Update April 2022: The federal budget plan passed a new anti-flipping tax. This tax may be levied on individuals who own property for less than a year. You may lose your Principal Residence Exclusion if you buy a primary residence and move for non-exempted reasons.
Furthermore, you may be subject to higher taxes if you sell a second home within a year after purchasing it. The capital gains tax would be replaced with a business income tax under the proposal. As a result, you will no longer be eligible for the 50% capital gains reduction in taxation.
When it comes time to buy a house, there are a few things you need to keep in mind. Location, size and budget are important factors when making such a crucial purchase. In this article, we'll look at the current state of the housing market in New Brunswick and offer a step-by-step guide on how to get started when buying a house in the province.
|Home Purchase Price||Saving Requirements||Income Requirements|
Your down payment is the portion of your home price that you must pay out of pocket. The rest is typically financed through a mortgage. Down payments in Canada usually range from 5% to 20% of the purchase price of a home. A down payment is to protect your New Brunswick mortgage lender should you default on your mortgage. This way, your lender has a safety cushion to sell the home at a lower price.
The minimum requirement to buy a home in New Brunswick is 5%. This is possible through CMHC insurance, which has qualifying rules. For a $300,000 home, this would be a minimum down payment of $15,000. If you can put down more than the minimum, you'll avoid paying for mortgage default insurance.
If you can't afford your down payment, you may qualify for down payment assistance programs (DPAPs). These are typically geared towards first-time home buyers or those with low incomes. In many cases, these are shared equity mortgages meaning your lender will also partake in the equity appreciation of your home.
As your home value increases so does the loan amount you have to repay. You can think of it as your lender owning a fixed percentage of your home. To learn more about federal, provincial, and municipal DPAPs in New Brunswick, you can review our page on New Brunswick First Time Homebuyer Incentives.
Lenders also assess your income source to qualify you for a mortgage. They'll look at whether your income is steady, how long you've been employed, and other factors. This is why it's essential to have a good job before starting house hunting.
Once lenders have assessed the steadiness of your income source, they will also review your debt service ratios. These calculate the percentage of your income going towards your home-related expenses and total debt obligations. There are two ratios mortgage lenders use:
Your credit score is the icing on the cake to buying a home in New Brunswick. While an excellent credit score won't get you a mortgage alone, it will help you qualify for the best mortgage rates.
Lower mortgage rates will also decrease your mortgage payment, which will reduce the percentage of your income directed towards home-related expenses. As a result, a better credit score may help you meet debt service thresholds.
A good credit score is generally anything above 660. This will help you qualify for a mortgage. However, the best mortgage rates are reserved for those with a credit score above 760. There are many options to check your credit score for free.
Now that you understand how your mortgage approval is calculated, you can understand the factors contributing to your maximum mortgage affordability. In general, to afford a more expensive home, you can:
However, the fastest way to determine your maximum home affordability is using a mortgage affordability calculator.
According to CREA, the average price for a New Brunswick home in April 2022 was $318,082. As you can see from the calculations below, to afford an average home in New Brunswick, you would need minimum savings of $21,085. With this down payment size, your annual income needs to exceed $87,140. Additionally, aim to have a credit score above 660. You can see how these numbers were calculated in the following section.
A 5% down payment means a 95% LTV. In other words, your mortgage size would be $302,178. Assuming an interest rate of 4.5% and a standard 25-year amortization, your monthly mortgage payment would be $1,410 for an average home in the province. Given the mortgage stress test rule, you would need to meet debt service ratio requirements with a hypothetical mortgage rate of 6.5%.
According to our stress test calculator, you would need a minimum annual income of $87,140 to qualify for an average-sized home mortgage in New Brunswick. Meanwhile, Statistics Canada suggests an average income of $45,000 for residents of the province. This income requirement assumes a down payment of 5%. However, credit unions, are not federally regulated and have more flexibility with the stress test rule. Additionally, making a larger down payment will decrease your mortgage payments and help you reduce income requirements.
Your credit score must exceed 660 to get a reasonable interest rate on your mortgage. However, if you have a score above 760, you will get the best mortgage rates. This may help reduce your monthly mortgage payment, reducing income requirements.
Now that you have laid the foundation, you can begin determining where you want to buy a home in New Brunswick. Most homebuyers pursue a top-down approach, meaning they first decide on a city and then find exciting neighbourhoods. When looking for a town in New Brunswick to buy a home, it is vital to consider the following factors:
|Benchmark Home Price||$344,200||$292,300|
|Median Property Tax (Rate)||$9,534|
Once you have narrowed down your search to a particular city, you can look at different neighbourhoods. Make sure to consider the following factors when looking at New Brunswick Neighbourhoods:
Taking time to reflect on what is essential will help you better communicate with your real estate agent. The clearer you are, the better chance you will find your dream home.
A common mistake most homebuyers have is thinking their down payment is the only upfront cost. Many of them forget to factor in closing costs, which are additional inspections and legal fees designed to protect your purchase. These are paid to various professionals, such as your real estate lawyer, home inspector, and land transfer tax.
Be prepared to pay 1% to 2% of the home purchase price in New Brunswick to cover closing costs. This means that for an average home in the province, expect to pay around $4,488 to $5,874 at closing.
Most real estate agents want to see you have been pre-approved for a mortgage before working with you. A pre-approval shows you meet lending qualifications and are likely to receive mortgage funding. Essentially, it proves you are a serious buyer with the means to purchase a home.
While a pre-approval is not a guarantee you will receive the mortgage, it acts as a conditional commitment from your lender. The condition is that your financial situation, including your income, debt, and credit score, remains unchanged.
The next step is to find a real estate agent with expertise in the city you are looking to buy. They will better understand the local housing market and can provide suggestions. Additionally, an experienced agent will help you avoid expensive mistakes navigating the homebuying process.
To save time, present your agent with a list of must-have and nice-to-have criteria. For example, you may require a three-bedroom single-family home in a good school district. However, it may be nice to have a garage located next to hiking trails and be recently renovated. You should also clarify your maximum budget and leave space for wiggle room. Your agent will use this information to present you with qualifying homes.
If anything catches your eye, you'll need to make an offer to purchase the home. By now, you have a deep understanding of your maximum affordability and have pre-qualified for a mortgage. This will let you quickly make offers.
Many homebuyers in Canada make conditional offers. This means certain events must happen for the deal to finalize. For example, you may have to receive mortgage financing or sell your current home first. Depending on the market dynamics, the buyer has leverage to include more conditions.
For example, if there are many homes for sale with a few buyers -buyers' market- the buyers can include more conditions to protect themselves better. However, if there are many buyers and a few homes for sale -sellers' market- a seller will pick offers with fewer conditions because they are more likely to finalize.
After an offer has been accepted, the deal is still not final. The buyer can still walk away for any qualifying condition in their offer agreement. All the conditions must pass for the property title to transfer. You will also need to make a deposit to prove you are serious. There may be an inspection, appraisal, and more depending on your conditions. These various assessments are the closing costs, which you must pay.
Congratulations, you have now gone through purchasing a home in New Brunswick. Take a moment to appreciate the journey! While the process can be stressful, it's essential to make informed decisions and rely on experts to help you. If you plan on making any renovations, the best time is before you move in. This way, you will not have to move any furniture. There are also home renovation loans to help you finance these costs.