-stated renovation plans, properly preparing for the move, and changing your home address are all essential steps to take when buying a home in Ontario. We hope that you will take all of these steps into careful consideration and wish you a smooth success for your buying journey.