Planning to buy a home? Get the right advice for this financial life milestone.

Buying a new home is a significant life event that affects your cash flow and has financial, tax and insurance implications. As wealth advisors, we can help you stay focused on the big picture with a comprehensive look at your complete financial picture – before you buy.

Three questions we should discuss before you buy a home:

  1. How much home can I (really) afford? While a pre-approved mortgage will provide you with the maximum amount you can afford, it’s also important to consider your entire financial situation and understand how much you should spend. Together we can discuss how buying a home will fit in with what we know about your short- and long-term goals, our income stream and your budget.
  2. What are the tax implications of buying a home? If this is your first home, you may be eligible for the first-time home buyers tax credit, which allows you to claim up to $5,000  for the purchase of a qualifying home. If this isn’t your first time buying a home, you’re likely also selling a home and may have the opportunity to reduce or shelter capital gains by claiming the principal residence exemption, if applicable. This income tax benefit provides an exemption from tax on the capital gain realized when you sell a property that is your principal residence.
  3. Am I adequately insured? It’s crucial to protect your family and your new home. We can help ensure your disability, critical illness and life insurance policies are appropriate and up to date.

Ready to buy?

Here are some practical and emotional considerations you should be prepared for.

Practical Considerations

  • Prepare your down payment – For properties between $500,000 and $999,999, there is a 5% minimum on the first $500,000 and 10% on the remainder. For properties worth $1 million or more, you’ll need a 20% down payment
  • Get a mortgage pre-approval – Getting a mortgage pre-approval from a financial institution not only allows you to focus on what you can afford and stay within budget, it also puts you in a stronger position as a buyer.
  • Protect yourself with mortgage insurance – Mortgage insurance and life insurance are two different types of insurance that can ensure your mortgage is paid after death. Mortgage insurance is sold by a financial institution to pay off your mortgage in case of death. Life insurance is broader coverage sold by a life insurance agent that can cover both your mortgage and other financial costs. Talk to us – we can help you understand which option is best for you.
  • Be aware of “hidden costs”

    ✔ Home inspection: budget for $300 to $1,000

    ✔ Home appraisal fee: budget for $375 to $500

    ✔ Title insurance: cost varies based on size and value of property

    ✔ Land transfer tax: typically 1.5% to 4% of purchase price (not applicable in Alberta and Saskatchewan), and charged at both municipal and provincial level for Toronto home buyers

    ✔ Adjustment for prepaid property taxes and/or utility bills: budget for $1,000-$2,000 or higher

    ✔ Home insurance: cost will vary based on value of your home

Emotional Considerations

  • Make a ‘needs vs wants’ checklist – allows you to save time by avoiding houses that don’t fit your career and help manage your emotions
  • Do your research – your real estate agent can research what comparable houses have gone for in the neighborhood and give you a range of what you could realistically expect to pay based on recent sales.
  • Look past the décor – consider how your own family will use the space, and ensure the home meets your must-haves.
  • Don’t let your emotions drive your decisions – falling in love with a house may mean you overlook major flaws and end up with a house that doesn’t meet your goals. Consult your ‘needs versus wants’ list, stick to your budget and be patient.

If buying a home is part of your future, please talk to us. We can help you put all the pieces together and give you a complete overview of your financial situation