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(NC)-Buying your first home is an exciting new
experience. Attending Open Houses, putting in an offer to buy and
decorating your new home to suit your style is all part of the
excitement. All the decisions that need to be made can also make you
feel nervous. Here are a few tips that can help out the anxious
first-time homebuyer.
How much can I afford?
There are two things to consider when
determining how much home you can afford. How much do you have for
your downpayment? What amount can you afford as a monthly payment
while still enjoying life? To help you answer these questions, you
can either call your financial institution, visit their website or
go to your branch and talk to your personal banker.
To shop for a home with confidence, you can
obtain a pre-approval certificate from your Financial Institution.
This document will tell you how much of a mortgage you can afford.
How Much Do I Need for my Downpayment?
You can buy a home for as little as 5% of the
purchase price. However, any mortgage with a downpayment of less
that 25% has to be insured by a third party such as the Canada
Mortgage and Housing Corporation (CMHC). The amount of your
downpayment will determine whether you need to insure your mortgage
or not.
- Conventional Mortgage - a mortgage where you
have at least 25% of the purchase price
- High-Ratio Mortgage - a mortgage where you
have less than 25% of the purchase price
Your insurance premium will depend on the
amount you are borrowing and on the percentage of your downpayment
amount. Premiums usually vary between 1.25% and 3.75%.
How Can I Save for a Downpayment?
There are a few different methods that can be
used when saving for your downpayment
- Setting money aside each month just as if you
had to make a monthly payment
- Opening a RRSP investment account. If you are
a first-time homebuyer you and your spouse can use up to $20,000
each towards your dowpayment without tax implications as long as you
repay the amount within 15 years.
- A cash gift from a parent or relative.
("gift" means its non-repayable)
Should I Be Aware of Any Additional Costs?
Your mortgage will cover off the purchase price
of your home, however there are other costs associated with buying a
home. These are called hidden or closing costs and can usually
amount to 1.5% to 3.5% of the total cost of your home. Here are a
few examples of the hidden costs of home ownership and the costs
associated with each.
Appraisal fee $150 - $200
Home inspection fee $300
Property survey $750-$1,000
Land transfer tax $2,000
Legal fees $1,300-2,500
Sales tax 7%
Title insurance $250
Home Insurance $450/year
Also, don't forget to consider general expenses
such as moving and home decorating costs.
Do you dream about owning your own home? CIBC
has now made it easier for those entering the new world of home
ownership. They have formed a partnership with Canadian Mortgage and
Housing Corporation (CMHC) to provide valuable and informative
services for the first-time homebuyer. For more information about
finding out how much you can afford, setting up an RRSP, or simply
reviewing your mortgage options, contact your CIBC personal banker
or call 1 800 465-CIBC (2422).
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