First Time Home Buyer in Tumbler Ridge
It's time to breath once the sold sign appears on the front lawn of your first home.
There comes a time when living with roommates, paying rent and not being able to treat a house really like your home takes over your desire to live with the ability to get up and go. It is at this point where some decide, it’s time to own a home.
It’s at this point my boyfriend Mikey and I arrived at a few months ago. For myself, I have been renting for the past nine years and have travelled around quite a bit. Mikey and I have lived in Ottawa, Toronto, Vancouver and a few other small towns along the way. Now, having steady jobs and a few pets, we are in a position we don’t want to worry about our lease not getting renewed, or being able to find somewhere to live that allows pets without costing too much.
When I think about all the money we have spent on renting, wowzers. Though I do not regret the time I’ve spent exploring; now I have realized you can still explore and have a place to call your own.
So we started the hunt. Looking through MLS online and taking walks past houses for sale, hoping the owners don’t think you’re staking out their home for a robbery.
With the guidance of our real estate agent we picked The One. The first one we saw actually. Then it happens…making the purchase.
After about a month of thinking about it and then a month of acting on it, we are first time homebuyers turned homeowners. However, it all comes with a price, which for us ended up being a little more than expected.
This appears true for first time homebuyers nationwide. A release from the Canadian Press states, “The Canadian Association of Accredited Mortgage Professionals (CAAMP) says a survey of 2,000 consumers in October, conducted on CAAMP’s behalf, suggests that first time buyers have been hard hit by tighter mortgage rules.”
This means not only is it tough to get a mortgage, but it’s also tough to jump through all the extra hoops and afford all the fees and taxes. The best defense is to be prepared…we pretty much jumped in with both feet and learned as we went, but that doesn’t mean everyone has to.
As first time homebuyers, we learned the hard way about all the extras homebuyers end up paying. As long as you are prepared for all of the underlying fees and taxes when purchasing a home, you have already won a quarter of the battle. So allow me to explain the good, bad and stressful parts of the whole ‘getting a mortgage’ process.
In the end, the whole shebang took us about a month to complete.
Nationally, an estimated 454,000 homes will change hands in 2012, falling one percent short of the 2011 level of 456,749 according to the ReMax Housing Outlook (RHO). The average price of a Canadian home is expected to remain stable at $364,000 in 2012—on par with the figure reported in 2011.
Falling under the national average, we bought our three bedroom, two bathroom, finished basement home in Tumbler Ridge for $237,500. In a larger city we would have been lucky to get a condo for that price. However here in Tumbler Ridge, we were warned not to purchase anything below $180,000, as we might not have been able to get a mortgage.
The reasoning behind this, as we were explained, is the lenders don’t want to lend their money for a condo, townhouse or detached house that is over 25 years old or in rough condition, it seems like a bad investment to them. This limited our scope, but we still found something within our budget, which had even been recently renovated. Mind you, there wasn’t much.
Also, when looking at mobile homes, though they may run you a little bit cheaper to start, but they only depreciate in value over time.
First time homebuyers in BC are exempt from the property transfer tax if you have lived in BC for 12 months consecutively or have proof you have filed two income tax returns as a British Columbia resident during the six years before the date you register the property. Having lived here in BC for 16 out of the last 24 months did not qualify us for this exemption. This means, we had to pay a property transfer tax.
If the fair market value is $200,000 or less, the tax is one percent of the fair market value. If the fair market value is greater than $200,000, the tax is one percent of the fair market value up to $200,000, plus two percent on the portion of the fair market value that is greater than $200,000.
This doesn’t sound like a lot, but it added an extra $2,750 to our bill due upon signing the papers at the lawyer’s office before the closing date.
Having a mortgage broker is a must; however, it is important to also do your research as their job is to make the process as easy on you as possible. Having a free pre-approval for a mortgage gives you a great idea of the price range you are looking for and what kind of percentage you want to put down on a house within your means.
Something also worth looking into to help save you money in the long run is the Canadian Mortgage and Housing Corporation (CMHC). This is the group that has the ultimate say over whether you will get your mortgage, and they are strict. Make sure you have your T4’s for the previous year and proof you have paid your phone bill or credit card every month on time for the previous year. They may ask for these things. Your lender may also ask for them. If you don’t have these documents, it could stop you from getting approved for a mortgage.
The CMHC will also charge you an insurance premium on the price of the property, which ends up going back onto your mortgage. This means, though we thought we were putting down five percent, in the end, we actually only put down 2.25 percent and CMHC pocketed the rest in an insurance premium. You pay this back to the lender with interest. The more you put down the less the premium. On a 35 percent down payment, your insurance premium would be 0.5 percent of the purchase price. It is worth doing the math and figuring out exactly how much CMHC will charge you based on what percentage of down payment you can afford.
Lenders may ask for an appraisal (how much it is worth) of the property if more than a 20 percent down payment is being paid. They don’t typically ask for an appraisal on a home with a five percent down payment. The going rate for an appraisal will vary and sorry folks, we didn’t need one, so I don’t know.
When you are buying a new house there are things you are going to need to pay for to get the process done. In Tumbler Ridge, to get someone to come and do a home inspection, which is necessary considering almost 100 percent of the homes here were built over 25 years ago. The home inspector will charge you about $500 to come and make sure everything is ok.
I found being there for this portion to be very cool because the inspector shows you what to look for in terms of electrical work, plumbing, foundation and insulation, and preventative measures to save you time, money and energy.
If you don’t get your house inspected, there could be real problems with it that you can’t see. In our strict lenders market, you may not get approved for a mortgage without an inspection.
The next thing that will cost you money is the lawyers. It’s a really good idea to shop around and get some quotes. I wish we had done this. The few hours at the lawyer’s office to sign some papers ended up adding $1,315 to our bill, minus ten dollars because they had done the paperwork wrong, so we had to get two certified cheques from the bank. We appreciated them saving us the ten dollars.
There’s no doubt about it, we would take the mountains, wildlife, fresh air, and space any day. As first time home buyers in this market, we were some of the lucky ones. The ReMax report says, referring to 2012: “By mid-year, the third round of CMHC mortgage tightening had a noticeable impact on housing markets, pushing homeownership beyond the grasp of many first time buyers.”
The report goes on to explain, “While first time buyers will continue to have a significant presence in the overall marketplace, they are expected to take a back seat in 2013 in Canada’s largest markets—with move-up buyers the new engine driving home buying activity.” Time will tell if that is true for Tumbler…or not.
CAAMP Chief Economist Will Dunning says the smaller number of first time buyers has already affected the resale market. “The housing resale numbers behave like a canary in the mine for us,” Dunning says, continuing, “My concern is that a policy-induced housing market downturn creates unnecessary risk that directly affects not just housing but job creation and the economy as a whole.”
Then, there’s us outside the norm with our five percent down payment as first time homebuyers. The home buying experience has cost around $10, 800 in additional fees just to get our mortgage.
Now, one more small thing, there are little fees here and there due to taxes and administration which will run you another $500 or so depending on the price of your house and the annual property taxes.
So after all of these fee and stipulations we still came in under the national average for housing prices, but spent an extra $11,000 or so on process fees, taxes and insurance premiums.
Up here in the north, to make buying a home as a first time homebuyer more affordable should there not be an incentive program instead of insurance premiums?
But there is a light!
It’s called the BC First Time New Home Buyers Bonus, and we could get up to $10,000 back from the provincial government for buying a home. Since we will be able to file our 2012 Income taxes here in BC, we qualify. In order to qualify you must be able to show filed taxes in BC either in 2011 or 2012.
However, if your family net income is more than $250,000, sorry money bags, but this rebate ain’t for you. Also, if you’re buying a home less than $150,000, a family net income of $225,000 will cause you to be disqualified.
So in the end it all almost balanced out for us. I would imagine all home buying experiences would be very unique, but it never hurts to know what little extras might get tacked onto a very important purchase.
Personally, I think it was worth it, some may disagree, but regardless, now comes the fun part, decorating!