Basement apartments are an increasingly popular trend we’re seeing among homeowners these days. As housing prices continue to rise, and the housing supply continues to diminish, people are looking for alternative ways to navigate the market. 

If you followed the recent federal election, you’d know that housing affordability was a major part of each party’s platforms. However, policies and laws can only go so far and many Canadians want to take things into their own hands. This is where secondary suites and basement apartments come into play. 

Here’s everything you need to know about buying a home in Milton with a basement apartment…

What Defines a Basement Apartment?

Basement apartments, sometimes also called secondary suites or accessory apartments are defined as a “self-contained dwelling” created by converting a section of the main dwelling into a secondary dwelling. 

Basements make popular accessory suites because it’s often fairly easy and inexpensive to turn a basement into its own apartment. 

What are The Benefits of Basement Apartments? 

Whether you’re a first-time homeowner or an empty nester, there are many benefits to having a basement apartment as part of your house. 

Getting your foot into the real estate market as a first-time buyer can be difficult. As home prices in Canada continue to rise, it’s becoming increasingly hard for young people to afford to buy a home. For these types of buyers, a basement apartment is a great option because it means they can collect rent from a tenant to help supplement their mortgage payments, improving affordability overall. 

Empty nesters can also reap the benefits of a basement apartment. These types of homeowners are typically dealing with excess space in their homes. If they aren’t quite ready to downsize but want to maximize the use of their space and make a little extra money, a basement apartment is a great option. 

Basement apartments are essentially real estate investments and can be used to further your space in the market, give exceptional landlord experience, and help you increase your investment portfolio. 

Buying a House with an Existing Basement Apartment vs. Building New

Basement apartments can significantly increase the value of a home. So if you are in the market for a property with an existing basement apartment, expect to pay a higher price initially. 

However, building a basement apartment might take an initial lump sum investment on your part, but in turn, will increase the property value should you want to sell later. 

If you’re currently in the market for a home, and you know you want to rent out the basement, it’s certainly worth looking into buying a house that has an existing basement apartment. It would save a lot of work and time on your part. 

However, it’s also important to consider the ROI. Do some research into how much building an accessory suite would cost vs. how much rent you could charge in that neighbourhood. This might give you a better idea of whether or not buying an existing house with a basement apartment is better for your unique situation rather than renovating and building your own. 

Ready to buy a home? Get started here:

• Our Top 8 First-Time Buyer FAQs
• The True Cost of Buying a Home: What You Need to Know
• A Buyer’s Guide to Pre-Emptive Offers

Thinking About Building a Basement Apartment? Don’t Forget About the Legalities

Building a basement apartment in Milton requires some careful planning and consideration on the homeowner’s part. For example, before you start building, you need to obtain a building permit and ensure your apartment meets certain regulatory standards:

• The basement apartment must be located in a detached single-family home. 
• It must have access to municipal sewer and water with either laundry in-suite, laundry connections, or shared laundry services.
• There must be at least three legal parking spaces on the property.
• Ceiling height must be at least 6′ 11″ (2.11 m), and 6’5″ under beams
• It must not be greater than 85m² or 915sq/ft in size. 
• 45 min floor and wall fire separation (requirements are different in older buildings)
• The dwelling must have its own private entrance.
• The home must have a walkout egress or window egress with a minimum 3.8 sq/ft clear opening.
• The building must have all the appropriate permits and inspections.

Legal vs. non-legal basement apartments is a hot topic in Milton and the GTA. Learn more about it in our blog What Makes a Basement Apartment Legal in Milton here.

How to Maximize Your Basement Apartment Income

Building a basement apartment is more than just sectioning off a part of your home and collecting rent. You are essentially becoming a landlord, which comes with significant responsibility. 

Although no two renters are alike, here are some general features that renters look for in a basement apartment:

• High-quality appliances and finishes (think, faucets, tub, shower, sink)
• Higher-than-average ceilings
• Large, bright windows
• Nice lighting 
• Open-concept floorplans
• All-inclusive utilities 
• Proximity to public transit, healthcare, grocery, and amenities

Read our quick guide to Milton Real Estate here to learn more about the best neighbourhoods for your unique needs.

It’s also important to attract the right type of tenant for your property. Consider your location and your ideal tenant and ensure that you are doing everything you can to attract that type of person to your listing. It’s also a good idea to complete credit checks and have your tenants fill out applications before agreeing to rent the apartment. 

Did you know we host first-time buyer webinars every month? Sign up to join our next webinar for FREE here.

When eager new homebuyers begin saving up for a home, it’s easy to fall into the trap of putting on the blinders and fixating on saving up towards one number in particular.

However, buyers can often forget to factor in the additional secondary and tertiary costs it takes to buy a home. For all buyers, new or recurring, these are critically important costs to know about.

So, whether you’re a first-time buyer or have set your sights on moving up, here’s a breakdown of some of the true costs you need to consider when buying a home.

The Deposit

The first expense you should plan for is the deposit. This is a percentage of the total cost of the home that gets paid to the seller or Seller’s agent brokerage right away to essentially “hold” the sale and show the seller you are committed to the purchase. Typically, a deposit is 5-10% of the total purchase price and is required to be paid within 24 hours of the offer.

The deposit also must be made in the form of a certified check, bank draft, wire transfer or Etransfer, which means a homebuyer will need fast access to funds when putting in offers. This money is typically paid to the Seller’s Realtor’s Brokerage company or sometimes to the seller’s lawyer to be held in trust until the home closes.

The higher your deposit, the more committed you may look to sellers and the more desirable your offer comes across. Once the deal is finalized, your deposit money can go towards closing costs or towards your down payment, which brings us to the next cost you need to plan for.

The Down Payment

A down payment is different from a deposit. The down payment is a lump sum payment that goes toward the final purchase of your home. In Canada, there are some rules around down payments. The minimum down payment you can pay is 5% for a home valued at $499,000 or less and 10% for homes valued at $500,000-$999,000. For homes over $1 million, buyers are required to pay at least 20%.

If possible, paying more than the minimum down payment amount is better because it means you will pay your mortgage off sooner, pay less interest, and build equity more quickly.

There’s nothing more fun than fantasizing about what your next home could look like. However, with the help of our Featured Listings page here, you don’t have to daydream quite as hard.

Your Mortgage And Interest Rates

Once your down payment has been accepted, you can deduct that amount from the final sales price of your new home. To account for the rest of the sales price, you’ll need to take out a mortgage.

Mortgages are essentially loans for homes. The total amount of your mortgage depends on a few factors, such as the cost of the home you’d like to buy, the amount of your down payment, what you qualify for based on your annual income, what your monthly expenses are, and your employment history.

Generally speaking, it’s either banks or private mortgage brokers who grant you a mortgage. Whoever you secure your mortgage from, you’ll have agreed on the total amount of your loan and the structure of how you’ll pay it back. In most cases, it’s in the form of a monthly payment to your lender, which will include an interest rate.

This means that if you’ve agreed to put down $2,000 per month towards your home, for example, this fee, plus whatever your mortgage interest rates are, will go to your lender.

What About Mortgage Insurance?

If you are unable to pay the minimum down payment for your purchase, you may still be able to get a mortgage, however, you will be required to purchase mortgage insurance

Mortgage insurance is an added cost that protects the lender since the lender is typically taking on more risk with a lower down payment.

Are you planning on becoming a first-time homebuyer? Ensure you’re well-informed about everything you need to know about your upcoming purchase by reading these related posts:

• 5 First-Time Home Buyer Mistakes To Avoid
• First-Time Home Buyer Grants in Ontario
• Our Top 8 First-Time Buyer FAQs

Land Transfer Tax

The province of Ontario requires homebuyers to pay them an additional fee called the Land Transfer Tax. Essentially, this reflects the provincial government’s cost of permitting you to transfer the title of property between their jurisdiction.

While each province has its own set of Land Transfer Tax rates, the amount you have to pay increases depending on the cost of your new home. The more expensive your new home, the higher the percentage of its value you have to pay in Land Transfer Tax.

In Ontario, the set of Land Transfer Tax rates ranges from 0.5% to up to 2.5% of your home’s value. However, if you’re buying a home in the Greater Toronto Area, the City of Toronto requires buyers to pay an additional municipal Land Transfer Tax alongside the provincial tax.

The good news for first-time homebuyers is that you may be eligible to have all or part of this one-time fee refunded. Eligibility for this refund requires buyers to qualify based on these criteria:

• The buyer must be a Canadian citizen or permanent resident of Canada
• The buyer must be older than 18 years
• The buyer must occupy the home within nine months of purchase
• The buyer cannot have previously owned a home anywhere in the world
• The buyer’s spouse cannot have owned a home while being your spouse

If that applies to you, then you can apply for a refund of the full amount of your Land Transfer Tax or up to a maximum of $4,000.

Lawyers’ Fees

In order for both the buying and selling parties to ensure they’re conducting a legitimate and viable transaction, it’s a real estate lawyers’ duty to review and approve all of the necessary paperwork and legal documents that are included in a transaction.

While both the buying and selling parties hire their own respective lawyers, both legal representatives work together to ensure the real estate transaction is completed smoothly and no contractual or legal details are overlooked.

As you might imagine, there are a lot of formalities and details that go into a real estate transaction, which is why it’s crucial you hire a dedicated real estate lawyer who has experience facilitating these types of deals. As with all lawyers, though, their services come with a fee, which you’ll need to factor into your overall budget as a homebuyer.

Whether you’ve already got an idea of who you’d like to hire or need help finding a legal representative, we work with a set of highly respected and experienced real estate-specific lawyers that we’re always prepared to recommend to our clients should they need it.

There are no ifs, ands, or buts about it — the safest way to buy a new home is through the help of a knowledgeable and experienced local Realtor®. Learn more about what we do, how we help, and how you can find the Realtor® that’s right for you here:

• How To Hire a Real Estate Agent As a Buyer
• Why You Should Work With a Realtor®
• 8 Steps to Finding the Right Real Estate Agent

Your Homeowners’ Insurance

Homeowners’ insurance is a form of property insurance that protects you, the homeowner, from any damages to you or your property once you own your new home. It’s also a requirement to get a mortgage.

In paying a monthly fee to a homeowners’ insurance provider, you are in essence paying for peace of mind. If any damages were to occur to you or your new home, your insurance provider would provide you with funds (up to a certain number) to pay for the cost of fixing the damages.

Although all insurance plans and providers are different, most homeowners’ insurance policies generally cover the costs of things like interior damage, exterior damage, the loss or damage of personal assets or possessions, and any personal injury that occurs on your property.

Interested in learning more about how we can help you make your upcoming home purchase the best buy of your life? Read all about our buying process and how we’ve helped buyers just like you find their dream homes the first time here:

• How We Help Buyers
• Our Buyers’ Guide

Common Mistakes Made By First-Time Buyers

There’s nothing quite like buying a home for the first time. It’s an almost indescribable excitement, joy, and pride that you’ll feel when you set foot in a place that’s truly your own. Of course, there are a few steps you’ll have to take before you can get there—and on the journey, there are plenty of opportunities to make mistakes. Fortunately, knowing what not to do can help ensure that the process is smooth and successful.

If you’re purchasing a home for the first time, here are five mistakes you should avoid…

1) Forgoing pre-approval

One of the biggest missteps many home buyers make is forgoing pre-approval. Taking this first step towards securing a mortgage is simple—and the benefits it can provide are well worth the effort.

During the process, a lender will look closely at your finances to determine how much they’ll likely offer you. While pre-approval isn’t an absolute guarantee that you’ll be fully approved, it is enough to show most sellers you’re a credible buyer who’s ready to make a home purchase!

2) Being unrealistic

You deserve to find your dream home. We’re talking about a place where you can imagine spending some of the happiest moments of your life. A living space like that should just feel right—but it won’t be absolutely perfect.

The truth is, flawless homes don’t exist. Unfortunately, some buyers don’t know that until it’s too late. They pass over beautiful properties capable of meeting their needs because they’re waiting for absolute perfection. Your best bet is to look for a place that checks all of your most important boxes, while giving you that “at home” feeling.

3) Overlooking serious flaws

Some features are easy to fall in love with, like an incredible layout or beautiful architectural details. While it makes sense to factor these “pros” into your purchase decision, it’s not a good idea to ignore any major issues a home might have because of them.

From mould growth to a shoddy foundation, some potential problems deserve your attention. No matter how much you adore a home, make sure you investigate any suspected red flags.

4) Not protecting yourself

Purchasing a home isn’t something you do every day, which is why most buyers don’t know what their due diligence should entail. In most circumstances, it will include a thorough inspection—and possibly the right set of conditions added to your purchase agreement.

In the simplest terms, a home-buying condition is a requirement that must be fulfilled for your purchase to be finalized. For example, a financing condition states that you don’t have to complete your transaction if your mortgage falls through. Your agent can help you take steps like this to reduce the potential risk associated with your purchase.

5) Underestimating costs

A home is the biggest investment most buyers will ever make. Given the price tag involved, it’s not surprising that many forget to factor in (comparatively) smaller expenses. The problem is, they have a way of adding up.

To pave the way for a smooth purchase, leave plenty of room in your budget for ongoing homeownership expenses. You should also make sure you understand the closing costs involved—such as legal fees and land transfer tax.

Buying a home for the first time may seem daunting, and it’s natural to worry about making mistakes. The good news is, an experienced agent can provide the guidance you need to make a smooth, low-stress, and all-around successful purchase.

Are ready to start the search for your first home? Reach out today to get started!