Michelle Kam Shares Helpful Tips for First Time Home Buyers

Buying a home is a rite of passage for many people. Despite the economic recession that has come about as a result of the COVID-19 pandemic, many young Canadians across the country are still looking to purchase a home. In fact, the new virtual workplace coupled with record-low interest rates has led many millennials who hadn’t planned to buy a home for years to move up their plans. That said, buying a home can be a tedious process, especially for first time home buyers.

With more than 15 years of experience as a real estate broker, Michelle Kam is well-versed in the world of Toronto real estate. She offers her top home buying tips for first time home buyers.

Be Prepared for the Down Payment

Let’s get into the nitty gritty of homeowning first. According to Michelle Kam, first time home buyers must have saved enough money to make a down payment. This is one of the first steps after deciding to buy a home. In Canada, bear in mind that you’ll need to be able to pay at least 5% of the purchase price of your home as a down payment. 5% is required for all homes up to $500,000. For any home priced over $500,000 but under $1,000,000, you will need to pay 10% of the rest of the home cost. Alternatively, if you plan to purchase a property that is over $1,000,000, then a 20% down payment will be required. These rules apply nationwide and are applicable to all types of homes, from condominiums to semi-detached homes to fully detached homes, shares Michelle Kam. In order to buy a home, you’re going to need to have enough money in the bank to pay for the down payment or you’ll need to know someone who’s willing to lend you the money.

Consider the Type of Home

Michelle Kam has witnessed many first time home buyers rush into the process of buying a home, failing to consider which type might suit them best. For example, many young people who enter the world of Toronto real estate often wish to buy a house. However, homes, especially those which are fully detached, are often the most expensive real estate on the market. For some, this won’t be a problem, but for others it can lead to a lot of stress and debt. First time home buyers should take some time to consider whether a house, versus a condominium or townhouse, might be the right fit. To make this decision, consider your current and future housing needs, as well as your finances. If having children is still far into the future, then perhaps you can wait to purchase a larger house.

Organize Everything for Your Mortgage

Michelle Kam’s final home buying tip? Organization is critical when purchasing property for the first time, especially in a hot real estate market like Toronto. That is why preparing all documentation in advance, especially as it pertains to your mortgage, is a great first step. That way, when you find a home you love, there won’t be much left to do beyond signing on the dotted line. Michelle Kam notes that there is a lot of paperwork involved, but don’t let that overwhelm you. The mortgage approval process can be lengthy, which is why it’s a good idea to get a head start. The documentation you’ll need to have on hand when applying for a mortgage includes but is not limited to the following: current employment information like a T4, savings and investment statement for 90 days prior, a void cheque, an inventory of any and all debts, and proof of a loan or financial gift from a family member if you will be using these alternative methods to pay for the home.

Land Transfer Tax

One last item Michelle Kam advises first time home buyers to be aware of in Toronto and the rest of the GTA is the land transfer tax. This can end up being a huge cost to home buyers in the area, as they have to pay both municipal and provincial land transfer taxes. These tax rates are both on a sliding scale. The municipal tax can range from 0.5% to 2.0% depending on the vaue of the property. As for the provincial tax, it can range from 0.5% up to 2.5%. While these taxes are a significant expense, Michelle Kam reminds us that first time homebuyers are entitiled to a rebate for both municipal and provincial land transfer taxes. Be sure to check with your broker to see how much you can potentially save on these tax charges.