About RE/MAX

Congratulations!

Purchasing a home or even thinking of buying a home is an exciting adventure. You will be joining the ranks of hundreds of families who realize that home ownership offers a number of benefits including building equity, saving for the future and establishing a home your family can call their own. Your hard-earned dollars contribute to your mortgage, not a landlord’s and over time your home will increase in value and the equity you earn is ultimately yours!

In this Home Buyers Guide, I will take you through a step by step process to help you determine the type of home ownership that is right for you. To make your home buying experience as pleasant as possible, I have included informative articles on mortgages, house hunting, the offer, closing details, moving and more.

Pre-Shopping

Before you start shopping for your home, give some thought to your lifestyle, the features you need and want, affordability, and the neighborhoods you prefer. Determining the features that are most important to you will bring you closer to finding your perfect home.

What Can You Afford?

Before shopping for a home, take the time to determine your budget. Consider your monthly expenses in addition plan for unexpected costs.

When preparing your budget, you will want to discuss what resources you can allocate to mortgage payments, living expenses, and other financial situations. As your Real Estate Advisor, I can either help or recommend you to a professional who can assist you in establishing a budget and reviewing your financial position. In addition, they may suggest some alternative methods to obtain financing, either through traditional lenders or other institutions.

To purchase a home, a down payment of as little as 5% down is required. Fortunately, Canada Mortgage and Housing Corporation offer a federal insurance program designed to help Canadians purchase their first home at an affordable cost. If you choose to put down 20% or more, you will not be required to have any CMHC insurance. Your Real Estate Professional or Mortgage Broker can provide additional details on this program.

To prepare your budget, collect the following:

  • Credit card statements
  • Monthly rent or mortgage payments
  • Utility payments (gas, water, power, telephone)
  • All other monthly expenses (such as food, child care, dues, etc.).
  • Annual or semi-annual expenses (such as insurance, car repair, taxes).
  • As well as allow for unexpected items such as medical emergencies, travel and education.
  • Non-fixed expenses (for example, medical expenditures) for the last year. This will give you an estimate of the average expenses of this type. Records or an estimate of personal expenses (entertainment, travel, etc.)

Once you subtract your expenses from your total income, the amount left over is called your net worth. This will give you an estimate of your financial situation at present and will help you determine how much you can afford for a down payment.

What Can I Afford?

There are two types of costs in buying a home — the initial down payment and the ongoing monthly mortgage payments. The largest one-time cost is the down payment.

When purchasing a home, there are also many one time costs and monthly expenses that you will need to budget for.

Typical One-time Expenses Include:

  • Mortgage application and appraisal fee
  • Property inspection (optional), due at time of inspection
  • Legal fees, due at the time of closing
  • Legal disbursements, due at the time of closing
  • Property survey (sometimes provided by seller), due at the time of closing
  • Land transfer, deed tax or property purchase tax, due at the time of closing.(in
  • Quebec within three months following signing)
  • Mortgage interest adjustment (if applicable), due at the time of closing
  • Home and property insurance, at closing and ongoing
  • Moving expenses, due on the date of move
  • PST on High Ratio mortgages
  • Realty Tax Holdback

Typical Monthly Expenses:

  • Mortgage payments
  • Maintenance (this could be condominium fees or allocated maintenance fees)
  • Property and content insurance
  • Property taxes
  • Utilities

Home Buying Needs and Wants

When you develop a needs versus wants list, try focusing on your needs and you’ll come closer to finding a home that meets your criteria while staying within your budget.

Similar to the list you develop to purchase groceries, why not develop your own list of needs and wants in a new home. This doesn’t mean you can not have what you want in your home, but rather, that you have a priority list of the most important features. You may not be able to obtain all the “want” items on your list, within your budget. You may have to compromise on a few items to stay in line with your budget.

Here’s a review of needs versus wants:

NEEDS

  • Adequate square footage for comfortable living.
  • Sufficient bedrooms for your family
  • Sufficient bathrooms
  • Comfortable eat-in kitchen
  • Garage or basement for storage needs
  • Backyard for children’s play area
  • Easy access to school

WANTS

  • Specific carpeting, paint, exterior colour
  • Pool
  • Jacuzzi
  • Hardwood floors
  • Bay windows
  • Built-in entertainment center
  • Brass lighting fixtures
  • Skylights
  • A pretty view

Try finding a happy medium of NEEDS and WANTS. That is, you will want to look for a home that includes all of your needs, with as many wants as practical, while remaining within your budget. Once you have this information in hand, your needs will be clearly defined from your wants. Having this knowledge will establish a clear direction for your new home shopping.

Consider Your Present and Future Lifestyle

Before you begin shopping for your home, reviewing your lifestyle, both now and in the future will make a big difference in the type of home you may need. You will save time. You will define your goals. You are likely to find the home you want, quicker, because you will not waste your efforts in viewing homes that do not meet your criteria.

Look at your lifestyle right now:

  • Are there some areas you would like to change?
  • Consider your lifestyle a few years from now?
  • Will it remain the same?
  • Will your needs increase or decrease?
  • Will you need a small or large home to meet your lifestyle needs?
  • Perhaps the attic or basement can be converted into additional living space.

Do you have preschoolers? In a few years, they will be teenagers, perhaps looking to move out and establish their own home. Perhaps your children have already left and you do not need a large home. Do you have an idea of how long you would like to stay in your home? Two years? Five years?

Where do you spend the most time? Kitchen? Basement? Kitchens and family rooms are often gathering places. Be sure these areas are large enough.

What about entertaining? Do you need extra space to accommodate family functions? Could you convert the basement into a family area? Do small children need a play area, or teens need a recreation area?

How many bedrooms do you require? Some people like smaller spaces for children, a home office, or frequent guests.

Bathrooms are among the busiest place in the home. Can the bathroom handle the traffic?

Think about your employment situation. Will you be changing jobs, or accepting a promotion with another company in another location? If you are transferred, could you sell your home quickly? On another work-related matter, how much time do you want to spend driving to and from work each day? Do you rely on public transportation?

While it might take some thought to answer these questions, the effort translates into a home more flexible and suitable to your needs. The answers could also affect your resale value when it comes time to sell or upgrade. Or, if you are planning to remain in your home for a while, a different home may be more suitable.

How is your maintenance-quotient?

Look at your lifestyle compared to homeownership. That is, how much time do you have to spend on maintenance. Are you a gardener? Do you enjoy puttering in the garden, mowing lawns and maintaining flower beds? Are you a person who enjoys fixing things around the house? While homeownership is a desirable and wise decision, it does come with responsibilities. To maintain the value of your home, and protect your investment, you will want to ensure your home is in good condition. This means careful attention to items that need to be fixed. Often, fixing them right away is easier than waiting for an accumulation of items.

Based on the age of the house, and an opinion from a Real Estate Professional, plus a home inspection you can get a good idea of future maintenance and repairs based on the age of the house. If you do not want the maintenance, a newer home, or perhaps a condominium, may be an option.

On the other hand, perhaps you enjoy painting, fixing, decorating and all the assortment of items needed to maintain a home? You might find an older home in a great neighbourhood that’s well below market value because it needs some work. This could be a great home improvement project, along with increasing the value of your home.

However, before you decide that this project will translate into your “dream home,” be sure to realistically evaluate the situation. Will you do the work on weekends, after work? Will you hire someone, and for how much? Can you live in a mess while you renovate, or can you afford to move in after it is completed? Sometimes people move into a home thinking they will complete the work in stages. Sometimes the work gets done. Other times it does not. Prior to purchasing the home, prepare a detailed list of the work that needs to be completed, along with a realistic estimate of the cost. You probably will not be happy with a bargain home that translates into a money pit.

Review the big picture

Instead of a money pit, perhaps a home in better condition is a wiser choice. For example, suppose you purchase a home in good condition. This costs $10,000 more than a fixer-upper. At today’s mortgage rates, assuming, and staying within your monthly budget, the nice home costs you only about $65 per month more than the fixer-upper. With the fixer-upper, you will spend considerably more than $65 each month to bring it into good condition.

Buying a home represents one of the biggest investments you will ever make. But that investment goes beyond financial considerations. You will want to give some careful thought to your lifestyle needs, both now and in the future. In addition, the time and money you have available for maintenance also is an important consideration for choosing the right home. Take a look at the entire picture before you purchase.

A good way to truly evaluate which home is right for you, outside of price, is to consider what you absolutely must have and what you can live without. Be sure to read the article Home Buying Needs and Wants. This article will help you develop a shopping list. Before you go house hunting, prepare a list of ‘can’t live without’ features and a list of ‘would be great if…’ features.

House Hunting Tips

You have established your budget. You have been pre-approved for a mortgage. You have contacted a Real Estate Professional to assist you with the purchase of a home. Now the fun, and evaluation begins. You will probably be looking at a few homes before you decide on the perfect one for your family. Before you decide to purchase that home you have absolutely fallen in love with, be sure to be objective in your decision. On appearance alone, the fireplace, the new flooring, paint job and new carpeting create a warm and inviting feeling. Yet, is the home really that perfect? Take a deep breath. Take some time to think about the bigger picture of the home in terms of your needs. Carefully consider whether this home offers the features that will last beyond the first impression. Here are some essential factors to consider:

  • Location is a significant factor in your choice of home. An established community, with a good reputation, a low crime rate and well-maintained homes, maintains home values. A garbage dump, industrious buildings disposing of bad odours and major freeways surrounding your neighbourhood are unattractive and disruptive to a peaceful lifestyle.
  • Also consider availability and cost of access to public transportation, major roads and highways.
  • Also consider the condition of public areas such as streets, sidewalks, parks and recreational facilities.
  • Public services should also be established including street cleaning, snow removal, garbage collection, and emergency services.
  • You will also want efficient access to medical services including hospitals, doctors and dentists.
  • Be sure that schools and related school services are also within easy access.
  • Recreationalshopping and entertainment needs should also be considered.

Your Home Buying Team

When you purchase a home, a team of professionals is standing by to assist you such as your Real Estate Associate, contractor, appraiser, lender, mortgage broker, lawyer, home inspector, insurance broker and more. This article explains the important role each of these people plays in your home buying experience.

Real estate agent

A real estate agent is a professional trained in all aspects of real estate. This person can save you time and trouble. They may even save you money. That is because a Real Estate Professional has access to all of the homes available for sale, via the MLS®System. All licensed Real Estate Professionals use this national system. A home listed on the MLS® System is available to any Real Estate Professional in Canada. This is the number one place where buyers and sellers meet. More than 90 percent of homes available are sold through the MLS® System.

Due to their training, experience, and industry connections, Real Estate Professionals are an invaluable resource. They have access to resources, and possess experience most people lack. They know the detailed steps involved to assist you in finding a home that meets your needs. They are also good negotiators who work on your behalf, to get you the best price.

Here are the valuable services your Real Estate Professional will conduct on your behalf:

  • Clarify your wants and needs so you do not waste time
  • Preview properties for ones that most closely meet your needs
  • Arrange appointments and showings
  • Put you in contact with a network of resources for additional needs you might have, including mortgage brokers, lawyers, home inspectors and appraisers
  • Tour the homes with you, and offer advice based on solid experience and understanding of the industry
  • Keep you informed of factors that influence your buying decision
  • Assist you with all closing details ensuring all items are handled smoothly and professionally

Contractors

If you are planning on making some improvements to your home prior to move-in, or sometime in the future, you will want to enlist the help of a credible contractor. This person can provide you with a price estimate on the work you would like completed.

A good place to start looking for a reliable contractor is with your friends, business associates and your Real Estate Professional. You could also check with a home builder or hardware store. When you have collected two or three names, arrange for estimates. Ask for references and a sample of the work they have previously completed. When you speak with former clients, ask about price, length of time to complete the project, communication during the project and satisfaction with the completed project.

When meeting with the contractor, ensure that he or she understands your needs and budget. They should inspect your home prior to giving you an estimate. If the project is being completed from architect’s drawings, be certain that the contractor has the specific details required.

When you have completed the three estimates, review each one carefully. If there is a large difference between each price, get more explanation. A low price does not mean you will get the best work. Or on the other hand, the same could be said of the highest price. There are many factors to consider in a home renovation. A low price might mean that the contract has quoted low to get the work. Once the project is in progress, he might request payment for additional items not covered in the initial price. With a high price, the contractor may have factored in higher quality materials and higher workmanship. Prior to signing, be sure you understand the specific details of the contract including hours of work involved, type of products installed and quality of finishing work completed.

Here are some guidelines to help you evaluate a quotation:

  • Details – are all aspects outlined
  • Costs – are all costs clearly stated
  • Extra costs – is there a provision for going beyond stated price
  • Project cap – the project cap should be clearly stated
  • Timeline – can the work be reasonably completed by the specified date
  • Inspections – will all inspections be handled in a timely manner
  • Bookkeeping – ensure you keep all material receipts
  • Subcontract – will any of the work be subcontracted, by whom and how long will it take, and who pays subcontractor as it clearly states.

Appraisers

In many cases, you may not have to hire an independent appraiser. Your lender usually requires an appraisal from their approved professionals, prior to the purchase of a home. Your Real Estate Professional will also prepare a CMA, “Comparative Market Analysis” for you, to establish a value range. If the home is unusual in some aspect, there are huge discrepancies between the Real Estate Professionals and the bank’s appraisal, you may want to consider an additional appraiser.

Lenders

A lender is anyone (a bank, your mother-in-law, a credit union, an institutional lender) who lends you money. As this financial commitment determines your future for many years to come, you will want to ensure you have a good relationship with this person or institution, with beneficial rates.

You can conduct your own search for a lender. First, get a copy of your credit history, available through Equifax. Then review the newspaper and other real estate publications and you will see the varying rates for institutions and banks. When you have got all the details established (employment history, credit history, price of home, etc), make an appointment and negotiate your best deal.

Mortgage Brokers

A mortgage broker could save you time and money. They do the legwork in finding the institution or lender which offers the mortgage terms and conditions that are best for your situation. This person works for you, not any particular lender, although they do have access to all available lenders. The lender will pay the mortgage broker a finder’s fee. Some, mortgage brokers, however may charge you a fee for these services.

Lawyers/Notaries

A lawyer understands the legal documents and other aspects of buying a home, from both the buyer and seller position. They work on your behalf, ensuring that all documents are properly prepared and you are protected. These legal details must be completed prior to possession date.

Home Inspectors

A professional home inspection could save you money, and headaches in the future. In a few hours this person will provide a complete, written review of your home, citing areas in good, fair or poor condition. With this report, you will have a good idea of repairs which will be required in a few years.

You can make the purchase of the home conditional upon a satisfactory home inspection. If the home inspection reveals some defects, you could cancel the contract, renegotiate or require that repairs be completed by a specified date. Your Real Estate Professional may be able to recommend a skilled home inspector who has the background and knowledge to provide you with an unbiased review. The $300 – 500 you pay for this service is definitely a good investment. Scrimping on this detail or thinking you do not need an inspection, could cost you in the future.

Insurance brokers

For your safety and to protect your belongings, you will need to ensure you have insurance on your home and valuables. You can shop for insurance yourself, by phoning several insurance companies and asking for a quotation. Or, a broker can save you time and money, as they have access to information from insurance companies. Since your home is used as collateral against your mortgage, the bank insists you have full insurance to cover the property.

RRSPs Can Help First Time Home Buyers

Did you know that, as a first time homebuyer there is a federal program in place to assist you with the purchase of your first home?

Under the Canadian federal government’s Home Buyer’s Plan, you can use up to $20,000 in RRSP savings ($40,000 per couple) to help finance the down payment on your first home. The great news is that you actually have 15 years to pay back your RRSPs penalty free. This timeframe will give you plenty of time to get settled into your new home.

To qualify, your RRSP funds must be deposited for at least 90 days prior to the purchase of your new home. By working with a qualified agent like myself, I will help ensure that the required home purchasing documentation is completed with you. Prior to withdrawing any RRSP funds, you will need a home purchase contract.

Alternatively, if you have $20,000 in savings and these funds are not located in an RRSP, you may want to utilize the Home Buyer’s Plan to its maximum advantage. You could consider transferring your savings into an RRSP, and then withdrawing them through the Home Buyers Plan to receive the tax benefits.

Not ready to buy for another few years? Consider the benefits of utilizing a Tax Free Savings Account. With a maximum contribution of $ 5000.00 per year, you can save for your future real estate investment. The great advantage of a Tax-Free Savings Account is that you can withdraw anytime without penalty and most importantly its tax-free! Before you make your financial decision, remember to always ask advice from an expert such as your financial advisor, lawyer and or tax specialist. These professionals can help determine which approach is best suitable for your financial situation.

CMHC – helping with the Canadian dream

Canada Mortgage and Housing Corporation (CMHC), plays a major role in Canada’s housing industry. As a home buyer, you can take advantage of the numerous resources available including home research services, market evaluations, and access to affordable financing options. Programs include; aboriginal housing, residential rehabilitation, adaptation for senior’s housing needs, public and private partnerships, in addition to available grants and awards.

CMHC makes it easier for Canadians to obtain a home by providing mortgage loan insurance. For many people, especially first time home buyers, saving for a down payment is a challenge. When a home buyer has 20% or less of the purchase price to put down, a lender requires mortgage insurance for protection against any payment defaults. CMHC provides this insurance for you the home buyer, to limit the lenders’ risk. The lender will then agree to finance up to 95% of the purchase price of your new home. You can then purchase a property with as little as 5% down! For example, if the cost of the home is $250,000, you only need a down payment of $12,500.

This allows you to become a homeowner, even if you don’t have a large down payment put aside. You just need to meet the following conditions and home ownership can be within your reach:

  • The home must be located in Canada and considered your principal residence.
  • You must have a down payment of at least 5% of the purchase price.
  • Your home-related expenses must not exceed 32% of gross household income which may include utilities, property taxes and condo fees if applicable.
  •  Your total monthly debt load must not exceed 40% of gross monthly household income. Debt such as personal loans, car payments and credit cards would need to be factored into this percentage.
  • You must be able to pay closing costs equal to at least 1.5% of the purchase price. Closing costs may include lawyers’ fees, GST, land transfers and more.

CMHC – An Affordable Form of Insurance

To determine your CMHC Mortgage Loan Insurance premium, your mortgage representative will calculate a percentage of the loan based on the size of your down payment. To clarify, if you put a smaller down payment on your home, you will pay a higher percentage in insurance premiums. Alternatively, if you put down a deposit of greater than 20% of the total cost of the home, you are not required to have CMHC Mortgage Loan insurance.

CMHC Mortgage Loan Insurance premium fees tend to range from 0.5% to 2.9%. Typically your mortgage insurance premium can be paid as a lump sum annually or can be included in your monthly mortgage payments. Your mortgage advisor will be able to determine what will work best for your needs.

Loan Size – % of Purchase Single Advance Multiple Advance
Up to 65% 0.50% 1.00%
Up to 75% 0.55% 1.25%
Up to 80% 1.00% 1.75%
Up to 85% 1.75% 2.50%
Up to 90% 2.00% 3.00%
Up to 95% 2.75% 4.25%

Note: A Multiple advance may be necessary for a new home purchase or mortgage plus home improvement type loans. E.g. $100,000 for house, $10,000 for improvements.

How Much Can You Afford?

Work through the following worksheet to see what you can afford.

Calculating Gross Debt Service (GDS)

With this calculation, you can estimate the maximum home-related expenses you can afford to pay each month. The total should not be over 32% of your gross monthly household income.

Example
Total monthly housing costs (As Noted Above) $1,305.00
Other Debts (personal loans, car loans, credit card, etc.) $450.00
Total monthly debts $1,485.00
Gross monthly income $4,500.00
TDS = Total monthly debts (x100)
——–
Gross monthly income
= 33%
$1,485 (x 100)
——–
$4,500
= 33%

Your monthly mortgage payments

To calculate your monthly mortgage payments, consider the amount borrowed, the interest rate and the amortization. Use our handy mortgage calculator to calculate your monthly payments found on every listing throughout this website.

Cost Per Thousand Dollars Borrowed
% 10 Years $ 15 Years $ 20 Years $ 25 Years $
4.00 10.11 7.38 6.04 5.26
4.25 10.23 7.50 6.17 5.40
4.50 10.34 7.63 6.30 5.53
4.75 10.46 7.75 6.44 5.67
5.00 10.58 7.88 6.57 5.82
5.50 10.82 8.14 6.84 6.10
5.75 10.94 8.27 6.68 6.25
6.00 11.07 8.40 7.12 6.40
6.25 11.19 8.53 7.26 6.55
6.50 11.32 8.67 7.41 6.70
6.75 11.44 8.80 7.55 6.86
7.00 11.56 8.94 7.70 7.01
7.25 11.69 9.07 7.84 7.16
7.50 11.82 9.21 7.99 7.32
7.75 11.94 9.35 8.14 7.48
8.00 12.07 9.49 8.29 7.54
8.25 12.20 9.63 8.29 7.64
8.50 12.33 9.77 8.59 7.96
8.75 12.45 9.91 8.74 8.12
9.00 12.58 10.05 8.90 8.28
9.25 12.71 10.19 9.05 8.45
9.50 12.84 10.34 9.21 8.62
9.75 12.98 10.48 9.36 8.78
10.00 13.11 10.63 9.51 8.95
10.25 13.24 10.77 9.68 9.12
10.50 13.37 10.92 9.84 9.29
10.75 13.51 11.07 10.00 9.45
11.00 13.64 11.22 10.16 9.63
11.25 13.78 11.37 10.32 9.80
11.50 13.91 11.52 10.49 9.98
11.75 14.05 11.67 10.49 10.15

This article is compiled with information obtained from CMHC. The information contained in this article is believed to be accurate, but not warranted to be so.

CMHC – Helping With the Canadian Dream

As the Government of Canada’s national housing agency, Canada Mortgage and Housing Corporation (CMHC), plays a major role in Canada’s housing industry. The agency offers numerous housing services including research services, market evaluations, and access to affordable financing choices. Programs include aboriginal housing, residential rehabilitation assistance, home adaptation for seniors independence, public and private partnerships and numerous grants and awards.

For many people, especially first time home buyers, saving the necessary down payment is a challenge. Additionally, with less than 25% of the purchase price to put down, a lender requires mortgage insurance for protection against any payment defaults. CMHC makes it easier for Canadians to obtain a home, by providing mortgage loan insurance. By providing this insurance, CMHC limits the lenders’ risk, allowing the lender to finance up to 95% of the purchase price of a new home. You can purchase a property with as little as 5% down. If the cost is $150,000, you only need a down payment of $7,500.

You can become a homeowner, even if you don’t have a large down payment put aside. You just need to meet the following conditions and home ownership can be within your reach.

  • The home must be located in Canada and considered your principal residence.
  • You must have a down payment of at least 5% of the purchase price.
  • Your home-related expenses must not exceed 32% of gross household income
  • Your total monthly debt load must not exceed 40% of gross monthly household income
  • You must be able to pay closing costs equal to at least 1.5% of the purchase price.

An Affordable Form of Insurance

The premium you will pay for your CMHC mortgage insurance is calculated as a percentage of the loan and is based on your down payment as a percentage of your home’s purchase price. Fees range from 0.5% to 3.75%; a .50% surcharge is added to the premium if multiple advances are required. You can pay this premium in a single lump sum, or it can be included in your monthly payments, along with the application fee.

Loan Size Single Multiple
Up to 65% 0.50% 1.00%
Up to 75% 0.55% 1.25%
Up to 80% 1.00% 1.75%
Up to 85% 1.75% 2.50%
Up to 90% 2.00% 3.00%
Up to 95% 2.75% 4.25%

Note: A Multiple advance may be necessary for a new home purchase or mortgage plus home improvement type loans. E.g. $100,000 for house, $10,000 for improvements.

How Much Can You Afford?

Work through the following worksheet to see what you can afford.

Calculating Gross Debt Service (GDS)

With this calculation, you can estimate the maximum home-related expenses you can afford to pay each month. The total should not be over 32% of your gross monthly household income.

Example
Monthly mortgage payment $750.00
Property Taxes $180.00
Heating Costs $105.00
Total monthly payments $1,035.00
Gross monthly household income $4,500.00
GDS = Total monthly payments (x 100)
——–
Gross monthly income
= 23%
1,035.00 (x 100)
——–
$4,500
= 23%

Calculating Total Debt Service (TDS)

This calculation allows you to estimate the maximum debt load you can carry each month. The TDS should not be over 40% of your gross monthly household income.

Example
Total monthly housing costs (As Noted Above) $1,305.00
Other Debts (personal loans, car loans, credit card, etc.) $450.00
Total monthly debts $1,485.00
Gross monthly income $4,500.00
TDS = Total monthly debts (x100)
——–
Gross monthly income
= 33%
$1,485 (x 100)
——–
$4,500
= 33%

Your monthly mortgage payments

To calculate your monthly mortgage payments, consider the amount borrowed, the interest rate and the amortization. Use our handy mortgage calculator to calculate your monthly payments.

Simply multiply (x) by the mortgage amount. Eg. $90,000 x 5.67 / 1,000= $510.30
($90,000 mortgage, amortized for 25 years (5.67) ) @ 4.75% interest.

Cost Per Thousand Dollars Borrowed
% 10 Years $ 15 Years $ 20 Years $ 25 Years $
4.00 10.11 7.38 6.04 5.26
4.25 10.23 7.50 6.17 5.40
4.50 10.34 7.63 6.30 5.53
4.75 10.46 7.75 6.44 5.67
5.00 10.58 7.88 6.57 5.82
5.50 10.82 8.14 6.84 6.10
5.75 10.94 8.27 6.68 6.25
6.00 11.07 8.40 7.12 6.40
6.25 11.19 8.53 7.26 6.55
6.50 11.32 8.67 7.41 6.70
6.75 11.44 8.80 7.55 6.86
7.00 11.56 8.94 7.70 7.01
7.25 11.69 9.07 7.84 7.16
7.50 11.82 9.21 7.99 7.32
7.75 11.94 9.35 8.14 7.48
8.00 12.07 9.49 8.29 7.54
8.25 12.20 9.63 8.29 7.64
8.50 12.33 9.77 8.59 7.96
8.75 12.45 9.91 8.74 8.12
9.00 12.58 10.05 8.90 8.28
9.25 12.71 10.19 9.05 8.45
9.50 12.84 10.34 9.21 8.62
9.75 12.98 10.48 9.36 8.78
10.00 13.11 10.63 9.51 8.95
10.25 13.24 10.77 9.68 9.12
10.50 13.37 10.92 9.84 9.29
10.75 13.51 11.07 10.00 9.45
11.00 13.64 11.22 10.16 9.63
11.25 13.78 11.37 10.32 9.80
11.50 13.91 11.52 10.49 9.98
11.75 14.05 11.67 10.49 10.15

This article is compiled with information obtained from CMHC. The information contained in this article is believed to be accurate, but not warranted to be so.

9 Biggest Relocation Mistakes & How to Avoid Them

On the one hand, moving to another city can be an exciting adventure. On the other hand, it could be a stressful time if things go wrong. This report explains the 9 most common mistakes when people relocate. When you plan ahead, you will avoid these pitfalls and ensure your move is handled smoothly.

1. Lack of information 
Contact the chamber of commerce, tourism department, municipality or library in your new community. At the same time, compare salaries, cost of living, taxes and housing prices.

2. Home not priced and ready for showing 
Before you sell your home, complete repairs. Often, it is the little things, like chipped paint, worn caulking and sticky doors that potential buyers notice. Have your home cleaned, including carpets? Have a Comparable Market Analysis (CMA) completed by one or two Real Estate Professionals to ensure a competitive price.

3. Not planning for temporary housing between destinations
You may need to set up temporary housing arrangements until the closing of your new home. This could take from a few days to a few months. If you need interim housing for a few days, perhaps staying in a hotel is the simplest solution. For housing longer than a month, you may want to consider an apartment with a short-term lease.

4. Not being pre-approved
Sellers are usually eager to negotiate with someone who has immediate buying power.

5. Not completing a professional home inspection 
This applies for both the home you are selling and the one you are buying, although who pays for the inspection (buyer or seller) is negotiable in each separate contract.

6. Insufficient time to handle children’s concerns
During relocation, a child could feel lost, sad, angry or confused. Sometimes, under the stress of completing so many details, the temptation is to get settled as quickly as possible so everyone feels at home. Talk to your children during the process. They will feel safe, cared for and comfortable. Acquaint your children with the new neighbourhood. If possible, have them meet new teachers and other children in their new school before moving. Try not to move in the middle of a school year.

7. Not being prepared for culture shock
Sometimes, when people move from familiar surroundings to a new community, culture shock can manifest. Symptoms can range from headaches, stomach aches, impatience, sleep problems to anger. These feelings are all normal and do pass over time. It may be helpful to incorporate the old with the new. This could include taking classes, joining clubs and pursuing activities you once enjoyed. It takes about six to ten months for someone to feel “at home” in a new community.

8. Not using local, licensed professionals 
Every area is different. Understanding the communities that make up your destination city, a Real Estate Professional can find you a home that matches your needs. You will save time and energy by having a professional do the work for you.

9. Not reading your employer’s relocation policies 
Read your employer’s relocation policies carefully, for the amount of reimbursement. Keep good records and copies of your receipts, as moving expenses are deductible under certain conditions established by Revenue Canada.

How to make the most of your move-up

When you are buying a first time home, the process is usually straight forward. However, when you are moving to a second or third home, other issues arise, making the process more complicated. You will need to consider financing, and selling your home at the right time. This way, you won’t have the added responsibility of paying the mortgage on two homes. You will also want to coordinate closings, so you can plan your move most efficiently. Here are some of the most effective things you can do to make the most of your move up.

Save your feet and your time 
Many people spend much time shopping for a home, only to be disappointed because it has either sold or is beyond the budget. This hit and miss strategy are time-consuming and very frustrating. A better alternative is to use the services provided by a Real Estate Professional. As a client, you have access to a Buyer Profile System/House Hunting System. Your Real Estate Professional will provide you with regular updates on all available property that match your needs. You will stay on budget, save your feet, and come closer to finding the home of your dreams, faster than trying to shop yourself.

Make improvements on your existing home 
A home that shows well, and in good condition always gets the highest price. A home in a less favourable condition is less appealing to a buyer. You will easily reap the rewards of completing minor repairs to your home. Also, make these improvements prior to putting your home on the market. You will want to present your home the best to get the best!

Sell your present home first 
The easiest and wisest strategy is to sell your home before you buy. This way, you won’t be at a disadvantage at the negotiating table, or feel pressured to accept a below-market value, to meet a purchase deadline. With your home already sold, there will be no strings attached on your next one. When you do find a new home, you have the option of putting a subject to on the contact. This way you can give yourself plenty of time to find a new home. In a slow market, perhaps you could rent your home and put it on the market later. However, with this option, check with your lawyer, tax advisor and accountant to ensure all legal, tax and financial aspects are considered.

Some Real Estate Professionals offer a Guaranteed Sale Trade-Up Program. With this service, the Real Estate Professional guarantees the sale of your current home before possession of your next one. If you have found the home of your choice, and your current home has not sold, the Real Estate Professional will buy the home from you. You are free to make your move without stress and worry.

Get mortgage pre-approval 
Pre-approval is your green light and your maximum power. In a short time, you will know how much you qualify for when moving up to a larger home. When you find your new home, you can present an offer immediately. A seller will often view your offer more favourably when financing arrangements are established.

Co-ordinate closings
With two major transactions, there are double the details of mortgage experts, appraisers, lawyers, loan officers, title registrations and home inspectors. A Real Estate Professional can assist you in ensuring all the logistical details of your transaction are handled correctly and on time.

Benefits of Buyer Agency Agreement

In an ideal world, every party in a transaction would be fairly represented. When it comes to real estate, however, this may not be the case. The seller and buyer, depending upon the type of agreement with the Real Estate Professional, may not be represented equally.

Many people believe that the agent they are working with automatically represents them and their interests. Yet, without specific disclosures, this is not true. Unless otherwise stated, the agent represents the seller in transactions for the sale of a home. This agent, as part of his or her fiduciary duty, must ensure his loyalty protects the seller’s position throughout the entire process.

This is true of the “listing agent” who puts the home up for sale, and the agent who finds the buyer. The agent – who helps the buyer find the right home – works for the seller as a “subagent” of the listing agent. With this system, all agents are legally bound to represent the seller. The buyer has no representation.

Example 1: You respond to a home advertised in a newspaper, a home magazine, or the Internet. The agent is friendly and informative. He or she tells you what you believe to be everything about the house. However, the agent represents the seller, not you.

Example 2: You are working with an agent who shows you 10 homes in a weekend. He buys you lunch twice. You tell him your two children. However, he does not offer Buyer Agency. As you feel comfortable with this person, you easily offer personal information. However, without Buyer Agency, this Real Estate Professional is really representing the 10 sellers. Any information you reveal to the agent must be relayed to the sellers.

As this Real Estate Professional represents the seller, he or she cannot reveal certain things to you, as the buyer:

  • The reason for selling (unless the seller specifically authorizes it)
  • Any concessions, in price or otherwise, that the seller may be willing to give up.
  • Any conversations between the agent and the seller
  • Any information that could be detrimental to the seller, or give you, the buyer, an advantage. This would include a CMA (Comparable Market Analysis) that could put the seller at a disadvantage.

Buyer’s agency ensures you get the best deal

In recent years changes to the real estate industry have been made to allow for a more equitable arrangement. Buyers are not alone. In fact, with a Real Estate Professional working on behalf of a buyer, as a buyer’s agent, a buyer receives a full range of professional services. A buyer’s agent commits to a home buyer and provides undivided, confidential representation. This real estate professional has the tools, knowledge, industry connections, negotiating skills and seasoned experience to work for you. Many people lack these essential skills to ensure you do not pay too much for a home.

How does a buyer’s agent help you?

A buyer’s agent must work in a professional, ethical manner, ensuring the purchaser is treated with care, confidentiality, full disclosure and accurate accounting. A buyer’s agent will also show the buyer available homes, point out the property’s features, provide financing information and submit the offer to purchase. If a Buyer’s Agency agreement is struck between you and the Agent, it is you, rather than the seller, who has the representation from the Agent with whom you are working. Working under the agreements of Buyer Agency, you get the following benefits:

Loyalty

The real estate agent must act in the best interest of the buyer.

Professionalism

The agent must act in accordance with the lawful instructions of the principal (buyer)

Disclosure of all material factors such as:

  • Seller’s financial condition
  • Properties true worth
  • Strengths and weaknesses of the property
  • Commissions split with other brokers
  • Legal effects of important contract provisions
  • Information about property value trends that may influence your decision about a certain area
  • CMA information. A buyer’s agent can develop a Comparable Market Analysis, revealing at what price similar properties in the area have listed for and sold for.
  • Existence of other offers
  • Relationship between agent and other parties

Reasonable care and skill

  • Determining and advising the buyer of a reasonable purchase price
  • Discovering any facts that would affect the purchase of the home, and advising the buyer
  • Ensuring all details and facts of the sale are correct
  • Ensuring all money handled between parties is accounted for

Most importantly, you can ask a buyer’s agent for advice and assistance in setting your offer price and structuring other terms of your offer. What’s more, you’ll have peace of mind knowing an advocate is working on your behalf to help you buy at the best possible terms.

The important thing is to understand your options so that you don’t unintentionally accept less representation than you want. When you are looking to make the biggest investment of your life, it is not hard to understand why it is important to be represented exclusively.

Solid Reasons for Investing in Real Estate

If you invest in the stock market, which includes an assortment of equities, bonds, mutual funds and options, you are in for a rocky ride. 2002 will record the third straight year of losses for North America’s stock market indices. Many financial advisors suggest that if investors can not stomach the rapid rises and falls of a stock, they might want to consider investing elsewhere.

Stocks are not for the faint at heart. It takes a great deal of stamina to survive the roller-coaster ups and downs of an investment that is heavily dependent upon economics.

What about real estate? Has it done better than the stock market? Let us take a look at Bill and Marsha, who each have received a $10,000 inheritance. They are not sure where to invest their proceeds.

Conservative Bill invests his $10,000 in the stock market. With interest in the Internet still growing, he puts it into a S&P 500 index fund.

A renter, and inexperienced in the stock market, Marsha uses her $10,000 as a down payment on an $80,000 condominium. Fast forward – 12 years. Who did better on their investment?

Bill’s return 
Since 1990, the S&P 500 more than tripled. From his initial investment of $10,000, Bill made about $22,000, pre-tax. During the same period, the value of the S&P 500 quadrupled, so Bill’s gain was roughly $30,000, pre-tax.

Marsha – reaping the benefits of home ownership 
What about Marsha? During the same period, home values increased roughly 4 percent per year nationally. At that rate, Marsha’s $80,000 condominium is now worth about $126,000. If she sold it, her profit would be about $46,000, tax-free.

On average, most Canadians invest and earn more in their homes than they invest and earn from their savings accounts, stocks, bonds and other investments. Gordon Pape, recognized Canadian author and financial advisor, suggests that home equity remains a cornerstone of most families’ wealth.

Real estate is a solid, familiar investment 
In addition, there are several other solid reasons for investing in real estate:

Forced savings. Contributing towards a mortgage automatically forces a family to save. Rather than paying rent, these monthly payments contribute to future security.

Appreciation. By nature of the demand and supply, home prices rise. According to the Edmonton Real Estate Board, a home purchased in January 1997 for $123,530 now sells for $167,000.

Tax-free profits. When your home is your principal residence, and you sell it, you will not pay tax on any of the profits. This is one of the last and greatest advantages for building wealth left in Canada.

Equity build-up. Your home will naturally rise in price, according to the market. In addition, you will be contributing to the reduction of your mortgage. The difference between what is outstanding on your mortgage and what your home is valued at, is your earned equity. Your equity is a valuable commodity that can be used to obtain additional financing, obtain a second mortgage, or move-up to a larger home.

Real estate has long been recognized as an inflation-resistant investment, providing homeowners with a tangible incentive to save. Buying your own home, or investing in one, is widely accepted as one of the soundest financial commitments you can make.

Arranging a Mortgage

Most people require a mortgage to purchase a home. This section explains the elements of a mortgage including type, terms and how to qualify for one. In addition, choosing the right mortgage for your needs can help you retire this financial obligation sooner.

Mortgage overview

Most people who purchase a home require some financial assistance. That is, they require someone to lend them sufficient funds to cover the price of a home. Most often, this financial arrangement is handled through a bank or other institution through a MORTGAGE. A mortgage is a legally binding agreement that states a certain party (mortgagor) lends money to another party (mortgagee). The mortgagee agrees to pay back the money at a certain rate, plus interest, over a certain time period.

There are two parts to this financial agreement: principal and interest. Principal is the actual amount borrowed. Interest is the lender’s fee you are charged for borrowing. You also have to determine the amortization period (the length of time it will take to completely pay off the mortgage) and the term, or length of time each mortgage agreement guarantees the interest rate.

When you are considering a mortgage, you have many options to consider such as type of mortgage (closed, open, high ratio, vendor take back, convertible), payment schedule (weekly, bi-weekly, monthly) amortization period. Before you sign any documents, shop at several institutions and compare rates and features. You could save, or lose thousands of dollars when the terms, interest rates and payment schedules are not working in your favor. These items are negotiable.

Mortgage amount

When interest rates are lower, your monthly payments are lower, so you might qualify for a larger mortgage. However, the larger the mortgage, the more you will pay in interest over the length of the mortgage. Your home will cost you more. If you can afford a bit more, without sacrificing your lifestyle, this will greatly contribute to reducing your financial obligation.

Down payment

To qualify for a conventional mortgage, you need a down payment of 25% of the purchase price. The mortgage cannot exceed 75% of the appraised value.

If you have less than the 25%, you may qualify for a high ratio mortgage. If you qualify, you can purchase a home with a minimum 5% down payment through CMHC (Canada Mortgage and Housing Corporation). Insurance, for an additional 0.5% to 2.75% of the mortgage amount, is mandatory with a high ratio mortgage. The house price may also be capped. See article in this series.

Get pre-approved prior to home shopping

House hunting takes a great deal of time and energy. And that is even with pre-approval. Before you start shopping for your dream home, go to the bank. Talk to the lending officer and review your mortgage options. Fill out the necessary paperwork (which only takes a few minutes), and you will know within a matter of days whether you are approved for a mortgage, and for how much. You will know what you can spend on a home before you start looking, you will be protected against interest rate increases, and most importantly, you will be well prepared to make an immediate offer on a home you like. A seller is more likely to consider an offer free and clear of encumbrances. With pre-approval, you are showing you are serious and ready to buy. With this simple and FREE service, you will eliminate problems down the road.

When you are shopping for a pre-approved mortgage, here are some areas to consider:

  • Competitive interest rates. Check out all options and interest rates. Sometimes, flexible features may cost more.
  • 90-day rate guarantee. You will be protected against rising interest rates while allowing you to take advantage of falling rates.
  • Flexible payment options. With these areas, you can tailor the mortgage to your lifestyle. Discuss payment frequency and lump-sum payment options.
  • Can you skip a payment in special circumstances or double-up on your payments?
  • Closing costs: Be sure you have a clear understanding of the fees involved.

Choosing a Mortgage to Meet Your Needs

When you are buying a home, the type of mortgage you choose, the down payment, the amortization period and even the payments make a difference. To get you started, here is a review of the most common types of mortgages.

Assumable mortgage

By assuming the existing mortgage, you may be able to save on the usual mortgage fees such as appraisal and CMHC fees. You will save time, since you do not have to negotiate to arrange financing from another lender and the existing mortgage on the home may be less than the current market rates. Alberta is the only province in Canada which allows for as assumable mortgage. You simply apply cash that has already been paid toward the mortgage and resume payments. Some institutions may require you to qualify.

Vendor take back

With a VTB, the vendor also becomes a lender, holding all or some of the mortgage. Sometimes the vendor will offer this loan at lower than bank rates.

Conventional mortgages

With a conventional mortgage, you need a minimum down payment of at least 25% of the purchase price. These mortgages have the lowest carrying costs and do not have to be insured against default. You are responsible for a property appraisal and legal fees registering the mortgage and completing the purchase

Low down payment insured mortgage

Low down payment mortgages – with down payments as low as 5% – must be insured to cover potential default of payment and their carrying costs. Therefore, this mortgage is higher than a conventional mortgage as they include the insurance premium. Low down payment mortgages are often referred to as National Housing Act (NHA) or High Ratio mortgages. Both Canada Mortgage and Housing Corporation [CMHC] or GE Capital Mortgage Insurance Company (Canada) [GE] offers default insurance. You are responsible for appraisal and legal fees and the application fee for the insurance.

Closed, open & convertible mortgages

With a closed mortgage, the interest rate is locked in for the full term of the mortgage. You must pay a fee to renegotiate the interest rate or pay off the balance before the end of the term. Closed mortgages are the most effective when interest rates may be rising and for people who are not moving in the short term. First time home buyers find them especially appealing, as mortgage payments are established for a set time frame. The interest rate for closed mortgages may be lower than for open mortgages. These mortgages are available in terms from six months to 25 years.

Flexibility is a prime advantage of an open mortgage. They can be repaid either in part or in full at any time, without incurring any additional costs. This mortgage, however, is generally available for a term of six months or one year. Interest rates for open mortgages may be higher than for closed mortgages because of the added flexibility.

In these two situations, you could save a tremendous amount on interest costs: 1) when you’re planning to sell your home soon without buying another and you speculate that interest rates are falling 2) when you think you may be able to pay down a considerable portion of your mortgage debt in the near future.

A convertible mortgage is a fixed-rate mortgage that provides the same security as a closed mortgage. It can also be converted to a longer, closed mortgage at any time without cost.

Fixed or variable?

With a fixed-rate mortgage, the interest rate is locked in for the full term of the mortgage. Buyers know the payment amount throughout the entire term. Fixed-rate mortgages could be either open (could be paid off at any time without costs) or closed (costs apply if paid off prior to maturity).

With a variable-rate mortgage (sometimes referred to as a floating mortgage), mortgage payments are set for a term of one to two years or longer although interest rates may vary during this time.

If interest rates go down, more of the payment is applied to reduce the principal. If rates go up, more of the payment is applied to interest payment. Variable-rate mortgages may be open or closed. With a variable rate mortgage a buyer has the flexibility to maximize upon falling interest rates and to convert to a fixed-rate mortgage at any time.

If you suspect interest rates will rise, you may want to lock in your fixed rate for a long time. If you speculate that interest rates are headed downward, a shorter time may be a good choice.

Prior to signing any mortgage document, you will want to ensure you understand the conditions, terms, payment schedules and consequences of non-payment. Also be sure that your lawyer, accountant and even your Real Estate Professional has reviewed the documents so you are protected against any surprises.

Qualifying For a Mortgage

Applying for a mortgage is a straight-forward process. When you are prepared, it is unlikely you will receive any surprises. A mortgage lender needs information about your work history, debts and assets to establish your creditworthiness and the ability for repayment. The bank will establish your gross income and potential payments and property tax expenses to arrive at a Gross Debt Service ratio (GDS). This is usually limited to 30-35% of your gross income. Debts will be added to establish a Total Debt Service ratio (TDS), which can’t exceed more than 40 percent of your gross earnings.

The lender needs to satisfy two risk requirements:

  1. Can you make your scheduled monthly payments?
  2. Second, if you default (don’t make your payments) can the proceeds of the sale of the home cover the cost of the loan?

To answer these questions, a lender will ask about your net worth. This is the difference between the value of everything you own and your debts. They will consider your bank balance, investments, real estate holdings, vehicles, debts, and credit card balances, along with your employment history.

The lender will also review your credit history. This shows your ability to repay your mortgage, as it indicates how you have handled past debts or become insolvent (bankrupt).

You will be asked to sign a form giving the financial institution permission to obtain information from your employer, creditors and credit rating agencies. You may want to check your credit history yourself before you apply for a mortgage. This way, any problems can be corrected and you won’t be turned down for a mortgage. You can request your credit history by contacting Trans Union or Equifax, two of the major credit bureaus. You will need to make a written request for your history. Send a letter asking for your credit history, along with photocopies of two pieces of ID with your current address, plus a photocopy of a utility bill or credit card invoice. The process takes about two weeks and you’ll get a good idea of how you will be evaluated by the banks.

Resolve any outstanding debt issues and ensure that any errors are corrected.

Mortgage loan insurance

If your down payment is less than 25% of the home, it is legally required that you purchase mortgage loan insurance. In Canada, most lenders are legally required to insure high-risk mortgages. If you default on your payments, the lender receives their money from Canadian Mortgage and Housing Corporation (CMHC) or another insurer. With this federal government guarantee, most lenders are confident in financing up to 90% of your purchase.

Fees for this insurance run between 0.5% and 2.75%, and are based on the size of the loan and value of your home. Premiums can be paid as a lump sum when you make your purchase or as part of your monthly mortgage payments. Additional fees include application and appraisal fees.

Make the Most of Your Mortgage

While you are shopping for a new home, do not forget about your mortgage. Take the time to shop at several institutions. Compare terms, rates and payments. Small items like terms, rates and payments can cost you or save you thousands of dollars over the life of your mortgage. The following list makes some suggestions on how you can make your payments work harder for you.

Get pre-approved

It is fast, simple and free. Before you shop for your home, spend some time with your financial institution. You will receive a written, pre-approval for a specified amount. When you have found your dream home, there are no waiting, or objections to the seller.

Consider your comfort level

In some cases, you may qualify for more or less than the dollar amount you want to commit to each month. Take the time to calculate different payment plans. Be sure you are comfortable with this amount. Develop a budget. Leave yourself some breathing room for unexpected expenses.

Consider your long-term goals

Before committing to a mortgage ask yourself these important questions: How long will you own this home? Will interest rates rise or fall? Will your income rise or fall? Will you be able to commit to monthly payments? Being objective about these factors can make a difference to the type of mortgage that is best for you.

Review payment schedule and additional privileges

The more you can pay, the more often, the more you’ll save. For example, making weekly or biweekly payments can take years off your mortgage. This way, you lessen the amount of interest accrued over the term. Increasing your monthly payment can also reduce interest and term. Some mortgages allow you to pay a lump sum towards the mortgage at a specified time. Be clear about pre-payment privileges, as not all mortgages include them.

Consider a portable and assumable mortgage

You can take a portable mortgage with you, should you move. You will avoid paying discharge penalties and re-applying unless you’re moving to a more expensive home. A buyer could take over your payments if you have an assumable mortgage. This could work to your advantage, making it easier for a buyer to purchase your home.

A Real Estate Professional can provide referrals to financial lenders who can assist you in obtaining the best mortgage for your needs. Having worked with families in various financial situations, his or her services can make a significant difference in the cost and effectiveness of the mortgage you obtain.

Shave years off your mortgage

Whether you are buying your first home, or have been making mortgage payments for years, you may be thinking about reducing this obligation, faster. In fact, changing your term, the payment amount and even making lump sum payments could pay down your mortgage more quickly.

Reduce the amortization period

The amortization period is the length over which the debt is carried. By reducing this time period, from 25 years to 15 years, you will save thousands in interest. The following chart shows these savings.

Interest rate *Monthly payment *Monthly payment Difference Interest
(per annum) 15-year 25-year Savings
7% $893.26 $700.43 $192.83 $49,332.18
8% $948.16 $763.21 $184.95 $58,299.80

*Compounded half-yearly, not in advance.
**Interest savings over the life of the mortgage, assuming constant interest rate throughout the amortization period. Based on figures obtained from RBC Royal Bank.

Make lump-sum pre-payments

Many lending institutions allow for lump-sum payments. On the anniversary date, you can make a payment of a specified amount towards the mortgage. You may also be able to double up on regular payments on any payment date. These double-up payments are applied to the principal.

Increase the amount of your payments

Any additional amount you can make on your principal reduces the amount of interest. Check with your lender when you have additional cash reserves.

Don’t forget about these costs

Buying a home is a milestone, whether it is your first, third or fourth. In addition to the price of a home, there are some other costs you’ll incur. Some of these costs are one-time fixed payments, while others represent an ongoing monthly or yearly commitment. Not all costs apply to every sale or purchase. However, when you are aware of the following items you won’t be hit with any surprises on closing day.

Inspection fee

An inspection performed by a professional inspector is a sound investment. For $300 – $500, you’ll receive a written report on areas that are structurally sound and those where repairs are required.

Appraisal fee

When you apply for a mortgage, your lending institution will ask for an appraisal of the property. Budget approximately $300 -$ 500.

Survey fee

When you purchase a resale home, you are also required to complete a Real Property Report, which assess any changes to the home and property. Budget around $400 – $600 (Rural fees vary depending on size of land being surveyed).

Property insurance

Insurance on your home covers the replacement value (structure and contents). To protect their investment on their loan, financial institutions require this coverage. Allow for $500 – $1,000.

Service charges

There will be an installation fee for utility services, including telephone, water, electricity, gas, and cable. Hook up fees range from $50.00 – $175.00 depending upon the service.

Legal fees

A lawyer should review every real estate transaction. Fees are determined by the complexity of the issues involved. Shop around and ask for an estimate prior to hiring any lawyer.

Mortgage loan insurance fee

Depending upon the down payment (can be payed infull upfront or into your monthly mortgage payment), some lending institutions require mortgage loan insurance. Budget between 0.5% – 2.75% of the total amount of the mortgage.

Mortgage application fee

Some financial institutions charge a mortgage application fee to process your application. If your request for a mortgage is turned down, most will return the application fee to you. Each year you renew a mortgage some institutions also charge a fee.

Moving costs

Costs for professional movers range from $65.00 – $100/hour for a van and two movers. Prices may be higher during peak moving times.

Local improvements

In some cases, the cost of local improvements made in your area (sewers, sidewalks, alleys) could be added to your tax bill.

Closing costs

With the purchase price of a resale home, the closing is always “subject to usual adjustments.”This means that any amount that the seller has already prepaid will be adjusted so that the home buyer pays the excess amount back to the seller and vice versa. These adjustments can include: municipal property and school taxes monthly condominium maintenance fees first and last month’s rental for rental properties that may be in the home, utilities (such as hydro, water and fuel oil, including GST).

Interest adjustment costs

Most lenders expect the first mortgage payment one month after closing the purchase – however, if you close mid-month, some lenders expect the first payment at the beginning of the next month, two weeks before you would normally expect. Or they charge a pro-rated interest to make up the difference.

Land transfer tax

Most provinces levy a one-time tax based on a percentage of the purchase price of the property.

Viewing Homes

This section gives you some advice on making the most of your viewing experience. When you separate emotion from facts, and the condition of the house, you will be in a better position to purchase a home that meets both your needs and your budget. You can avoid any costly errors that could lead to future problems.

How to Avoid the Most Common Buyer Errors

Shopping for a new home is an emotional experience. It is also time consuming and comes with a myriad of details. Some buyers, however, get caught up in the excitement of buying a new home and tend to overlook some items. Their home purchase turns into an expensive process. These errors generally fall into three areas:

  • Paying too much
  • Losing a dream home to another buyer
  • Buying the wrong home

When you have a systematic plan before you shop, you will be sure to avoid these costly errors. Here are some tips on making the most of your home purchase:

Bidding without sufficient information

What price do you offer a seller? Is the seller’s asking price too high? Is it a deal? Without research on the market and comparable homes, you could lose thousands of dollars. Before you make that offer, be sure you have researched the market. A Real Estate Professional can offer an unbiased opinion on the value of a home, based on market conditions, condition of the home and neighborhood. Without knowledge of the market, your offer could be too much. Or worse, you could miss out on a great buying opportunity.

Buying a mismatched home

What do you need and want in a home? Sounds simple. Yet, clearly identifying your needs and bringing an objective view to home shopping leaves you in a better position. Sometimes, home buyers buy a home that is too large or too small. Perhaps they did not consider the drive to work, the distance to school, or the many repair jobs waiting for completion. Plan ahead. Use your needs list as a guideline for every home you view.

Unclear title

Before you sign any document, be sure the property you are considering is free of all encumbrances. As part of their services, a Real Estate Professional can supply you with a copy of the title to ensure there are no liens, debts, undisclosed owners, leases or easements.

Outdated survey

Before the purchase is completed, an updated survey is essential. This report will indicate boundaries and structural changes (additions to the house, a new swimming pool, neighbour’s new fence which is extending a boundary line, etc.).

Unexpected repairs

For $300 – $500 a professional inspector will conduct a thorough inspection of the home. This way, you will have an idea of the cost of future repairs. Make the final contract subject to a favourable report.

Shopping without pre-approval

It only takes a few hours to get mortgage pre-approval. When you are shopping for a home, this gives you more power. A seller is more likely to consider an offer from a serious buyer.

Remember additional costs

Besides the funds for the purchase of a home, you’ll need funds for items such as loan fees, insurance, legal fees, surveys, inspections, etc.

Rushing the closing

Before you sign, ensure that all documentation clearly reflects your understanding and conditions of the transaction. Has anything been forgotten? Don’t rush. You could lose money, financing or even the sale.

Take Off the Rose Coloured Glasses and Save Money

“A home that meets my needs, at the lowest possible price,” is every homebuyer’s creed. Yet, when a home buyer goes shopping for a home, two homes compete for their dollar: a home that meets his needs, and a home that fulfills their desires. The goal is to find a home that meets these two criteria. However, in the real world, this rarely happens. Usually, it is a compromise of needs against wants relative to price.

Sometimes, a buyer falls in love with a home for the wrong reasons. Later, they regret the choice because the home does not match their needs. It may be too big, too far away from work or school, or even too large to maintain. In the long term, a dream home ends up being a costly investment.

While it sounds simple, decide what you want in a home before you shop. Take off the rose-coloured glasses. As much as possible, look at your needs and the home you are considering, objectively. To get you started, fill out the following items below:

What do I absolutely NEED in my next home:

What would I absolutely LOVE in my next home:


How prices are set

Usually, four common strategies are used to price a home. Understanding these techniques can help you get a better deal on your home, while matching your needs.

Greatly overpriced

Every seller wants to get the best price on their home. However, with multiple offers, the battle may be won by inflating the price, anywhere from 10-20% of its true market value. Too high a price could leave the home on the market for months. If it does not sell, it could be considered a “problem.” The price may have to be reduced to sell it.

Somewhat overpriced

Homes in this category also tend to sit longer on the market. The reasons: there may be room for negotiation in the price, or the seller is emotionally attached to the home.

Priced at fair market value

These homes tend to sell within a reasonable time, close to the asking price. Competitively priced, they represent a thorough analysis of other homes on the market.

Priced below fair market value

For various reasons (including health, relocation, condition of the home, divorce), a seller may want to sell a home quickly. This type of sale often results in multiple buyers, with the home being sold quickly.

A Real Estate Professional can provide you with a thorough analysis of any home you are considering. This price will be based on market conditions, similar homes in the neighbourhood and condition of the home. At the same time, a Real Estate Professional will work with you to match your needs to the price, in a great neighbourhood.

What is Fair Market Value?

When you are buying or selling a home, naturally, your most important concern is getting the best price. As a seller, you may have lived in your home for years. You have contributed towards the mortgage each month. You have maintained your home. And now, it is only right that you should reap the rewards of your efforts.

As a buyer, you want to ensure you are paying fair value for a home. How then, do you get fair market value for your home? In this article we will explain, specific house, present condition and 30 to 90 days, the three factors that influence market value.

In this article, we refer to market value, as it applies to single-family homes only. Evaluation methods are different for condominiums and commercial properties.

The term, “market value,” is a broad and confusing term. Consumers shop in a store and pay the price indicated on the price tag. A book is worth $18.95 according to the tag. A car is worth $15,000 because the price tag says it is. We rarely question the value or worth placed on these items. We just pay the price.

At the end of the season, if an item did not sell, its value changes. The $18.95 book did not attract enough buyers. Therefore, the store puts the book on sale to entice people to buy the unsold books.

Initially, the market value of the book was $18.95. However, when new titles arrive on the shelf, or the subject of the book is no longer popular, the market value could drop to $9.95.

Therefore, market value is the price that an item will sell for, within a reasonable time period. When considering real estate, “reasonable” refers to one to three months.

When it comes to determining fair market value on a home, the following definition is helpful:

“Market value is the price at which a particular house, in its current condition, will sell within 30 to 90 days.”

Three criteria make up this definition;

1. Specific house
2. Present condition
3. 30 to 90 days

To determine a home’s value, most people use an appraisal or comparative market evaluations.

An appraisal, conducted by a certified appraiser, is a professional opinion of a property’s market value, based on recent sales of comparable properties, location, square footage, construction quality, floor plan, shopping, schools, transportation, etc. On average, this type of evaluation costs $300 – $500. Lenders require an appraisal as part of the mortgage application process.

A comparative market evaluation (CMA), performed by a Real Estate Professional is a free, informal estimate of market value, based on sales of comparable properties.

Specific house

Market value is limited to your specific house. The location and neighbourhood of your particular home is the starting point for this determination. The exact same house in another city, or another neighbourhood across town, does not matter for your determination.

For example, a house in St. Albert could be worth $375,000. But if the exact same home was located in Edmonton, it may only be valued at $300,000.

Home prices also fluctuate significantly from city to city and from neighbourhood to neighbourhood. Therefore, when considering the market value of your home, it must be compared to similar homes in the same or adjoining neighbourhoods.

Present condition

The second factor in determining market value is the condition of your home. Is it in “showing” condition? Does it need some improvements? The condition of your home determines the number of buyers who may want to view and purchase the property. This relates to the time your home will remain on the market before it sells. Most home buyers want a reasonably priced home, in good condition. They may look less favourably on a home that requires major work.

Some people determine a market value by subtracting the amount of estimated fix-up costs from the selling price. This may not be the best way to evaluate a home. A home in good condition sells for $80,000. A home you may like needs $4,000 in repairs. This may not equate to a market value of $76,000 ($80,000 – $4,000). Why not?

Homes that require work take longer to sell. To attract more buyers, the price may have to be reduced beyond the cost of the repairs. it is all a matter of how much someone is willing to pay for these repairs. Additionally, determining market value for a home that needs some work, is not an exact science. Some Real Estate Professionals suggest subtracting approximately two to three times the amount of the fix-up costs.

30 to 90 days

In most markets, a home will sell within 30 to 90 days. If it does not, the price is probably too high. Even homes that are “perfect” will not sell in this time, if the price is too high.

On the opposite end: if a house sells within a short period, perhaps the asking price was too low or it could be a hot market. When there are housing shortages or fear of rising prices, many homes are purchased within a matter of days of the listing.

Don't Pay Too Much For Your Next Home

Whether you are buying your first home, or your fifth, the process of buying a home is a detailed, time-consuming venture. At the same time, it is an emotional period laden with difficult choices. You want to ensure that the home you purchase meets your family’s needs now and in the future.

Each of these decisions often involves money. When you consider all that money it represents, you will want to ensure that you do not pay too much. This article helps you become a savvy buyer, by pointing out some of the pitfalls inherent in the home-buying process. These include such things as knowing what you want before you begin shopping, taking your time to shop, choosing the right Real Estate Professional, and remaining objective while viewing potential homes. With this information, you will be closer to finding your ideal home.

#1 – Before you shop, develop a needs vs. wants list

Everyone has a picture of an ideal home. This would include all the features you not only need, but have long desired. However, when it comes time to buying a home, the desires cost more. While it is nice to think about having a beautifully landscaped backyard or a solarium perhaps even some built-in appliances, these are usually considered luxury items, which can add considerably to the price of your home.

That is why it is a good idea to develop a needs and wants lists. With this list, begin with items you really need like adequate space, garage and number of bedrooms. For most people, basic needs should be considered first. After that, you could consider additional desires, if you can manage these benefits financially.

With such a list in your hands, you are less likely to be caught up in the excitement of the pursuit. you will have a good idea of what you want, within you price range, and if you can afford those additional items.

#2 – Get pre-approved prior to shopping

Visit your financial or lending institution prior to home buying. Quickly, you will know the amount of mortgage you will qualify for. Be sure to get a mortgage commitment in writing. Most importantly, this tells sellers that you are a serious prospect. Depending upon market conditions, a seller may lean towards an unconditional offer. you will have less negotiating power if you have to wait for mortgage approval.

Banks and financial institutions have developed many programs especially for home buyers, be that first-time buyers or those with equity in their homes. When you review your needs and objectives with a lending officer, you will be one step closer to purchasing your home.

#3 – Choose your winning team

Buying a home is a complicated process with many people involved. From choosing the right mortgage to finding a home inspector, to viewing available properties, there are many steps involved for even the hardiest person. With a Real Estate Professional on your side, you will have access to these services, already in place and highly recommended. A good agent has the knowledge and experience developed from many years of helping both buyers and sellers. During this time they have developed a network of people, from lenders, lawyers, home inspectors and movers, to assist both home buyers and sellers.

#4 – Communicate clearly with your Real Estate Professional

Spending time with your Real Estate Professional will reap huge dividends. When you have a clear picture of the type of home you are looking for, your Real Estate Professional can come closer to finding the home you want. You will not waste time looking at homes that do not match your needs.

#5 – It is still true – location, location, location

You have heard it so many times, that it is probably starting to sound like a broken record. That is because it is true! A home is not a stand alone item. Rather the value of a home is greatly affected by the surrounding homes. do not let your emotions determine your purchase. Think resale. The desirability and resale value of your home depends largely on location more than any other factor. People want a desirable community that includes character, quality of schools, access to work, major transportation arteries, recreational facilities, etc.

On your viewing trips, take a careful look and ask the following questions: How does this home compare to others in the neighbourhood? Are yards fenced? Are there many children playing in the streets? Are front and backyards and the exterior of the homes properly maintained?

Walk around the neighbourhood and get a feel for the people living in the area. You may want to speak with a few neighbours to get their comments. If you like the community, carefully examine the home you like. Generally speaking, extremely large homes surrounded by smaller homes tend to appreciate less than a large home among other large homes. Alternatively, the smallest home in the neighbourhood tends to stand out by the other homes on the block. Sometimes, it could take a bit longer to sell a smaller home, as some people are reluctant to pay extra for the neighbourhood.

Additional factors that affect the property value of a home include traffic, sounds, smells, zoning bylaws. Be objective. do not rely too heavily on your emotions. Be sure you are completely satisfied with the neighbourhood. If you choose a neighbourhood with problems, you likely will not get as much as you hoped when it comes time to sell.

#6 – Use your Real Estate Professional’s knowledge of the community

Your Real Estate Professional is trained in all aspects of Real Estate, including understanding supply and demand, economics and the neighbourhoods of the city in which they practice. As they regularly view homes as they are placed on the market, they are at the heartbeat of knowledge and information about housing trends and prices. They can save you time and money, by narrowing your prospects to only those that meet your requirements. It is a very time-consuming process to view every home available that meets your needs. A Real Estate Professional can do much of the work for you, by reviewing your needs, reviewing the properties and then hopefully, advising you of a potential match. Comprehensive knowledge of the available homes in your neighbourhood is one of your Real Estate Professional’s strongest assets. With the aid of computerized systems, a Real Estate Professional is notified within hours when a home becomes available.

#7 – Check your emotions and shop with your head

When people purchase a home on emotion, without an objective view of the property, problems may develop later. Shopping for a home is an emotional process. It could be costly. Using your head, along with asking for an objective opinion (from your Real Estate Professional) could help you avoid costly errors.

#8 – Pay attention to “red flags”

When evaluating a home, be sure you know the difference between acceptable and unacceptable problems. Cosmetic items like peeling paint, worn carpeting, unattractive wallpaper can be easily remedied. You could use these as negotiating items, as there will be costs involved in updating the home.

Major problems, however, are clearly “red flags.” Look for items such as major foundation cracks, water damage, outdated electrical systems and inadequate plumbing. These items could cost you dearly in the future.

#9 – Hiring a home inspector is a wise investment

A home inspection is an inexpensive way to gain peace of mind and guard your pocket book. A proper inspection will cover all areas of the house including foundation, electrical, heating, plumbing, floors, walls, ceilings, attic, roof, siding and trim, porches, patios, decks, garage and drainage. A professional inspector can give you an objective view of the property, with a written report, indicating the present condition and items that will need repair.

#10 – Be cautious with fixer-uppers

Some people may be inclined towards purchasing a home that needs some work. This could be a challenge and an opportunity to make money. Sometimes, a fixer-upper can be purchased below market value, and sufficient repairs made to bring it to a good sale condition with a profit realized. However not all fixer uppers will bring in the profits you might expect. It depends upon the price of the home, the amount of repairs needed and the market conditions at the time of sale. If the home is not priced low enough, you may not recover your investment of time, trouble and money. Before you purchase what looks like a quick way to profit, carefully consider the condition of the home and ALL the repairs that need to be made. Get several estimate, complete a comprehensive budget and be sure to consult with your Real Estate Professional. He or she can give you an idea of what you can reasonably expect to recover when the home is put back on the market.

#11 – Consider your future needs

Take a look at your lifestyle now and in the future. Will you need extra space for a home office, a child or perhaps a child moving back home? Perhaps it may be easier and less expensive if you purchase a home that can meet these needs now, rather than moving up to a larger home a few years later.

#12 – Proceed quickly

When you are ready to buy, move fairly quickly. That is because good properties usually sell fast. This is especially true when there is a shortage of homes available. However, when you work with a Real Estate Professional, you have access to the most current technology. As part of the Real Estate Professional network, a Real Estate Professional has access to properties within hours of when they are listed. Technology works to your advantage. When a Real Estate Professional knows your needs, they will notify you when properties that meet your criteria become available. Many Real Estate Professionals now have personalized web sites which allow you to sign on a client, and receive notification of these listings via email. You save time and effort, and you can view only those homes that come closest to your needs.

#13 – Clarify relationships

In any real estate transaction, be very clear about who is working for who, and what the relationship represents. Many people believe that the agent they are working with automatically represents them and their interests. Yet, without specific disclosures this is not true. Unless otherwise stated, the agent represents the seller in transactions for the sale of a home. This agent, as part of his or her fiduciary duty, must ensure his loyalty protects the seller’s position throughout the entire process.

#14 – Ask for a written CMA

A Comparative Market Analysis (CMA) is an analysis of comparable homes in the neighbourhood. It shows you the sale prices of comparable homes in the neighbourhood, along with asking prices of other homes in the area currently on the market. A Real Estate Professional can request this report for any home and neighbourhood in Canada. Ask for this report in writing. With this valuable document, you will have the appropriate evidence for either a too-high asking price, or one that is a bargain.

#15 – Investigate the seller’s situation

Knowing about the seller’s reasons for moving could work to your advantage during negotiations. For instance, a seller who has been transferred to another city, may be more motivated to sell rather than someone who is still shopping for a new home. A vacant house, a house that has been on the market for several months and reduced in price, could also be indications of a motivated seller.

#16 – Keep personal information to yourself

Conversely, information could be used to your detriment. Information about your mortgage, size of down payment, move-in deadline, or circumstances for buying, could be negotiating factors. While you want your Real Estate Professional to know these details, do not reveal any of this information to the seller.

#17 – During negotiations, keep your emotions in tact

In certain situations, emotion could cost you money. If you let the seller know how interested you are in the property, this might be seen as a financial opportunity. Recognizing that you are highly motivated, you could be an easier target for a higher price. If you absolutely love the home, keep it to yourself. This is a definite advantage of working with a Real Estate Professional. Trained to be non-emotional, he or she can ensure you get the best price.

#18 – Ensure the deal is right before you sign

While you definitely want to move quickly, once you have made the decision to purchase, you do not want to cave in to pressure for a quick close. Someone who is trying to pressure you into buying a home, is doing so for a reason. This could involve money, or a multitude of other reasons.

#19 – Exercise your negotiating skills

Even if you prefer not to haggle, it is worth it, especially when it is your home and your future. Most people expect to haggle over the price. That is often why the price is set a bit higher than the actual selling price. There is always room for negotiation. If you want to get the best home possible for the least amount of money, then negotiation is the only way to get a good deal.

#20 – Avoid bidding wars

In some cases, the seller’s Real Estate Professional may use scare tactics to rush the sale or increase the price. Falling for this trap could cost you money. If there is another buyer, or some other reason this pressure is being applied, whoever wins also loses because they overpay. If there really is not another buyer, then it is likely that the deal with fall through. Be sure the other side is aware, that if this is the case, you might be interested if this happens.

#21 – Insist on a written disclosure of all known defects

Legally, sellers must disclose all known material defects of a property. Ask for this in writing. Also be sure to consider the ramifications of these defects. Will it be costly down the road? Are they “serious” defects?

#22 – Be aware of your hidden costs

There is more to a home than simply the mortgage. You will be responsible for other items including mortgage insurance, appraisal fees, legal fees, inspection fees, transfer taxes, title insurance, inspections, etc. Your Real Estate Professional can give you a good idea of the costs associated with buying a home that are beyond the final negotiated price of your home.

Congratulations! You are on your way to getting the home you want at the best price. Armed with the information contained in this article, you are less likely to be swayed by emotion, high pressure, or time constraints. In addition, it is a time-tested principle – a Real Estate Professional, working for your interests, is your best route to the home you want. A truly sharp and professional agent uses all of the suggestions outlined in this article.

Shave years off your mortgage

Whether you are buying your first home, or have been making mortgage payments for years, you may be thinking about reducing this obligation, faster. In fact, changing your term, the payment amount and even making lump sum payments could pay down your mortgage more quickly.

Reduce the amortization period

The amortization period is the length over which the debt is carried. By reducing this time period, from 25 years to 15 years, you will save thousands in interest. The following chart shows these savings.

Interest rate *Monthly payment *Monthly payment Difference Interest
(per annum) 15-year 25-year Savings
7% $893.26 $700.43 $192.83 $49,332.18
8% $948.16 $763.21 $184.95 $58,299.80

*Compounded half-yearly, not in advance.
**Interest savings over the life of the mortgage, assuming constant interest rate throughout the amortization period. Based on figures obtained from RBC Royal Bank.

Make lump-sum pre-payments

Many lending institutions allow for lump-sum payments. On the anniversary date, you can make a payment of a specified amount towards the mortgage. You may also be able to double up on regular payments on any payment date. These double-up payments are applied to the principal.

Increase the amount of your payments

Any additional amount you can make on your principal reduces the amount of interest. Check with your lender when you have additional cash reserves.

Don’t forget about these costs

Buying a home is a milestone, whether it is your first, third or fourth. In addition to the price of a home, there are some other costs you’ll incur. Some of these costs are one-time fixed payments, while others represent an ongoing monthly or yearly commitment. Not all costs apply to every sale or purchase. However, when you are aware of the following items you won’t be hit with any surprises on closing day.

Inspection fee

An inspection performed by a professional inspector is a sound investment. For $300 – $500, you’ll receive a written report on areas that are structurally sound and those where repairs are required.

Appraisal fee

When you apply for a mortgage, your lending institution will ask for an appraisal of the property. Budget approximately $300 -$ 500.

Survey fee

When you purchase a resale home, you are also required to complete a Real Property Report, which assess any changes to the home and property. Budget around $400 – $600 (Rural fees vary depending on size of land being surveyed).

Property insurance

Insurance on your home covers the replacement value (structure and contents). To protect their investment on their loan, financial institutions require this coverage. Allow for $500 – $1,000.

Service charges

There will be an installation fee for utility services, including telephone, water, electricity, gas, and cable. Hook up fees range from $50.00 – $175.00 depending upon the service.

Legal fees

A lawyer should review every real estate transaction. Fees are determined by the complexity of the issues involved. Shop around and ask for an estimate prior to hiring any lawyer.

Mortgage loan insurance fee

Depending upon the down payment (can be payed infull upfront or into your monthly mortgage payment), some lending institutions require mortgage loan insurance. Budget between 0.5% – 2.75% of the total amount of the mortgage.

Mortgage application fee

Some financial institutions charge a mortgage application fee to process your application. If your request for a mortgage is turned down, most will return the application fee to you. Each year you renew a mortgage some institutions also charge a fee.

Moving costs

Costs for professional movers range from $65.00 – $100/hour for a van and two movers. Prices may be higher during peak moving times.

Local improvements

In some cases, the cost of local improvements made in your area (sewers, sidewalks, alleys) could be added to your tax bill.

Closing costs

With the purchase price of a resale home, the closing is always “subject to usual adjustments.”This means that any amount that the seller has already prepaid will be adjusted so that the home buyer pays the excess amount back to the seller and vice versa. These adjustments can include: municipal property and school taxes monthly condominium maintenance fees first and last month’s rental for rental properties that may be in the home, utilities (such as hydro, water and fuel oil, including GST).

Interest adjustment costs

Most lenders expect the first mortgage payment one month after closing the purchase – however, if you close mid-month, some lenders expect the first payment at the beginning of the next month, two weeks before you would normally expect. Or they charge a pro-rated interest to make up the difference.

Land transfer tax

Most provinces levy a one-time tax based on a percentage of the purchase price of the property.

The Offer

Are you ready to put an offer on a home? This section explains the components of an offer and how it forms an essential part of your purchase.

How to Avoid the Most Common Buyer Errors

Prior to showing your home, and after a thorough evaluation with a Real Estate Professional, you should have the following: a realistic idea of the price, how low you will settle, what conditions you will accept; and what terms would be agreeable.

With this information, you are prepared. When an offer is presented, you will be able to compare it to your initial guidelines. Your Real Estate Professional will evaluate these offers and, hopefully, arrive at one that comes closest to your objectives. At the same time, however, your Real Estate Professional will likely exercise some leveraging power with any other negotiable items. A Real Estate Professional works on your behalf, considering all the factors, you as a buyer, and the seller, to work at an agreement that is satisfactory for both parties. It comes down to persuasion and negotiation. Your Real Estate Professional has specialized training in this important area.

Evaluating the offer

When you have found the home you want, you will need to make a formal written offer. This is called an “offer to purchase.” This is a legally binding document which should be completed with due care and diligence. This document outlines what you, the buyer will give (a combination of price and terms) to the seller in exchange for the home.

It is highly recommended that a lawyer or real estate agent prepare the offer on your behalf. This will reduce any financial or time errors. Review the document before signing. If there is anything you do not understand, be sure to ask for clarification. Once signed, the document is binding and you could face consequences upon default.

An interested buyer will present an offer to your Real Estate Professional through his or her agent. Your agent will discuss the offer with you, ensuring you understand all aspects. The offer should clearly outline all terms, conditions and details of the sale including:

  • Buyer information. Seller information. This includes items (for both parties) such as name, legal and civic address of the property to be purchased.
  • The purchase price.
  • Inclusions in the purchase price (e.g. appliances, carpeting, fixtures, etc.) related to the original listing. List any additions or exclusions. Be sure there are no liens or payment dates due on these items
  • Detailed financial information: deposit amount, a refund of interest on deposit, down payment and mortgage, etc.
  • Closing date for the sale of the property
  • If you are assuming the seller’s mortgage, complete details of this obligation. If the mortgage is not being assumed, the owner needs to provide supporting documents, to show clear title (free of all encumbrances). Existing mortgages must be discharged with sale proceeds on closing.
  • Possession date
  • Any Conditions to sale, such as satisfactory home inspection, mortgage approval; sale of an existing home, etc.)
  • Any work/obligations to be completed by seller between the closing date and the date of occupancy (e.g. repairs, painting, leaving the premises)
  • Offer time frame. This is the period for which the offer is valid. The offer either expires or is up for re-negotiation on that date.
  • A Real Property Report is mandatory by the financial institution for mortgage approval and by the lawyer or notary for transfer of ownership. This certificate indicates outdoor improvements, from the date of construction, such as decks, patios or pools.

Net proceeds

Keep in mind that the purchase price is not the final price you will receive. That is because you will have additional fees to cover from the sale of the home including:

  • lawyer
  • real estate agent
  • bank (for the balance of your mortgage and for any prepayment or discharge penalties)
  • taxes (if there are any outstanding)

You and your agent should thoroughly review every detail. If there is anything you do not understand, ask!

Before you accept and sign the offer, it is a good idea to have your lawyer review the offer. This way, you can be confident nothing has been missed, everything is legally accurate, and your interests are protected.

Offer strategies

You could handle the offer in several ways, according to your timing and needs.
If you are not attached to the home you want to buy, you could try and present a very low offer. This offer is considerably lower than the asking price. However, a low offer may be successful if the seller is desperate to sell. The seller could present a counter offer. Alternatively, the seller might turn down your offer completely and refuse to sell the home to you. Your Real Estate Professional can offer some professional guidance on presenting a fair and reasonable offer.

When you have fallen in love with a home, and you really want the home, you could present your best offer. This offer leaves no negotiating room, but if the market is hot, it is an offer that will attract attention. Your Real Estate Professional can advise you on the best way of making an offer that is fair and reasonable, without indicating to the seller that you are desperate. Why pay more than necessary.

In a seller’s market, perhaps you may want to pitch a price, along with the multiple offers probably on the table. This often happens when there is a bidding war for the property. You could up the offer, or walk away from the home.

An offer can be conditional or firm

When your offer is firm, then you are telling the seller you are willing to purchase the home without any conditions. Upon acceptance of the offer, you have purchased the home. This is a legally binding agreement. Upon default, if you are unable to close, you could lose your deposit and face legal consequences. Be sure to confirm your financial matters prior to signing any documents.

A conditional offer includes stipulations on the purchase. These could revolve around a home inspection, financing, or sale of your existing home. If any of these conditions are not met then the home is not sold.

The deposit

A sum of money, usually no larger than 3-5% of the purchase price, shows that you are serious about purchasing the home. This amount will be applied against the purchase of the home when the sale closes.

From offer to acceptance

Upon reviewing your offer, the seller can accept it as is, reject it or return with a counter offer. A counter could be in regards to price, conditions, closing date or other variables. The offers will continue between the seller and the buyer, until both parties have come to some agreement, or one party stops the negotiations.

Once the offer meets with your approval, you will want to secure the transaction with a deposit. This indicates your intention to proceed with the purchase. When you have accepted the offer, you will proceed through the closing details until you move in. The next article in this series explains the closing procedures.

Closing

Buying a home is a complicated process involving a buyer, a seller, and lawyers for each of these parties. This section will explain the importance of a home inspection, title transfer, appraisal and surveyor to ensure you are legally protected.

Behind the Scenes of Closing Day

Closing day is the day when all the parts of buying and selling a home come together. Each party’s lawyer will have successfully completed the details required to ensure all legal aspects are covered. On this day, you will take possession of the home, get the keys and perhaps even move in. It is also a busy time for the seller, as they will likely be in the midst of moving. However, before that day arrives, there are closing details to complete to ensure the smooth transfer of the property.

Lawyer review

A lawyer represents your interests, and ensures that the legal documentation is properly completed. Your lawyer receives a copy of the offer. He or she reviews the conditions of the sale, the contract and the information for title transfer and registration. Every condition on the offer must be met by closing date.

It is your lawyer’s responsibility to search the title of the property (at the registry office) to ensure that the home is purchased without any legal problems and that there are no liens on the home or the personal property of the seller that forms part of the agreement.

Your lawyer also needs to contact the municipality for taxes, zoning compliance (permits, use, setbacks, pool, fencing, compliance with subdivision agreements, etc.) and public utilities (hydro, gas, etc.) within the time stated in the offer, to ensure that no taxes are outstanding and the home meets with established guidelines.

Preparing a statement of adjustment is also part of your lawyer’s duties. This confirms the selling price, adjustments and the balance (less the deposit you provided with the offer). The lending institution will also draw up a certified cheque for your lawyer to be held in trust.

With the purchase price of a resale home, the closing is always “subject to usual adjustments.” This means that any amount that the seller has already prepaid will be adjusted so that the home buyer pays the excess amount back to the seller and vice versa. These adjustments can include: municipal property and school taxes, monthly condominium maintenance fees, first and last month’s rental for rental properties that may be in the home, utilities, such as hydro and water including GST. Your lawyer will prepare a statement of these settlement charges.

Surveys and Inspections

Your lender requires an up-to-date land survey. This document records the location of the home on the lot as prepared by a certified land surveyor. It records any changes to the exterior of the home since construction. Any additions such a deck or building additions could affect your taxes, property assessments and zoning restrictions.

Inspections

If a home inspection was part of the conditions, it should be completed by the date specified in the contract. You should also be satisfied with the report, and any repairs requested as a result of the report results. If you were planning to purchase a resale car, you would want to avoid the headaches of choosing a lemon. You would most likely have it inspected by a mechanical service or a mechanic you know.

When you are purchasing a home, why take a chance on unexpected headaches and money? You will want to make a careful tour of the home, not only yourself, but with a professional inspector. Spending $400-600 is money well spent, as the inspector will conduct a thorough inspection of the home, and provide you with a report detailing any potential problems. Based on workmanship, average length of time for operating efficiency, the inspector can give you a good idea of the condition of mechanical items of the home and repair costs down the road. An inspector will not pass or fail the home. Rather, he will give you an unbiased opinion of its condition.

Financial matters

Financial details should be finalized and ready for implementation on the closing date.

Utility services

Contact utility, cable and phone companies to ensure connections are in place on your moving day.

Insurance

Update your insurance policy so coverage begins on your new home and property upon closing. Your lawyer also needs a copy of the policy before closing.

Completing the contract

On closing day your lawyer pays the vendor, registers the home in your name and delivers the title and keys. Be sure you have all the keys, including side door, garage door, shed, mailbox, garage door opener, etc. You may want to change the locks or have them re-keyed.

The Move

While moving is inconvenient and disrupting there are some ways to make the move more manageable. You might even save some money in the process.

Behind the Scenes of Closing Day

Very few people enjoy moving. It is a necessary job most people avoid. However, it is a necessity of life that we all face, often at many times in our lives. Moving is inconvenient. It can also be costly. In this article we will give some suggestions on how you could save a few dollars on your next move. While some costs are unavoidable, like the cost of movers or renting a moving van, taking care of smaller items could produce significant savings.

Start early

Start moving, packing and cleaning your house as soon as you can. When you are prepared you won’t be spending extra money on boxes, storage costs or perhaps rush moving fees. As soon as you know when you are moving, book your moving company. Some moving companies offer mid-month moving discounts. You might save money by moving in the middle of the month, rather than at the end.

If you start planning your move early enough, you may be able to gather enough packing supplies from friends, neighbours and businesses.

Have a garage sale in plenty of time before you move. Why pay to move items you no longer need?

Be organized

When you are organized both on moving day and by having your items packed appropriately, you could save money. Overtime costs you money.

On moving day, be ready. Pack items in strong and secure items before moving day. Label cartons to ensure correct placement in your new home. To make for a smoother move, remove the items you will be moving yourself, like plants and valuable, before the movers arrive.

Move garden tools, lawn mower, patio furniture and other backyard items to the front for faster loading. Clear as much of the basement as you can. Even bringing smaller boxes closer to the entrance will save time.

Disassemble as much furniture as possible. Take apart swing sets and other large items. Take beds and tables apart, taping screws to a prominent part of the furniture.

Remove necessary doors to ensure a quicker move.

Be sure the driveways and sidewalks are clear when the moving van arrives. If you are moving from an apartment, ensure the elevator is free for the time of the move.

If moving appliances, remove hoses from the washer and dryer to prevent damage to walls and floors. Place hoses inside the appliance for easy recovery.

Carry small items and boxes. Avoid carrying heavy and awkward items that require two people.

As much as possible, keep children and pets out of the way during moving day. Ideally, perhaps a neighbor could watch the children and care for the pets on moving day.

Before leaving the house, check to see that all items have been loaded.

At the new house

Be organized. Have movers place boxes directly in appropriate rooms. This saves time and money.

As much as possible, assemble furniture items yourself.

Assist with moving smaller items.

When you are prepared, organized and try to do as much of the moving as you can, you will go a long way to saving money! Perhaps the money you save can contribute to a house warming gift or party!

Making moving manageable

For most of us, moving ranks among our least preferable activities. There are many other things we would rather be doing. However, the work and effort involved in moving all your belongings to your new home is well worth the effort. In fact, with some advance planning, you can make your move more manageable.

It is never too early to start planning for a move. The more time you spend organizing your belongings, the less stress and load you will carry on that day, and for months to come. Moreover, as the weeks roll by, and you get closer to moving day, the following checklist will go a long way to reliving some of your anxiety.

8 to 12 weeks before

  • If you are hiring a mover, call around for estimates. Hourly rates vary. Also, book your day as soon as you can. Spots fill up quickly.
  • Check with your accountant regarding moving expenses. Depending upon the type of move and location, costs may be tax deductible. If your employer is covering your move, ensure you keep a record of the move.
  • Now is a great time for a garage sale. Clear items from the basement, attic, storage shed, etc. Conduct an inventory of your items. For items you have not used in the past year, consider taking them to a local charity. If you have many items to donate, many organizations have a free pickup service.
  • Seek out information about your new community. Investigate schools, shopping facilities, medical facilities and other items you will need.
  • Gather your personal records: medical, dental, school reports, motor vehicle insurance, banking documents, credit card statements, mortgage documents, magazine subscriptions. Prepare and mail change of address cards.
  • Safely dispose of hazardous and flammable products such as paints, gas bottles, cleaning fluids and oils.
  • Begin to use up items you will not be moving, like frozen foods, cleaning supplies and gardening items.
  • Contact tradespeople to make arrangements for any work that needs to be done, such as repairs, removing light fixtures, house cleaning services, dismantling waterbeds, dismantling of satellite equipment.

4 to 7 weeks before

  • Consider the transportation of pets and plants. If necessary, consult with a veterinarian to ensure your pet is safety and comfort.
  • Contact utility companies at your old and new address. Keep your phone and utilities connected at your current home throughout moving day.
  • Update your home, auto, renter’s, medical and life insurance to reflect your move.
  • If you are moving, purchase boxes or begin collecting them from friends and local businesses. Begin packing items you do not use on a regular basis. When packing, be sure to mark the contents of the box, and location. you will save much time unpacking and the movers can easily carry the boxes to their appropriate locations.
  • Confirm your moving date with your mover.
  • Close accounts in your local bank and open accounts in your new branch.

2 to 3 weeks before

  • Clean outdoor equipment and toys. Drain any fuel from your lawn mower and other machinery and ensure that water is drained from hoses.
  • Defrost fridge and freezer. To avoid mildew, ensure they are completely dry before moving.
  • Cancel deliveries and services such as newspapers, house maintenance, milk, pool service, diaper service, etc., and have them redirected to your new address.
  • Withdraw contents of your safety deposit box, pick up any dry cleaning, return library books and rented videotapes. Consider how you will transfer your valuable belongings. It is better to keep them with you during the move.
  • Give away plants that are not being moved.

1 week before

  • Prepare a survival kit. Keep this in your car, so you will have all the personal items you need, like toothpaste, pyjamas, change of clothing, papers, etc, handy when you need them.
  • Organize and keep the items you are taking separate from those going in the moving van. This way they will not get loaded in the van in error.
  • Be sure to get plenty of rest the day before your move. Being alert and well-rested helps to make the move less stressful.
  • To keep your children safe and to ensure their comfort, you may want to have them play at a friend’s house or attend a day care center on moving day.
  • Arrange to have trades arrive at your home to disconnect any appliances that require professional removal.

Moving day

  • Clean out the food from the fridge and freezer.
  • Take a final look in rooms, drawers and closets to ensure nothing has been left behind.
  • Before leaving the property, ensure that all windows are secure and that water, gas and electricity supplies are shut off. Place keys and documents in the agreed location.