Buyers Information
Getting Started  •  Buying Costs  •  First Home  •  What Can I Afford?  •  Your Buyers Team
Mortgage Types  •  Mortgage Terms  •  Land Transfer Tax  •  Making an Offer
Moving Checklist  •  Dream Home Wish List Request  •  Mortgage Pre-Approval

Getting Started

The first question is bound to be, "How much home can I afford?" That depends on a number of factors:

Your selected location. Are you set on a specific area? Downtown? The suburbs? A rural setting?

Your preferred type of home. Detached? Semi? Duplex? High-rise? Link? Townhouse? New or Resale? There are a variety of home styles you will want to explore.

Your income. After all, it's not just the mortgage you have to take into account. There are property taxes, utilities, and in some cases condo or strata fees. As a general rule of thumb, your monthly home-carrying cost should not exceed 30-35% of your income.

Market conditions. Is it a buyer's, sellers or balanced market?

There are also additional costs to keep in mind. It's a good idea to work out exactly what you want and what you can afford before you begin the search. Be specific! After all, you don't want to suddenly come to the realization that your dream house has come with a nightmare of bills and expenses. Stick to looking at houses in your price range. The more you've thought it out, the better your sales representative can meet your needs.

A part of deciding just what you can afford can be accomplished by meeting with your bank or a mortgage broker and negotiating a pre-approved mortgage. There are many types of mortgages and many different terms. Research all of your options. This ensures that there are no surprises once you're ready to make an offer.

Once you've figured out your monthly expenses and what you can afford, you can start your search. It could happen that the first home you see is the one you want; or you might look at home after home with none of them catching your interest. Rest assured, the home you're looking for is out there, and when you find it, you're ready to make an offer. If your offer is accepted, the next steps are closing and moving into your new home.

Purchasing a home is easy once you put your plans into action.

Understanding the Costs of Buying a Home

Jill's Team with Royal LePage Signature is committed to helping you be an informed buyer. It's important to know the costs you will incur beyond the purchase price when buying Toronto Real Estate.

BUYING COSTS

When buying a home, it is very important to remember that you will have to meet other expenses besides the price of the property. These may include:
  • Appraisal fee
  • Mortgage insurance application fee (where required)
  • Mortgage insurance premium, which can be added to the mortgage amount
  • Legal fees and expenses
  • Fire insurance premium
  • GST, if it is not included in the selling price
Additional expenses:
  • Moving expenses
  • Appliances for the new home
  • Furniture, draperies, etc.
  • Maintenance equipment: lawn mower, snowplow, etc.
  • Any urgent repairs and other unforeseen expenses
  • Land Transfer Tax.
For an accurate assessment of the closing costs involved in buying your property, contact JILLSTEAM.CA. We will make sure you are fully informed at all times.

BUYING YOUR FIRST HOME

So, why buy your own home? There are several reasons why home ownership is an excellent idea right now:

  • On a month-to-month basis, owning your own home won't cost you much more than what you are currently spending on rental accommodations. And each month you'll be making an investment in your own future, not someone else's.
  • With Canada's current lower interest rates and stable housing prices, mortgage costs are coming down, while average incomes are rising. This means that owning your own home is a viable alternative to renting.
  • Getting a mortgage has never been easier. Now, for as little as no money down, you can move into your own home. You can even use your RRSP funds towards the down payment, tax-free.
Presently there are three programs available to help first-time buyers into their own homes without having to save for years for a down payment:

The Home Buyer's Plan (HBP);
The 5% Down Payment Plan; and
The No Down Payment Plan.
In all three programs, the definition of "first-time" is broad, and not just limited to people who have never owned a home in their life.

The Home Buyers' Plan (HBP) is a program under which you can, generally, withdraw up to $20,000 from your retirement savings plan (RRSPs) to buy or build a qualifying home. Withdrawals that meet all applicable HBP conditions do not have to be included in your income, and your RRSP issuer will not withhold tax on these amounts. However, before you can withdraw funds you must have entered into a written agreement to buy or build a qualifying home which you must occupy no later than one year after buying or building the home.

If you buy the qualifying home together with your spouse or other individuals, each of you can withdraw up to $20,000. You cannot withdraw an amount from your RRSP under the HBP if you or your spouse owned the home more than 30 days before the date of your withdrawal.

Details
  • Up to $20,000 per person could be withdrawn tax-free from RRSPs to buy or build a principal residence. Couples -- including common-law -- will be able to withdraw up to $40,000.
  • You have to meet the first-time buyer's condition. You are not considered a first-time home buyer if you or your spouse owned a home that you occupied as your principal place of residence in the past 5 years. To determine past 5 years, the 4 years preceding the year you make your withdrawal plus the period in the year you make your withdrawal ending 31 days before your withdrawal is the rule adopted.
  • Home buyers withdrawing funds do not have to pay income tax on the amount withdrawn, as long as the funds are repaid into an RRSP in the future.
  • The 15-year repayment period will begin in the second calendar year following the calendar year in which the withdrawal is made. In addition, a qualifying home must generally be acquired before October 1 of the calendar year following the year of withdrawal. For example, those making withdrawals under the plan in 2000 will have until October 1, 2001 to acquire a qualifying home and their first annual repayment will be due by the end of 2002 or the first two months of 2003.
  • A special rule denies a tax deduction for contributions to an RRSP that are withdrawn within 90 days of the RRSP deposit being made. Consequently, to get the normal tax break for a contribution and to use those funds under the plan, the money must be in your RRSP for at least 90 days before a withdrawal is made.

You can participate in the HBP more than once if:
  • your HBP balance for your previous participation is zero on January 1 of the year you want your new participation in the HBP to occur; and
  • you meet the first-time buyer's condition and all other HBP conditions that apply to your situation.

Existing homeowners can use the HBP to purchase a more accessible home or a home for a disabled dependent relative where the individual withdrawing the funds:
  • qualifies for the disability tax credit (DTC) and is buying a home that is more accessible for the individual or is better suited for the care of the individual;
  • is related to a disabled individual who qualifies for the DTC and is buying a home for the benefit of the disabled individual that is more accessible for, or better suited for, the care of the disabled individual, or;
  • is related to a disabled individual who qualifies for the DTC and is withdrawing an amount for the disabled individual to buy a home that is more accessible for, or better suited for, the care of the disabled individual.

For more information call 1-800-959-8281 or to visit Revenue Canada's web site click here.

With as little as five percent of the purchase price, all home buyers now have access to mortgage insurance enabling then to enter the housing market, as long as you can manage the costs of home ownership.

Details
  • Mortgage insurance for 95 percent mortgages is now available to both first time and repeat home buyers.
  • Buyers using the Program may consume up to 32 percent of their gross family income for payments of principle, interest, property taxes and heating, and total debt load cannot exceed 40 percent of family income.
  • Insurance premiums on loans above 90 percent of the lending value of the house will be 3.25 percent of the mortgage loan. This premium can be added to the mortgage.
  • The maximum amortization period is 25 years.
  • Borrowers are required to demonstrate, at the time of application, their ability to cover closing costs equal to at least 1.5% of the purchase price.
  • Where the minimum equity requirement is being met by way of a financial gift, the funds must be in possession of the borrower 15 days before making an offer to purchase.

Click here for more information or call CMHC at 416-221-2642.

More recently, down payments are no longer required, under a new policy recently announced by Canada Mortgage and Housing Corp. Effective March 1st, 2004, the federal crown corporation, which previously would not guarantee mortgages unless buyers put up at least five percent of the price from their own funds, has dropped that requirement. However, borrowers will still have to prove their ability to meet their debt requirements in order to qualify for mortgage insurance. Contact us for details about the new plan aimed at making home ownership available to a great many more Canadians.

What is Agency

Agency relationship is created where one person, known as the principal, asks another person, known as the agent, to act for and on behalf of the principal. The principal will define the nature and extent of the agency relationship; in other words, what the agent is being asked to do. In Real Estate transactions, agency relationships are created when vendors or purchasers ask REALTORS to act on their behalf in Real Estate transactions.

Consequences of Agency Relationship
As a matter of law, an agent who represents a principal owes that principal the highest duty of "utmost good faith"; the agent must represent the principal's best interest at all times. The agent owes his principal a duty of confidentiality regarding information about the principal.

Agency in Real Estate Transactions
In most cases, there are two parties to a real estate transaction; a vendor who owns a property and who wants to sell it, and a purchaser who wants to buy a property. The job of REALTORS is to bring together willing Vendors and willing Purchasers in successful real estate transactions.

Qualifying for a Mortgage

Jill's Team will help you understand your mortgage options and how much home you can afford.

WHAT CAN I AFFORD?

It is important to determine the maximum amount of the mortgage that you may qualify for before you start to look for your new home and it's simple.

First Click here to determine the Maximum Mortgage Amount for which you may qualify* and to calculate your Monthly Mortgage Payments.

Then determine the affordable mortgage amount that you feel most comfortable with, add your estimated down payment to this amount and you are ready to start looking.

Click here to calculate land transfer tax.

* These calculations are estimates to be used as a guideline only and subject to final approval by the lending institution of your choice

Getting off to the right start can save you both time and money, just to mention two of the advantages of knowing exactly how much you can afford at the very beginning of the buying process. With a pre-approved mortgage, you can hunt for the right home and at the right price, knowing that you will qualify for the mortgage. A pre-approved mortgage and rate guarantee lets you lock in your interest rate for as long as 60 - 90 days, if interest rates increase during this period, yours won't. If your mortgage is funded within the guaranteed period and interest rates are lower on the funding date, you will receive the lower rate.

Your Buyer Team and Their Roles

Sales Representatives

A real estate sales representative is a professional who can save you time and trouble. And possibly even a lot of money. You see, real estate sales representatives have the home buying experience most people lack. They know all of the steps and they are good negotiators who will work on your behalf.

A sales representative will:
  • Fine-tune your wants/needs list
  • Get special computer access to listing information
  • Screen houses so as not to waste your time
  • Arrange appointments
  • Offer helpful advice about the neighbourhood
  • Introduce you to trusted contacts who should be on your team, such as mortgage brokers, lawyers, and home inspectors.
  • Above all, find a real estate sales representative who is a professional in the type of home you're looking for. A country home professional may not be the urban market specialist you need. And when speaking with your sales representative, be as clear as possible about your needs.

Contractors

If you've decided to do some renovations on your home to make it more sellable, it's time to look for a credible contractor. Before anyone begins work on your home, it is important to do your homework.

1. Ask for Referrals

Your architect will make recommendations
Your sales representative will offer some suggestions
Contact friends or neighbours who have had similar work done
Ask at your local builder supply store
When you're interviewing contractors, ensure their credibility. Contact their references. Ask to see some samples of the contractor's work and speak to his clients to ensure that they were satisfied with the price, length of time in which the project was completed and overall, how the project was handled. Also, check with your local Better Business Bureau.

Once you have the names of a few contractors that look promising, arrange to get estimates from them. By arranging for three quotes you'll get a good idea of the costs and quality of work.

When going over the project with your contractor, ensure that he understands your needs and your budget. Each contractor will have a different idea on how to approach the work and they should inspect your home before giving an estimate. If contractors are bidding based on an architect's plans, be certain that they have detailed their approach to the job based on the drawings.

What's more, if there is a significant difference in the price, ask the contractors to explain their estimates. And keep in mind that the lowest price is not always the best. A price that's too low may mean that the contractor has undercut to get the project and then may submit additional project costs once the project is underway. As well, a high price doesn't always mean that you're getting gouged. The contractor may have budgeted for higher quality materials and may offer workmanship that is of an overall better quality.

In every case, before you sign the contract, be certain that it is as detailed as possible to the point of noting the specific finishes and brand names of the products to be installed.

2. Evaluating a Quotation
  • Are the specific details of the project outlined?
  • Are the specific costs detailed?
  • Is there a provision for extra costs?
  • Has a cap been set for the total project?
  • Is there a firm project timeline?
  • Has the contractor allotted time for inspections?
  • Have you indicated that you wish to see all material receipts?
  • Will the work be subcontracted?

Appraisers

Hiring an appraiser to appraise the value of property you are considering to buy may seem sensible but it is highly unnecessary. Your lender will want their own personal appraiser anyway, so you could be wasting valuable money. As well, most sales representatives are competent and can do a "Comparative Market Analysis" for you, to establish a value range. The only situation where hiring an appraiser would become necessary is where the property is unusual with no comparable sales.

Lenders

The true test for a buyer is "What else can we buy for the same or less money?"

In short, a lender is anyone who will give you money. There are private lenders and institutional lenders, like banks and credit unions. Even your brother-in-law can be your lender. Of course, when you're looking for a lender, you' re looking for a long-term relationship and terms and rates which are beneficial to you.

You really have a few options. You should go to a mortgage broker who will search the mortgage market for the best rates and conditions based on your circumstances. Usually the broker is paid by the lender without cost to you. However, the cloudier your credit history, the more likely there will be a fee! A good mortgage broker will be connected to all major lenders through the mortgage market.

You can also do your own search. With a good credit history, it's really not that complicated. Pick up your newspaper and you'll see what the different lending institutions are offering. Find the institution you feel you would be most comfortable with, and one that offers the terms and conditions you're looking for. Then, go in person and negotiate your best deal.

We'll go into more detail about this process in the arranging a mortgage section.

Mortgage Brokers

This is a person who will do the leg work in finding the institution which offers the mortgage terms and conditions that are right for you. Much like an insurance broker, this professional works for you and can offer you an unbiased referral. Although most brokers are paid a finders fee by the lender, some will charge 2% of the total mortgage to find you a lender.

Lawyers/Notaries

A lawyer is there to represent your interest, and to process the documentation required. The legal aspects differ from province to province. Your sales representative can recommend lawyers to advise you on the steps to be taken before the keys to your new home are presented to you. A lawyer helps ensure you are protected!!!

Home Inspectors

Have the home inspected! Whether you make it a condition of purchase or not, having the property pre-inspected by a qualified home inspector will give you the added confidence that you've made the right decision. Be very careful to verify the qualifications of your home inspector because there are no government standards or licenses for home inspectors. Some home inspectors in Canada do not have any form of accreditation. For your protection make sure your home inspector is a member of (PACHI) or (OAHI). This is your assurance that they have met their education requirements, have the experience and carry E & O Insurance.

Insurance Brokers

You'll want to make sure your property and valuables will be covered. A broker offers independent advice and can save you time, trouble and money. Plus, the bank will insist that you carry full insurance since your property is used as collateral against your mortgage.

Mortgage Types

Conventional and High Ratio Mortgages

To qualify for a conventional mortgage, you simply have to have a 25% down payment of the purchase price, with the mortgage not exceeding 75% of the appraised value.

If your down payment is less than 25%, then you qualify for a high-ratio mortgage. This type of mortgage requires loan insurance, which can cost an additional 0.5% to 3.75% of the mortgage amount. With this type of mortgage you could also be limited to a maximum house price.

Second Mortgage

Of course, if you cannot add on to your mortgage, you may consider a second mortgage. Each mortgage uses your home as security and gives the mortgagee the right to take your home if you default on your loan. The first mortgagee gets paid first in cases of default and has the best chance of recovering all of its money. So it only goes to figure that subsequent mortgages usually come with a higher interest rate.

Mortgage Features

Every lending institution is different, and each will have their own customizable mortgage options. When you're hunting for a lender and a home, see how the following features could be beneficial to you.

Prepayment


This is a wonderful option if you receive regular bonuses or if your income fluctuates throughout the year. With a pre-payment privilege, you have the right to make payments toward the principal portion of your mortgage over and above the monthly payments. A mortgage with a pre-payment option is closed. An open mortgage means you can pay the entire principal sum without notice of bonus.

Portability


If you still have time remaining on that fantastic loan you negotiated, portability is one option you'll want to discuss with your lender. Quite simply, it means transferring the balance of your current mortgage at the existing rates and with the existing terms and conditions, to your new home.

Assumability


Let's say that the vendor has negotiated a dynamite mortgage. With an assumable mortgage you, the purchaser, simply assume the obligations of the mortgage. This is a wonderful feature especially if the terms are more favourable than the existing market conditions would allow. Remember, when it is time for you to sell, you may still be liable for any mortgage you allow the buyer to assume. This means if the buyer stops making payments, you could be accountable for the payments. Be sure to have the subsequent buyer approved for the assumption of the payments, thereby avoiding this potential land mine.

Expandability


If you need additional funds down the road, will your mortgage terms allow you to increase the principal amount? Usually, your new rate will be a blended amount of the initial mortgage rate and the prevailing rates. It's a great option to discuss with your lender if you foresee large expenses in your future like renovation or education costs.

Mortgage Terms and Fees

Mortgage Term

Over the course of your amortization period, you may have many different mortgages. The term is simply the length of time that interest rates, payment schedules and obligations to the lender exist. When the term comes to a close, you will have the option to renew your mortgage at your current or new lending institution. You can also put a lump sum toward the principal without restriction, or pay off your entire mortgage without penalty. If you wish to change the structure of your agreement during the term you may have to pay a substantial fee to the lender.

Choosing Security or Flexibility

Mortgages are available with closed, open and convertible options, with fixed or variable rates. The options you choose will reflect your beliefs about the market -- is it going up or down? -- and your short-term goals and desire for long-term security.

Amortization


This is the amount of time over which the entire debt will be repaid. Most mortgages are amortized over 15-, 20-, or 25-year periods. The longer the amortization, the lower your scheduled mortgage payments, but the more interest you pay in the long run.

Open Mortgage


This type of mortgage offers a great deal of flexibility, as it can be repaid in part or full at any time without penalty. This is a great mortgage if you believe interest rates are moving down or if you plan to move in the near future. The term may be limited to six months or one year.

Closed Mortgage


Here the interest rate is fixed for the full term of the mortgage, and you will have to pay a penalty to change the agreement conditions. This type of mortgage is ideal for buyers who suspect that interest rates will rise and who are not planning to move in the near future. This type of mortgage is usually available in a wide variety of terms.

Convertible Mortgage


With this mortgage, you'll enjoy the same peace of mind as a closed mortgage, plus the flexibility to convert to a longer closed mortgage at any time without penalty. If you think rates will drop, this will allow you to wait until you feel they have hit bottom, or if rates rise, you can lock in.

Additional Costs


Before you calculate the amount of your down payment and determine what you can afford, it's a good idea to set aside a few thousand dollars to cover the extra costs that seem to spring out of nowhere. Here is an overview of costs you could encounter. The good news is that not all of them will apply.

Property Taxes


If the Vendor has paid a portion of the taxes in advance, you will be responsible for reimbursing the Vendor on closing. Plus, if you have a high-ratio mortgage, your lender may require that you have your property taxes added to your mortgage payments.

Utility Fees


Utility fees are calculated through a meter so you will be responsible for paying what you have used up on the meter.

Land Transfer Tax


This applies in most provinces and ranges from 1% to 4%. For instance, in Ontario, you'll pay 1% of the first $55,000 - $250,000 and up to 2% of any amount over $400,000.

Survey Fee


Your lender will require an up-to-date survey. You can make it a condition of the Offer to Purchase that the Vendor provide a survey, or you will have to have one done. If there is no survey available, you may purchase "Title Insurance" in lieu of a survey which saves you about $500 - 700.

Appraisal Fee


A basic appraisal usually costs under $250.

Property Insurance


Your lender will insist that you have insurance on your property because your home is used as security for the mortgage.

Service Charges


You'll be charged for telephone, cable and a variety of other services that you hook up at your new home.

Lawyer (Notary) Fees


Each real estate transaction requires the assistance of a legal professional to review the Offer to Purchase, search the title, draw up the mortgage documents and take care of the details on the day of closing. Lawyers fees range widely depending on the complexity of the transaction. Ask your sales representative to recommend a lawyer. And remember, fees can be negotiated.

Mortgage Loan Insurance Premium and Application Fee


Mortgage loan insurance will be necessary if you have a high-ratio mortgage (less that 25% down payment). The application usually costs $75 with a valid appraisal, otherwise it's $235. The actual insurance premium will range from .5% to 3.75% of the purchase price and is added onto the mortgage.

Mortgage Broker Fee


Some brokers may charge as much as 2% of the total mortgage to find you a lender. In most cases though, the broker is paid by the lender. Buyers with good credit should not have to pay a fee.

Moving Costs


Whether you've decided to do it yourself or hire a moving company, now is the time to budget for the costs involved.

Status Certificate


If you're moving into a condominium (complex not necessarily a high-rise) this certificate outlines the condominium corporation's financial and legal state. It will cost you up to $100, usually paid for by the seller if agreed to in the Offer to Purchase.

Condominium Fees


These monthly fees vary from complex to complex. The fees are applied to everything from grounds keeping and carpet cleaning to security personnel and health club maintenance. Depending on the type of structure, these fees will usually be a few hundred dollars.

Home Inspection Fee


For around $300, depending on the size of your home, you'll receive a complete written report about the condition of the structure. Do your research and hire a reputable firm.

Renovation and Repairs


Your home inspection may indicate the need for some general repairs or a major project. Have some money set aside, particularly if you are purchasing an older home.

Redecoration


Your taste will be different from the previous owner. Set aside money to paint and wallpaper. Prepare a list of things you can live with, for now, and decorating faux pas that need immediate alteration.

Water Quality Certification


If you are purchasing a home with a well, you'll want to ensure the quality of the water. This will cost approximately $50 to $100.

Land Transfer Tax

Buyers in most areas will have to add Land Transfer Taxes to their closing costs

Land transfer taxes are a part of the process unless you live in Alberta, Saskatchewan, or rural Nova Scotia. These taxes, levied on properties that are changing hands, are the responsibility of the buyer. Depending on where you live, taxes can range from a half a per cent to two per cent of the total value of the property.

Many provinces have multi-tiered taxation systems that can sometimes be difficult to understand. If you buy a property for $260,000 in Ontario, for example, .5 per cent is charged on the first $55,000, 1 per cent is charged on $55,000 - $250,000, while the $250,000 - $400,000 range is taxed at 1.5 per cent. Your total tax bill? $2,375.00.

The following chart illustrates Land Transfer Taxes by province:

Ontario

Up to $55,000 X .5 % of total property value
From $55,000 to $250,000 X 1 % of total property value
From $250,000 to $400,000 X 1.5 % of total property value
From $400,000 up X 2 % of total property value

British Columbia

Up to $200,000 X 1 % of total property value
From $200,000 up X 2 % of total property value

Manitoba

Up to $30,000 N/A
From $30,000 to $90,000 X .5 % of total property value
From $90,000 to $150,000 X 1 % of total property value
From $150,000 up X 1.5 % of total property value

Quebec

Up to $50,000 X .5 % of total property value
From $50,000 to $250,000 X 1 % of total property value
From $250,000 up X 1.5 % of total property value

Nova Scotia

Halifax Metro
1.5 per cent on total property value
Outside Halifax County, check with local municipality.

Making an Offer

When it comes time to make an offer, your Real Estate Sales Representative can provide current market information which will aid you in presenting your offer.

Your Sales Representative will communicate the offer, sometimes known as an Offer to Purchase, to the seller, or the seller's representative, on your behalf. Sometimes there may be more than one offer on a property. Your Sales Representative will guide you through this process as smoothly and effortlessly as possible.

Firm Offer to Purchase

Usually preferred by the seller because it means that you are prepared to purchase the home without any conditions. If the offer is accepted - the home is yours.

Conditional Offer to Purchase

Usually means that you have placed one or more conditions on the purchase, such as "subject to home inspection", "subject to financing" or "subject to sale of buyer's existing home". The home is not sold until all the conditions have been met.

Acceptance of Offer

Your Offer to Purchase will be presented at the earliest possible opportunity. The seller may accept the offer, reject it, or submit a counter-offer. The counter-offer could be in reference to any number of factors, including the closing date and/or the purchase price. The offers may sometimes go back and forth until both parties have agreed upon an offer or until one or the other ends the negotiations.

Jill Fewster-Yan, Broker, MBA
Jill@JillsTEAM.ca | Office: 416-443-0300 | Fax: 416-352-5557