Buying a new home? Here are three things you might want to consider

By Special to MoneySense on April 30, 2021
Estimated reading time: 4 minutes

Three questions you should ask yourself when purchasing—and protecting—your new home.

A family just moving into a home, taking a moment together to read a children's book

Photo by HiveBoxx on Unsplash

Buying a home can mean many exciting decisions, from renovations to landscaping to furniture selection. And while choosing paint colours may be fun, it’s important to also spend time thinking about the financial decisions that come with a new home, such as reviewing your mortgage and protection options available, so you can both purchase—and help safeguard—your dream home. Luckily, whether you’re a first-time home buyer or a seasoned pro, sound advice is readily available to help you make the right choices for you. For those thinking about buying a new home, here are three questions to ask yourself.

1. What should I consider when determining a down payment?

“When assessing how much to contribute to your down payment, it’s important to go back to the basics,” explains Jared Jarman, associate vice president, specialized advice, at TD. “Starting with a budget that captures all of the costs associated with your purchase helps you to break down the cost of your move and to see what may be needed down the line, helping determine how much you can reasonably contribute to your down payment.” Shirley Malloy, vice president at TD Insurance, points out that first-time home buyers may forget to factor some fees in their budget, such as legal fees, taxes, adjustment costs and protection plan options. “Do you know the closing costs of the home you’re buying? Have you considered potential refunds you could be eligible for, like land-transfer taxes for first-time home buyers? Have you considered your home insurance options?” she asks. “Questions like these are important to ask and to factor into your budget.” After you have a better idea of the budget you’re working with, Jarman suggests assessing risk before making a final decision. “A 20% down payment is recommended when buying a home,” says Jarman. “If you make a down payment of less than 20%, you’re considered to have a high-ratio mortgage, which means you’ll have to pay for mortgage default insurance to offset that risk.”

2. What type of mortgage is right for me?

There are various types of mortgages and interest rates to consider when buying a home and getting to know all of them can seem intimidating for first-time home buyers. For those who aren’t aware of the options, Jarman suggests first familiarizing yourself with the difference between a fixed- and variable-rate mortgage to get a better understanding. “A fixed-rate mortgage has a fixed interest rate, meaning that regardless of what happens with interest rates, the rate you locked in at won’t change,” says Jarman. “At TD, the variable mortgage rate changes, meaning that the rate itself will fluctuate with adjustments to the TD Mortgage Prime Rate. However, at TD, this does not mean that your payments will fluctuate throughout the term of the mortgage,” he explains. Jarman adds that while these concepts may seem overwhelming, a second opinion can provide an extra boost of confidence. After gaining a basic understanding, he suggests running through the benefits of each of your options with a TD mortgage specialist so you can get a better handle on how mortgages work, while ensuring you’ve considered all of the options available to you.

3. Will I be able to cover my mortgage in case of the unexpected?

“Since a mortgage is often your biggest monthly expense, you might want to consider getting coverage for it,” says Malloy. “At the end of the day, applying for optional creditor’s group insurance today could make a big financial difference for you, your loved ones and the future you’re building in case of a covered health event.” Malloy explains that mortgage creditor’s group insurance is a useful consideration to keep in mind when buying a home because it could help you in an unexpected situation that’s covered. For example, if you’re eligible, TD Mortgage Protection can help financially protect you and your family should you experience a covered unforeseen health event. (The limitations and exclusions are outlined in the Certificate of Insurance.) If you apply and are approved for TD Mortgage Protection, the outstanding balance of your TD mortgage could be reduced or paid off, should you suffer a covered critical illness or pass away, which could help alleviate your biggest financial obligation during a difficult time. “While it’s easy to get caught up in the initial purchase of a new home, prospective home buyers should also consider what safeguards they can put into place now to help protect themselves for the long term,” says Malloy. To get a better understanding of available coverage options for your TD Mortgage that best suit your needs, Malloy recommends using the TD Protection Plans Assessment Tool—a user-friendly way to assess how a covered critical illness or death could impact your finances. To learn more about TD Mortgage Protection and how these plans can help safeguard your financial future, visit td.ca.