Your Friendly Guide to Buying a Home in Saskatchewan (and Canada!)
Tags: 5% Down Payment, Buyer Tips, Buying a home, Deposit, Down Payment, First Time Home Buyer, KEVIN APPL
Embarking on the journey of homeownership is an exciting and life-changing experience! As you prepare to find your perfect home in Saskatchewan or anywhere else in Canada, it’s essential to familiarize yourself with the financial aspects of purchasing a property, such as the down payment and closing costs. In this friendly guide, we’ll demystify these topics and provide helpful tips for navigating the Canadian housing market with ease and confidence.
A Snapshot of the Canadian Housing Market
Canada’s housing market is admired worldwide for its stability and attractiveness. The combination of a robust economy, affordable interest rates, and increasing immigration fuels the demand for housing. In recent years, big cities like Toronto, Vancouver, and Montreal have seen significant growth in property prices, making it a bit challenging for first-time homebuyers to enter the market.
However, don’t let this deter you! Owning a home in Canada, and particularly in the beautiful province of Saskatchewan, is still an attainable goal for many. To make your dream come true, it’s crucial to understand the financial requirements, such as the down payment and closing costs.
Down Payment: The Friendly 5% Rule
In Canada, the minimum down payment you’ll need when buying a home is 5% of the property’s value. This rule applies to properties with a purchase price of $500,000 or less. For homes priced between $500,000 and $1 million, you’ll have to put down 5% for the first $500,000 and 10% for the remaining amount. For properties over $1 million, a minimum down payment of 20% is required. Keep in mind that these rules are for owner-occupied homes, and different requirements may apply for investment properties – ie homes with rental suites, duplexes or any 2nd property purchased with the intent to be rented out and not be your principle residence.
Don’t worry! The down payment is your friend. It shows your lender that you’re committed to the property and less likely to default on your loan. Plus, the size of your down payment affects your mortgage insurance premium, which is necessary for high-ratio mortgages (i.e., mortgages with a down payment of less than 20%).
Closing Costs: Your Home Buying Buddy
When purchasing a property, it’s essential to budget for closing costs. These costs are like your trusty sidekick, helping you finalize your real estate transaction. Closing costs can amount to as much as 1.4% of the purchase price and include various fees, taxes, and expenses. Some common closing costs are:
- Land Transfer Tax: This tax, set by the provincial government, is charged when a property changes hands. Each province has different tax rates, calculated based on the property’s purchase price. Good news for Saskatchewan residents: you’re exempt from this tax! Don’t celebrate too quick though – you still have to pay for land title transfer fees. Usually about $300 per $100,000 of home purchased.
- Legal Fees: You’ll need a real estate lawyer to help you navigate the home buying process and ensure all legal documents are correctly drafted and filed. Legal fees can range from $500 to $1,500, depending on the transaction’s complexity.
- Home Inspection Fees: A home inspection is an essential step in the home buying process, as it helps identify any potential issues with the property. The cost of a home inspection typically ranges from $300 to $500.
- Appraisal Fees: Your mortgage lender may require an appraisal to determine the property’s fair market value. Appraisal fees can range from $300 to $500 too.
- Mortgage Default Insurance: If your down payment is less than 20%, you’ll need to purchase mortgage default insurance, also known as CMHC insurance. The premium depends on the size of your down payment and the property’s value, and can range from 0.6% to 4.5% of the mortgage amount. This insurance is typically added to your mortgage and paid off over the duration of the loan.
- Property Insurance: As a homeowner, you’ll need property insurance to protect your home and its contents from damages. The cost of property insurance varies based on factors such as the property’s value, location, and coverage requirements.
- Title Insurance: This insurance protects you against potential title defects and is usually purchased by the buyer. Title insurance fees can range from $100 to $500.
- Property Tax Adjustments: Depending on when you close the deal, you may need to reimburse the seller for property taxes they’ve already paid for the year.
- Utility Adjustments: Like property tax adjustments, you may need to make utility adjustments if the seller has prepaid any utilities for the property (Please note this is VERY rare).
- Moving Expenses: While not a closing cost per se, it’s essential to budget for moving expenses when purchasing a home. The cost of moving depends on factors such as the distance of the move and the size of your household.
Saving for Your Down Payment and Closing Costs: Tips and Tricks
Now that you’re familiar with the financial requirements of buying a home in Saskatchewan (and Canada!), it’s time to start saving for your down payment and closing costs. Here are some handy tips to help you reach your goal:
- Set a savings goal: Determine the approximate cost of the home you want to purchase and calculate the required down payment and estimated closing costs. With these figures in mind, set a clear savings goal.
- Create a budget: Keep track of your income and expenses to identify areas where you can cut back and allocate more funds towards your home buying goal.
- Automate your savings: Set up an automatic transfer from your primary bank account to a dedicated savings account for your down payment and closing costs. This will ensure that you consistently save money each month.
- Use RRSPs: In Canada, first-time homebuyers can take advantage of the Home Buyers’ Plan (HBP), which allows you to withdraw up to $35,000 from your Registered Retirement Savings Plan (RRSP) to put towards a down payment. Remember, this amount must be repaid within 15 years.
Purchasing a home in Saskatchewan or anywhere in Canada is a thrilling and fulfilling adventure. By understanding the need for a minimum 5% down payment and budgeting for closing costs as high as 1.4% of the purchase price, you’ll be well-equipped to navigate the home buying journey with confidence. With smart budgeting, consistent saving, and an awareness of available resources, you’ll be on your way to making your dream of homeownership come true. Happy house hunting!
If you would like to read the official rules and regulations you can visit the Government of Canada’s Website