A few weeks ago I was having a conversation with my mother and she was asking me some questions about my work. The topic of mortgage size came up, and never one to shy away from giving her opinion, she let me know her two cents. Sometimes these types of conversations can be relatively frustrating but if I’m in the right kind of patient mood they can be kind of entertaining since in a lot of ways my mother still thinks it’s 1972. Usually I can get her to reconsider her opinion or at least fake like she is.
In a nutshell, her thinking is that people today are crazy for taking such big mortgages with large loan-to-values and long amortizations. “What’s the matter with buying a starter home and after a few years buying something bigger? That’s what we did.” So I explained to her how sometimes it doesn’t make sense to begin with a starter home since making a move into a larger home is going to trigger costs like realtor fees, land transfer taxes, legal fees and potentially fees to break their mortgage. In the end, the homeowner could be right where they started if not further behind with regards to equity than when they started. With all that in mind, a lot of buyers would prefer to jump at the bigger house to begin with rather than spin their wheels with a starter home. This was one of the conversations that didn’t end with my mother agreeing with me but at least she faked like she did...I think.
The reality is that some people don’t think they are getting into a starter home until they live in the house for a few years and their needs change or they realize in hindsight that they didn’t really think through what all their needs and wants might be. Let’s face it; buying a house can be an emotional and exciting experience so sometimes logic doesn’t show its face. For those people who think they’re buying their long-term home whether as a first-time homebuyer, here are some things to consider in order to ensure it’s a long-term home.
Before you begin searching for a home, it’s always helpful to think about your needs both now and in the future. And if you have any questions about the home-buying process or different types of real estate, you can always ask your mortgage professional or real estate agent for input.
Following are some things to consider when you’re deciding which type of home to buy:
• Location. Do you want to live in a city, town or in the countryside? How long will your work commute be? Where will your children attend school and how will they get there? Are you close to amenities?
• Size requirements. Do you need several bedrooms, more than one bathroom, space for a home office, a two-car garage?
• Special features. Do you want air conditioning, storage or hobby space, a fireplace, a swimming pool? Do you have family members with special needs? Do you want special features to save energy, enhance indoor air quality and reduce environmental impact?
• Lifestyles and stages. Do you plan to have children? Do you have teenagers who will be moving away soon? Are you close to retirement? Will you need a home that can accommodate different stages of life?
New Versus Resale Homes
When thinking about your ideal home, the first thing you should consider is whether you want a previously owned home (often called a resale) or a new home. Here are some characteristics that may help you decide:
• Modern design. A new home has an up-to-date design that takes into account the latest trends, materials and features.
• Personalized choices. You may be able to upgrade or choose certain items such as siding, flooring, cabinets, plumbing and electrical fixtures.
• Up-to-date with the latest codes/standards. The latest building codes, electrical and energy-efficiency standards will be applied.
• Maintenance costs. Maintenance costs will be lower because everything is new and many items are covered by a warranty. You should still set aside money every year for future maintenance costs.
• Builder warranty. This is a warranty that may be provided by the builder of the home. Be sure to check all the conditions of the warranty. A homebuilder’s warranty can be important if a major system such as plumbing or heating breaks down.
• Neighbourhood amenities. Schools, shopping malls and other services may not be complete for years.
• Extra costs. You may have to pay extra if you want to add a fireplace, plant trees and sod or pave your driveway. Make sure you know exactly what’s included in the price of your home.
• You can see what you are buying. Easy access to services. Probably established in a neighbourhood with schools, shopping malls and other services.
• Landscaping is usually complete and fencing already installed. Previously owned homes may have extras like fireplaces, finished basements or swimming pools.
• No HST. You don’t have to pay the HST unless the house has been substantially renovated, and then the taxes are applied as if it were a new house.
• Possible redecorating and renovations. You may need to redecorate, renovate or do major repairs such as replacing the roof, windows and doors.
Deciding Which Type of Home to Buy
There are many types of homes to choose from and each has its advantages and disadvantages. Think about your needs before making a decision, and don’t forget to look beyond the interior walls. The environment surrounding your home can be as important as the environment within.
Following are some different types of homes from which to choose:
Single-Family Detached – A home containing one dwelling unit that stands alone and sits on its own lot, thereby offering a greater degree of privacy.
Semi-Detached – A single-family home that is joined to another one by a common wall. It can offer many of the advantages of a single-family detached home and is usually less expensive to buy and maintain.
Row House or Townhouse – Many similar single-family homes, side-by-side, separated by common walls. They can be freehold, condominiums or rental units. They offer less privacy than a single-family detached home but still provide a separate outdoor space. These homes can cost less to buy and maintain – but they can also be large, luxury units.
Link or Carriage Home – Houses joined by garages or carports, which provide access to the front and back yards. Builders sometimes join basement walls so that link houses appear to be single-family homes on small lots. These houses can be less expensive than single-family detached homes.
Condominiums or Stratas – A condo or strata is a form of ownership, not a type of construction. They can be high-rise residential buildings, townhouse complexes, individual houses and low-rise residential buildings.
There’s no guarantee you’re going to be making the right decision when buying a home but taking all the possibilities into consideration will make it more likely. So, although you’re excited about moving into your dream home, take your time and weigh your options to increase your odds of making the right decision.