Buying your first home is a big decision that should be based on your current financial position and the impact a home loan will have on your finances and lifestyle.

For many first-time homebuyers, saving what is required for a down payment can seem overwhelming. However, saving for a down payment can be as simple as managing your budget differently.

Start with a goal.


One of the best ways to save is to have a goal. It will keep you motivated and give you something to work towards. For example, you may choose to save a 10% deposit plus expenses (usually 5%) for your first home. But the more you can save, the better off you’ll be. Find out how much you need to put aside in order to reach your savings goal.

Create a budget.


Write down how much money you bring home each month; write down the payment amounts for each of your monthly bills; subtract your expenses from your income to determine how much extra money you have each month.

Develop a culture of saving. 


Your first priority should be developing a culture of saving. This not only helps you in budgeting and planning for the future, but also satisfies banks and other lending institutions that you have a clear commitment to save.

When you go shopping, ask yourself if you really need the item you are thinking of buying. If you don't need it, don't buy it. Put the money into your savings account instead. Remember that small amounts of money can add up to large sums over time.

Start an automatic saving plan.

Make saving automatic by setting up an automatic savings plan at your bank to regularly move a specific amount of money directly from your chequing account to a savings account. You’’ll be surprised at how much you can save and how quickly the “pay yourself first” approach adds up.


Borrow from your RRSPs.

If you qualify as a first-time homebuyer, you may be eligible for the government's Home Buyers' Plan (HBP). This allows you and your spouse or partner to withdraw up to $25,000 each from your Registered Retirement Saving Plans (RRSPs) to add to your down payment or to cover purchase-related costs. Best of all, you don't have to pay income tax on the funds, as long as you repay the total amount to your RRSP over the next 15 years. The repayment period starts the second year following the year you made your withdrawals. If the full $25,000 is withdrawn, the minimum annual repayment would be $1,666.

Take a holiday from tax. 


If you open a new Tax-Free Savings Account (TFSA), you won’’t pay any tax on earnings, which will help you compound your savings. You can contribute up to $5,000 a year to a TFSA, and save for your down payment, tax-free. 
 


Review your mortgage options. 


Once you make the decision to purchase a property, the next choice is the type of loan to suit your budget. The two most common types of loans are the variable interest rate loan and the fixed interest rate loan. You can now choose to pay back your mortgage over 25 or 30 years, instead of the traditional 20-year amortization period. This means you will pay more interest over the long term, but you can reduce monthly payments to get into your starter home. You can always change this later, once your income rises and you can pay your mortgage down faster.

Get into a starter house. 


Try to be as flexible as possible when choosing your first home. Unless you’re status conscious, your first home doesn’t necessarily have to be your dream home. You could settle for a starter home, which you can afford with a small down payment and easy mortgage instalments. There are plenty of lower-priced houses out there in need of repair, with some "Do-It-Yourself" projects where you can add more value to the house. Be careful not to buy a place where the cost of repairs will eat up any profits you might make when you sell.

In just a few years you will build enough equity in your starter home to make it easier for you to sell and move into to your dream home.

Buying your first home is an exciting process. After all, your home could be the largest asset you’’ll ever own. Being able to finance most of its cost will take a load off your back in the future.

From; Mark Weisleder LLB

Whenever I write about why you should use a real estate agent to sell your home, the mail pours in. I’m sure it will this week, too.

I am a real estate lawyer and write courses and teach industry players how to do their jobs more professionally and ethically. I also believe that in many cases you will be better protected and make more money selling your house if you use an agent. Not always, but in many cases.

Here’s why I think that:

1)      You don’t have to pay upfront: Do-it-Yourself marketing companies are not real estate agents. You usually pay $1,000-to- $2,000 up front, for pictures, videos and to have your home listed on the MLS system. However, you get no money back if your home doesn’t sell. With a real estate agent, if your home doesn’t sell, you pay nothing, even though the agent may have spent a lot of time marketing and using all of their own and their company contacts to sell your home.

2)      A bidding war is unlikely: Bidding wars are the norm in the GTA and other parts of Ontario. In virtually all cases, the home is sold by a real estate agent. The reason is that it takes experience to price the home properly. Second, the process is fair because no one knows what anyone else is bidding. With a private seller, there is no duty of confidentiality, so the seller can tell one buyer what another buyer is bidding. Buyers do not trust the process so there is no bidding war.

3)      You negotiate on your own: When you do it yourself, it is difficult to know what a fair price is for your home. You might have to pay an appraiser to find out. When a buyer hears that you are saving commission, they will want to split the savings. So you don’t get all the commission savings and you also have to negotiate with a buyer who is likely represented by a real estate agent. This agent will use all their experience to figure out how low you will go, while giving nothing away about their own buyer.

4)      Not knowing your obligations: Sellers cannot rely on the term “Buyer Beware.” You have to disclose problems with your home and you cannot hide or cover up anything. Otherwise, you can still be sued after closing. Who wants a court fight long after you move?

5)      Lenders are more cautious when they see a private deal: I have seen deals collapse this way. In one case, the lender sent their own appraiser because they were concerned the buyer paid too much money. The appraiser agreed and the buyer’s loan commitment was cancelled. The deal died.  In another case, the seller was worried the buyers did not have proper financing. They wanted more proof about the buyer’s financial situation than the buyer was willing to give. Lawyers became involved when things could not be worked out amicably.

When buyers are represented  by agents, they are usually pre-qualified in advance so the seller can have comfort that they will have the money available to close the deal on time. 

 When you’re out for a walk this weekend have a look at the For Sale signs and see how many are represented by realtors. There’s a reason for that.

  By all means, try and sell your house on your own, just beware that it’s not as easy as it looks.

Mark Weisleder is a Toronto real estate lawyer. Contact him at mark@markweisleder.com