Zoocasa
Sold Prices
Mortgage Calculator
Map
Market Insights
  • Blog Home
  • For Buyers
  • For Sellers
  • Real Estate News
  • Mortgage News in Canada
  • Free Guides (PDF)
  • Real Estate Infographics
Zoocasa
Home Buying a Home

Top 7 Tips for the Aspiring Homeowner

admin by admin
April 2, 2012
in Buying a Home, Guest Posts
4 min read
Share
Tweet
Share
0 Shares

by Canadian Parents Magazine

Home ownership is certainly a blessing. Unfortunately, it also contains the seeds of what can be financial misfortune, perhaps never more graphically depicted than in a 1986 Steven Spielberg movie, The Money Pit, in which a young couple experiences every calamity possible in remodeling a dilapidated house. With the aim of helping aspiring homeowners avoid some common errors, I want to pass on seven tips.

1. Pick the right area. Perhaps the most overused phrase in real estate is: “The three most important factors in real estate are location, location, and location.” That happens to be true, but rarely does advice follow its utterance. What this means in practical terms is that you select your home in an area that exhibits pride of ownership, few if any slum properties, an absence of nearby vacant commercial spaces, neighborhood schools with high performance ratings, and a community with a low crime rate. Whatever cannot be noted by inspection is readily available from a variety of sources. And as to the house itself, though it’s always nice to get a pretty one, the location is the main concern. I’ve always operated on the premise that the worst house in the best neighborhood beats the best house in the worst neighborhood.

2. Don’t stretch beyond your means. It’s common knowledge in the real estate industry that tenants tend to rent less expensive residences than they can afford, whereas homebuyers customarily reach for the moon-and beyond. Perhaps it’s a psychological acknowledgement of intentions: temporary vs. permanent. Regardless, there is an approach toward life that I advocate, known as sandbagging. It suggests that you don’t commit to obligations that may strain your limits. It’s far more sensible that you obligate yourself to less than you think you can handle, this in recognition of the workings of Murphy’s Law that says: “Whatever can go wrong, will!” For those of you who need it spelled out in simpler terms: Choose a cheaper home than you can afford.

3. Avoid a hazardous mortgage. At no time in the past forty years have mortgage interest rates been as low as they are today, nor does it seem likely that they will drop lower. Though that doesn’t necessarily mean rates will rise, the odds favor it. The significance: If you finance your home with an adjustable loan, there’s a likelihood that your payments will rise in the future. For this reason, opt for a fixed rate loan. It’s true, of course, that your initial rate will be higher, but if you can handle a 15-year fully amortized loan, you’ll come close to getting the best of both worlds.

4. Don’t stint on the down payment. Home purchases today can be financed with extremely small down payments, sometimes as low as nothing at all. There is temptation for many buyers to lever into as expensive a home as they can with the least cash possible. I recommend against this for a variety of reasons, but which, if you harbor any caution at all, you can feel in your bones. However, there’s a specific percentage down payment to aim for. It is 20 percent, and there’s a reason. Loans not exceeding 80 percent of a home’s value normally carry lower interest rates, and are exempt from mortgage insurance that adds a premium of about ½ percent per year.

5. Make sure that your title is secure and adequate. A form of insurance protection that a buyer receives is called title insurance. The company providing it examines the ownership record of the property and insures the buyer against any title defects. The premium for this coverage is paid at the time of sale and protects the buyer for as long as ownership lasts. Normally the amount of the coverage is the purchase price, but it’s not a bad idea to anticipate the future. As real estate has a tendency to appreciate in value over time, you might consider increasing the face amount of coverage as an added protection. In some states this increase is possible on payment of an additional premium.

6. Hold title wisely. Married couples traditionally hold title to their homes in joint tenancy. The reason why is understandable. In the event of a death, the surviving spouse receives automatic title to the property without the inconvenience of probate. Although this solves one problem, there is an inherent disadvantage. Only half the property takes a stepped up basis as of date of death. The other half remains at the original acquisition basis. Under certain circumstances this might result in the imposition of an eventual capital gains tax. This problem is resolved if title is held, instead, as community property, where the full property takes the stepped up basis. Check this with your counsel.

7. Be slow to remodel. Now that you’re sitting in your very own home, you see all the things you want to change. To this I say: certain items of repair may be required at once for simple habitability, but except for these, go slowly. It’s best that you live in a structure for awhile to get a feel of what you really want. It’s simply that a home will grow on you with time, and ideas concocted during your first week of occupancy often seem outlandish by the third month. It’s best that you spend the first six months in planning, measuring, sketching, collecting prices, inspecting other homes and models, and enthusiastically fantasizing. At the end of that time you may be ready to proceed.

—

About the Contributor

Online since June 1996, CanadianParents.com provides a warm and friendly home on the Internet for parents and professionals who share a common goal: a passion for raising their children well.

Previous Post

Is Canada Headed For a US-style Sub-Prime Mortgage Crisis?

Next Post

Before you buy, consider the “heart and lungs” of your new home

admin

admin

Related Posts

A house that needs repair
Affordability

What You Need to Know Before Buying a Fixer Upper

May 26, 2023
Birds eye view of Halifax, Nova Scotia
Buying a Home

Halifax, Nova Scotia: Your Ultimate Guide to Real Estate, Neighborhoods, Schools, and More

May 25, 2023
Toronto skyline
Buying a Home

Toronto Apartment Condos vs. Detached Homes: Which Appreciated More?

May 10, 2023

Blog Search

No Result
View All Result

Newsletter Sign-up

Join a community of 130,000+ subscribers. Don't miss important real estate news, market data, and buying and selling tips.

Recent Articles

Detached Home Prices Soar in the Greater Toronto Area (GTA) During Q1

May 31, 2023
a trowel and a fork in the ground.

Canadian Gardening Tips for a Successful Spring and Summer

May 30, 2023
A cottage on the lake

Best Cottage Areas in Ontario

May 30, 2023
Skyline of Toronto

Exploring the GTA Cities with the Highest Property Taxes: An In-Depth Analysis

May 29, 2023

Featured Listings (Updated Weekly)

A small lighthouse in Nova Scotia

Luxury Real Estate in Halifax, NS: 7 Listings You Can’t Miss

May 12, 2023

Updated: 7 Houses Currently For Sale in Toronto Under $699,900

May 2, 2023
A detached house on a sunny day.

Updated: 7 Houses Under $900,000 For Sale in Mississauga

April 27, 2023
The outside of a detached home.

Updated: Cheapest Toronto Homes Currently Listed for Sale Under $1,000,000

April 26, 2023
first-time home buyer programs and rebates

Social Media

250 The Esplanade Suite 408 Toronto, ON M5A 4J5

Terms of Use | Privacy Policy | Careers | Sitemap | About Us

 

Zoocasa © 2007–2022. The trademarks MLS®, Multiple Listing Service® and the associated logos are owned by The Canadian Real Estate Association (CREA) and identify the quality of services provided by real estate professionals who are members of CREA.

Stay Connected

1-844-683-4663 | [email protected]OCASA.COM 

  • Blog Home
  • For Buyers
  • For Sellers
  • Real Estate News
  • Mortgage News in Canada
  • Free Guides (PDF)
  • Real Estate Infographics
  • Real Estate News
No Result
View All Result

Zoocasa © 2007–2022. The trademarks MLS®, Multiple Listing Service® and the associated logos are owned by The Canadian Real Estate Association (CREA) and identify the quality of services provided by real estate professionals who are members of CREA.