7 Questions First-Time Homebuyers Forget to Ask
- Apr 18, 2016
Buying your first home can be overwhelming because carrying a mortgage is a big commitment and there are many details to be mindful of. There’s a lot to learn and we’re here to help. Let’s start with seven key questions first time home buyers often forget to ask, answers to which can make a big difference in your enjoyment of your first home.
1. What will I need to pay to buy my home, beside the purchase price and the lawyers’ fees?
Many first-time home buyers assume that all the money they’ll need is for the initial deposit to secure the property, the down payment for the mortgage, the legal fees, and the land transfer tax.
However, the following expenses may also apply:
a. Tax on mortgage default insurance – Mortgage insurance protects the lender from losses related to borrower’s potential default, and if the buyer’s deposit is less than 20% of the purchase price, the buyer’s lender will obtain such insurance and pass its cost to the buyer. In many cases, the lender will attach a mortgage default insurance premium to the principal of the buyer’s mortgage. However, the tax on such premium is the buyer’s responsibility and should be covered on closing.
b. Title insurance premium – title insurance is very common in Ontario and is taken in lieu of numerous municipality searches and lawyer’s opinion.
c. Oil – there are still homes with oil tanks in Ontario. As a rule, the seller must fill the oil tank and pass the bill to the buyer.
d. Property taxes – if the seller prepaid his/her final property taxes or paid his/her interim taxes in full, there can be a significant credit to the seller on the Statement of Adjustments.
e. Municipal Land Transfer Tax Administration fee – effective April 1, 2016, any Toronto municipal land transfer tax is subject to an administration fee of $75.00 plus HST.
f. Registration costs – $74.72 for the Transfer and $74.72 for each mortgage to be registered on closing.
g. Disbursements – it depends on the type and age of the property, number of sellers and purchasers, location of the seller’s lawyer, the costs paid by a lawyer on behalf of his/her clients, also known as disbursements, can exceed lawyer’s fees and, of course, are to be paid by the buyers on closing.
h. Any possible complications on closing, which may require additional legal costs.
2. Do I need to contact any authorities after my purchase transaction has been completed?
Yes, yes, and yes! Do not wait until a tax lien is registered on title to your new property or water arrears are applied to your property tax roll. As soon as a deal is closed and you’re in possession a copy of the registered Transfer, we strongly recommended that you advise every single utility provider and the local property tax department that you are the new registered owner of the property.
3. Can I refuse to close a deal, if the sellers did not install a new deck (or made some other discussed updates) before closing, as they promised in the agreement of purchase and sale?
No. Unless an agreement of purchase and sale states that if the seller did not fulfill their promise/warranty to complete the work prior to closing this agreement becomes null and void, the buyer would be obligated to complete the transaction and close the transaction. You can always sue the seller after closing.
4. Can I make the needed home renovations or desired additions?
If you want to make a home addition or a significant home renovation, you should check the local by-laws and zoning regulations. Research this topic before you make a home purchase offer and it’s accepted by the seller.
5. What are the documents relating to warranties for appliances, HVAC equipment, furnace and/or garage door openers?
This question is very rarely asked by buyers. However, you will definitely benefit from asking it, especially if the home you’re buying has new appliances. Even user guides are very helpful to have around.
6. Will my car fit into the garage?
It’s common for buyers to be typically “sold” on a property because of the kitchen, bathrooms, or some other fancy electronics. The garage door size often gets overlooked, and with some of the old homes having very small garages it’s a good idea to double-check that your current (and future, if you’re planning to buy a bigger car) vehicle will fit in the garage.
7. What is the water tank capacity?
Not everyone knows that heavy usage of water by a family of 3-4 will require at least 80 gallons’ capacity tank (medium usage usually requires a 50 gallons’ tank). The average life span of a tank is 13 years. It is very important to find out what tank capacity the home you’re looking to buy has to avoid potential cold showers in the morning.
So many questions, yet so little time! Do not rush: a house is a huge investment and its purchase should be carefully planned.
Our advice is that you hire a licensed buyer representative who can consult you professionally through this process of buying your first home, and help you to find answers and practical solutions.
Let us know in the search box above if you have any questions for us! We’re happy to help.