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RBC Financial Planning - Tips on Budgeting and Borrowing

Buying a New Home


Things you should know about buying a home

Although home ownership is a goal of most Canadians, there are both pros and cons of being a homeowner. Here are three of the negative aspects:

  • When you own a home, you are responsible for maintaining it, which can take up a large amount of time. When you rent, it's the landlord's problem. Of course, owning a condominium lets you enjoy the advantages of owning without the maintenance. But you do pay for the privilege.
  • When you own a home you're not as mobile as you would be if you were renting. Depending on market conditions, selling a home can take a long time, so if you plan to move around a lot, renting may be better for you.
  • When you own a home you have your money tied up in it. And although real estate has provided roughly the same growth as the stock market, it does not provide the same amount of flexibility. However, a homeowner can usually access required funds for investing through a line of credit.

On the other hand, there are powerful and compelling reasons to buy a home. Pride of ownership, opportunity for capital appreciation, freedom to do whatever you like with it and a feeling of security.

If you have decided to buy a home, here are a few things to consider:

  • The first thing to do, even before you start looking for a home, should be to arrange for a pre-approved mortgage. That way you'll know what you can afford and you can negotiate your purchase in confidence.
  • Make sure you've got enough to cover fees and closing costs. These may include the appraisal fee, loan fees, attorney's fees, inspection fees and the cost of a title search. They can easily add up to $5,000 to $7,000 -- and often run to 5 percent of the mortgage amount.
  • Because of the high costs of buying and selling, unless you're planning to stay in your home for at least 4 to 5 years it may not be a wise decision. Of course there have been times when the real estate market has increased so quickly, it would have paid handsomely to buy and sell over one year.
  • Be sure to research the area in which you're looking. Talk to neighbours. Visit schools. Check on future development. That beautiful wooded area across the street could be slated for a shopping mall. In a nutshell, you want to be aware of and consider all issues that could affect the resale price.
  • Remember that most real estate agents have one goal - to make a sale. Just be aware of this when an agent gives you advice. Many agents may have your interests first in mind but many will not. You'd be wise to ask for referrals so you can have more faith in your agent.

Always use a home inspector before you make an offer. Again, ask for referrals. And always do a walk-through the day before the close to ensure that all is as it should be.

Important information about our financial planning services can be found at the bottom of our homepage.

Things you should know about buying a home
Financial help for first time home buyers
Consider renovating instead of moving


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 İRoyal Bank of Canada 1995-2017 Last modified: 09/24/2014 09:40:34