How do you plan to pay for the new home ?
A standard method as per Canada's life style is to take a mortgage. A mortgage in simple words is a bank loan taken to pay for the full value of a home. If you have the required amount of money to buy a home, you might not need mortgage (i.e. loan). The major questions or financial tricks arise when you plan to go for a mortgaged finance.
It surprises some people that they pay more than $200,000 to bank for the loan of $100,000. This happens when the duration of loan crosses a certain period, say 10 years. If you apply the formula of "number of years x interest rate = 72", you can work out the number of years when the payment amount will be double. For example, if interest rate is 6 per cent per annum, the formula will read as "number of years x 6 = 72". Calculating further will bring out that if the loan is for longer than 12 years, the payment of principal plus interest will be more than double of loan amount. Similarly, if the interest rate is 12 per cent per annum, the 100,000 loan will be repaid as more than 200,000 (p+i) after six years.
Where do you plan to take up your new home ?
This is another big question one faces. While planning to take up a home near the place of work, one can plan for deduction of taxes. If you relocate your residence within 40 km of the place of your work, you can claim deduction of your moving expenses from the total income for that year. For more details on that, refer to CCRA publications.
There are few more factors which contribute towards choosing the location for your new home. Among them are proximity to a) school, b) hospital, c) shopping complex, d) public transport and other factors like place of work, relatives etc.
Do you want to be the first owner of a home ?
When you are the first owner of a home, you might be interacting directly with the builder. As new home owner, you get protection on your deposit amount and protection against faulty construction under New Home Warranty Program. If you are buying a home, which was previously owned by another person, you might get help of realtor, a home inspector and other professionals to evaluate the property where you will be putting your hard earned money.
Is this your first home in your life ?
If yes, you get some more incentives. It is worthwhile checking out on OHOSP - Ontario Home Ownership Savings Plan. Saving under this plan allows you to get tax deduction in proportion to your income. You also get facility to withdraw funds from RRSP to pay for your home.
How do you plan for the new expenses ?
If you are not living by a budget, this is a good time when you start planning your finance. A one page budget of your total annual income and total annual expenses will help you to figure out how much money you can spare for the new property. List down your sources of income and how much you expect to earn for the year from those sources. Then list down your weekly expenses. Multiply them with 52 and work out the number for the whole year. Add long duration expenses like annual vacation, annual expenses etc and you will have your budget ready in your hand. You need to take into account the mortgage payment, property taxes, heat and hydro bills, insurance premium, property maintenance expenses etc.
What kind of layout do you expect ?
A brief plan of what layout would suite you helps while you are going through choices of homes. You can evaluate how many rooms you need in the house, what kind of exterior and interior is needed. Which rooms will need the connections for telephones, cables and the internet. If you already have furniture, what size of the door openings will help you to move the furniture in the house. How much space will be used up by your existing furniture and what new furniture you might need to buy and so on. Renting the basement or main floor helps to pay off the mortgage quickly. If you are aiming to rent out a part of your home, it is worthwhile looking at the layout so that the tenant can move in and out without disturbing you. However, you might plan to adjust your requirements of layout because a good price is offered.
Who will be informed about your change of address ?
Make a list of your friends, relatives, government agencies, places where you have invested some money need to be informed about your change of address. A standard letter will help you to inform everyone as soon as you move into the new accomodation. Check with postal agency if there is a facility to redirect letters to a new address.
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