FREQUENTLY ASKED QUESTIONS
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New townhomes offer many advantages and often have a lower purchase price than a re-sale home, depending on market conditions. You have more freedom in choosing the location of your home, along with a selection of modern finishes and upgrades. New buildings also have less risk of costly, noisy or intrusive renovations and repairs. Townhomes offer the benefit of living in a board-managed development, which is great for busy lifestyles. On top of all that, you’re protected through the Alberta New Home Warranty Program.
The Alberta New Home Warranty Program offers you protection and is one of the many reasons why so many people choose to purchase new over re-sale homes. Among the areas protected are your deposits, your new home’s completion, quality of the workmanship and materials and your home’s structural integrity. Should you ever sell your home, any remaining warranty coverage is fully transferable to the new owners.
First, calculate your monthly expenses and your monthly debt payments. Then calculate your net worth; mortgage lenders will want to know this information.
Lenders look at your housing costs and determine what percentage they are of your gross monthly income. They call this your Gross Debt Service (GDS) ratio. For a mortgage, your GDS should be 32% or less of your gross monthly income. Your monthly debt load should be below 40% of your gross monthly income. They call this your Total Debt Service (TDS) ratio.
Some purchases will include some additional costs, like:
Mortgage Insurance: If your down payment is lower than 20% of the property’s value, you will have to get insurance from the Canada Mortgage and Housing Corporation (CMHC). It can cost up to 5%, depending on the amount of your down payment.
Property Insurance: Your mortgage lender requires your home to be insured, so price out home owners insurance.
Legal Fees: All legal fees and disbursements must be paid upon closing and cost at least $500.
Property Tax: You may have to pay a property transfer tax, along with regular property tax payments once you take possession of your home.
If you are a first-time homebuyer, you may withdraw up to $25,000 ($50,000 per couple) from your RRSPs under the Home Buyers’ Plan. Because you can use these funds to increase your down payment, they are not considered income and are not taxable. However, you must purchase your home by October 1st in the year following your withdrawal. Additionally, you must repay the amount withdrawn within 15 years and start repaying in the second year after you withdraw. These repayments are not tax-deductible.
While your home requires a deposit in the pre-construction phase, mortgage payments only start upon completion of the home. This means while the home is being built, your deposit is the only payment you need to make. Once you take possession, your mortgage payments will begin.
Even before buyers move in to a new townhome, condo by-laws are put in place to determine where the condo fees are designated. Generally, condo fees include the day-to-day care and upkeep of the common property, like snow removal, landscaping, cleaning of common elements and heating/cooling system maintenance.
Condo fees also include contributions to the reserve fund, which is used to pay for major repairs to building systems, to ensure the condominium is kept in good repair over the life of the building. Additionally, your fees may include property management, building maintenance, amenities and the corporation’s insurance policies.
All condominium communities will have a list of by-laws, so be sure to check them for any restrictions that may affect you. Every community will have specific bylaws, depending on its style and location, and new by-laws can be passed by the condo board.