Congratulations On Your First Home! A Helpful Q&A for First Time Buyers
Some of our favourite clients to work with are first-time home buyers (Fun fact: Sari was recently one herself). We understand the excitement and anxiety of making that first huge purchase, and the relief that comes from finally being able to exhale in your new home. Before that happens though we know that there are a lot of moving parts to making everything run smoothly. With that, first time buyers, we wanted to answer some of your most common questions directly.
How much money will you need to set aside for your home purchase?
Answer: Unfortunately the true cost of your home does not stop at the sale price on your real estate listing. Since your purchase price is not the final sale price of your home, it is important not to spend every last penny trying to hyperextend yourself in that last-minute bidding war. There are a number of additional closing costs involved, including appraisal fees, home inspections, builders fees (if you are buying a newly-built home and have requested any add-ons to the design), moving costs, and of course taxes. If you are a first-time buyer then you may be eligible for a tax credit to offset some of the tax burden, but best to speak with your legal team first (who, of course, also has associated fees).
What are ‘joint tenants’ vs. ‘tenants in common?
Answer: Your lawyer will ask you, if you are in a partnership, how you would like to structure the ownership of your home. Most couples opt to become joint tenants, which means just that - they own the home jointly. Should one partner die, the ownership of the home immediately passes to the surviving partner. However, there is another option called ‘tenants in common,’ where instead of a straight joint ownership each party owns a share in the home. Thus, when one party dies, their share in the home is among their assets, and goes to whoever is stated in their will to receive their property (or their next of kin if they die ‘intestate’ - without a will). This is more common for second marriages and blended families, or in business partnerships, so that you can control exactly who will benefit from your assets after you are no longer here.
What is mortgage insurance, and when do you need it?
Answer: Mortgage insurance protects your lender in case you, as the borrower, defaults on the mortgage. There are three main providers of mortgage insurance in Canada, the Canada Mortgage and Housing Corporation (commonly known as CMHC), Genworth Financial, and Canada Guaranty Mortgage Insurance Company. You will require mortgage insurance if your down payment is less than 20% of your purchase price, which is often the case for first-time home buyers. All three insurance companies have different rates, and your bank or financial advisor will help recommend the best option for you.
What is title insurance, and do you really need it?
Answer: Title insurance is something most homeowners never fully understand, but it can save the day when you least expect it. Title insurance is insurance that protects the legal title on your home. When you purchase a home, the title on that land is registered to you through an official digitized system. Unfortunately, there have in the past been notorious fraudsters, who have developed some truly frightening schemes to dupe people out of the legal title on their own home, which in turn creates an absolute legal mess that can become both problematic and costly. Title insurance protects against this sort of fraud, so that if there is any attempt at defrauding you out of the ownership of your home, you are covered. Most lenders will actually require you to purchase title insurance in order to protect them. Title insurance can also protect new buyers from previous owners’ misdeeds, such as unpaid property taxes or water bills, so it’s always worth considering even when not required.
What does a real estate lawyer do?
Answer: There is only one thing that stays true no matter what home you buy and where - every home purchase comes with a mountain of paperwork! There are various forms and agreements required to make that home legally yours, and they are complex! Many of the forms appear to be standard issue templates, but the devil truly is in the details, and the fine print is crucial to determining the terms and conditions of your home ownership.
At Sari Rose Law, our team will walk you through every step of your transaction, and make sure that all of your questions are answered before you make what is likely the largest purchase of your life thus far. We know first-hand how exciting this time can be, and we want to be sure that you go into your transaction informed, educated, and satisfied that you are making the best choices for you. Contact us today to set up an appointment with our team.