Posted by: Karim Ali

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A Guide to Affording New Builds

 

Learn exactly what financial groundwork is needed to purchase the coveted newly built townhomes in Ottawa’s suburbs. From the necessary annual household income to the savings required for downpayment and closing costs, this article demystifies the process, ensuring you’re well-prepared to make this significant investment.

 

Purchasing a new home is a dream for many, and the bustling community of Kanata offers an enticing opportunity with many townhomes, some priced as low as $610,000. This guide breaks down the financial requirements needed to turn the key on these modern dwellings, ensuring potential buyers are well-informed of the monetary commitment involved.

 

Overview

 

To qualify for the purchase of the Odyssey model in Kanata, as an example, a prospective buyer needs to meet specific financial criteria. Here’s a snapshot, followed by a detailed breakdown:

 

  • Annual Household Income: $145,000
  • Savings Requirement: $47,250

Breaking Down the Savings Requirement

 

Purchasing a new build, especially one as appealing as the Odyssey model, requires upfront capital not just for the downpayment but also to cover various closing costs. Here’s how the $47,250 savings requirement breaks down:

 

 

  • Deposit: $40,000 is required by Mattamy Homes within four months of purchase. This deposit can constitute part or all of the downpayment at closing 
    • Closing Costs: An additional $7,250 is needed to cover various expenses associated with finalizing the purchase. These include:
    • Ontario Land Transfer Tax: $8,675, with a $4,000 rebate available for first-time buyers, effectively reducing this cost.
    • Legal Fees: Approximately $1,800, covering the costs of legal advice and document processing.
    • Title Insurance: An optional but strongly recommended $300 expense to protect against potential title defects.
    • Home Inspection: Another optional but advised $500 expense to ensure the property was built the right & fair way.

Understanding the Income Requirements

 

The financial journey to owning an Odyssey model townhome in Kanata extends beyond saving for upfront costs. Banks and lenders assess a buyer’s income against their potential monthly expenses to ensure financial stability. Here’s a breakdown of the monthly expenses associated with the Odyssey model:

 

  • Mortgage Payments: Estimated at $3,332, which, when combined with insurance costs, totals approximately $3,465 per month.
  • Heating Costs: A necessary expense pegged at $100 per month, as required by lenders.
  • Property Taxes: Roughly $316 per month, contributing to the upkeep and services provided by the municipality.

The total monthly expenses for qualification purposes amount to about $3,881. To comfortably manage these expenses, banks typically require that no more than approximately 32% of your gross monthly income is spent on housing. This stipulation brings the annual household income requirement to around $145,000.

 

 

 

Navigating the Financial Path to Homeownership

 

Understanding the financial implications of purchasing a new build is crucial. Here are steps to ensure you’re on the right path:

 

 

  1. Assess Your Financial Health: Before considering a purchase, evaluate your savings, income, and existing debts. Ensure your financial foundation is solid, with a stable income and a savings plan that aligns with the requirements of buying the Odyssey model.
  2. Explore Financing Options: Research various mortgage rates and terms from different lenders. Consider speaking with a mortgage broker who can offer insights and options tailored to your financial situation.
  3. Consider the Long-term Commitments: Beyond the initial purchase, homeownership involves ongoing expenses such as maintenance, utility costs, and potential homeowners association fees. Ensure your budget accounts for these long-term commitments.
  4. Seek Professional Advice: Consult with real estate professionals, financial advisors, and legal experts to navigate the complexities of buying a new build. Their expertise can provide clarity and confidence in your decision-making process.
  5. Plan for Closing Costs: Be prepared for the additional expenses at closing. Saving beyond the minimum requirements can provide a financial cushion to cover unexpected costs or price adjustments.

 

Purchasing a newly built townhome in Kanata is an exciting opportunity but requires careful financial planning and consideration. With a clear understanding of the income and savings requirements, prospective buyers can embark on this journey with confidence. By preparing financially and leveraging professional advice, the dream of homeownership in Kanata can become a reality, offering a modern living space in a vibrant community.

 

Value a detailed guide of newly built home options in Kanata? Reach out here, we’re excited to help.

Bonus tips

1

If you’re a first-time homebuyer, make sure to leverage every benefit available to you. The Ontario Land Transfer Tax rebate is a significant advantage, offering up to $4,000 off your land transfer tax. Additionally, explore other first-time buyer programs that may provide financial assistance, tax rebates, or help with your downpayment. These benefits can substantially reduce your initial costs and make homeownership more accessible.

2

If you’re considering applying for a mortgage anytime in the future, take steps now to make your future application as strong as possible. This includes improving your credit score, reducing your debt-to-income ratio, and gathering comprehensive documentation of your income and assets. A higher credit score and a lower debt load can secure you a more favourable mortgage rate, ultimately saving you money over the life of your loan. Consider consulting with a mortgage broker to strategize the best approach for enhancing your creditworthiness.

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