STEP 1: LOCATION, TYPES, NEW HOME or RESALE
Living in an urban setting can offer a large variety of living styles and is more often than not, near to the amenities that you would use on a regular basis, such as shops, restaurants and entertainment. However, living in the suburbs can prove to be easier on your pocketbook! Suburban living oftentimes offers larger lots and more square footage than urban living at the same cost. Furthermore, suburban living offers a larger variety of newer homes while the amenities may not be so conveniently located, not to mention to the possibility of future development in the area with construction and building close by.
Many factors should be considered when choosing the location of your new home. For instance, take into account whether property values have increased or decreased in the area.
Choosing a Neighborhood
Potential expansion and development in an area can be a factor in property values as well as the taxes, so take into account if any future development or zoning has been proposed.
Contacting your local municipal office will give you all the necessary information you will need regarding this.
Things to consider asking your local municipal office:
- Is a high-rise office tower going in next to your home?
- A new highway?
- A new sub-division on a nearby property?
- Are there any zoning by-laws that might affect your future plans, such as, running a business out of the home?
Different Types of Homes
Single family detached: A free standing home which sits on its own lot and is occupied by only one family
Semi-detached: A single family home that is jointed to another one by a common wall
Duplex: Two Units, one above the other, The owner may live in one unit and rent the other
Row or townhouse: One of several single family homes joined by a common wall. These can be condominium or freehold units
Link or Carraige: Houses, freehold or condominium, joined by garages or carports which provide access between the front and rear yards. Builders sometimes join basement walls so that link houses appear to be single family homes on small lots.
High-rise condominium: Multi-story residential building, containing condominium units. A condominium is not a type of house but a form of ownership.
Advantages to purchasing a new home:
- Often offered choices for upgrades or select certain items such as siding, finishing materials, flooring, kitchen cabinets, plumbing and fixtures etc.
- You are assures the most modern building code, electrical and energy efficiency standards will be applied
- Builder warranties are usually available in all provinces. This is vital if a major system, such as plumbing or heating, breaks down
- Maintenance costs are usually lower
- Note: Unless you’re a builder, builder warranties are not applicable to homes you build for yourself
Disadvantages to purchasing a new home:
- Often times many amenities, such as schools, public transportation and shopping, may not be complete if the area is newly developed
- There could be construction noise and traffic
- It may take time for landscaping or trees surrounding the home to grow
Advantages to purchasing a re-sale home:
- The neighborhood is more likely to be well established
- Landscaping and fencing is usually already there
- It may have upgrading such as finished basement
- There is no GST unless the house has been substantially renovated
Disadvantages to purchasing a re-sale home:
- Maintenance are often times higher than for a newer house
- You may require a professional home inspector to check for structural problems, such as a leaky basement or a deteriorated plumbing system
- You may need to renovate, re-paint, modernize or redecorate the home
Things to consider when purchasing a re-sale home:
- Exterior Condition Inspect the condition of the roof, eaves roughing, brick, siding, decks, patios and foundation.
- Energy Efficiency What kind of heating and insulation is in the home? Is the whole house well insulated?
- Air Quality Does the house smell clean and fresh? Check for conditions and materials that could be tell-tail signs of how the house was cared for.
- Basement/Crawlspace Conditions Is there any sign of mold moldy? Look for water stains, leaks, cracks or a cover-up job
- Structural Problems Doors and windows that are not easy to open and close as well as uneven floors can point toward future problems.
- Test the Water Pressure Turn on the taps or the flush the toilet to test. Run two taps simultaneously to see if it significantly affects the water pressure or temperature.
- Is There Parking? Does the home have a personal or shared driveway?
STEP 2: COSTS TO BE AWARE OF
There is a possible list of extra costs involved in buying a home:
Appraisal fee: If your loan is not insured, your lender may need a property appraisal at your expense.
Property taxes: There are always taxes involved, if you have a high-ration mortgage, your lender may require that you add your property tax installments to your mortgage payments.
Survey Fee: An up-to-date survey may be required by your lender. Ask the vendor to supply one as a condition of your offer to purchase, or you will have to pay for one to be done.
Property Insurance: Property insurance covers the replacement value of the structure of your home and its contents. Your lender will insist you acquiring the proper insurance on your home, is this is the security for your mortgage.
Prepaid taxes or utility bills: You may have to reimburse the vendor on a prorated basis if some bills have been prepaid after the closing date.
Land Transfer tax: Land Taxes apply in most provinces. They vary as a percentage of the property’s purchase. It is usually about 1%-4%.
Service Charges: Keep in mind the additional fee’s that will need to be paid to hook up new services and utilities, such as your telephone, internet and/or cable television at your new home.
Lawyer: Even the most clear-cut home purchase requires a lawyer to assess and review the offer to purchase, search the title, prepare mortgage documents and tend to the closing details.
Mortgage loan insurance premium and application fee: If you have a high-ratio mortgage, your lender will want a mortgage loan insurance provided by CMHC or a private company. The insurance will cost between 0.5% and 3.75% of the amount of the total mortgage (extra fees may apply) and can be incorporated into the mortgage. The application cost will range from $75 to $235 depending upon how the lender processes your application. (Check with your local lender for additional details).
Moving Costs: Don’t overlook the cost of a qualified moving company or a rental truck.
Estoppels Certificate: An Estoppels Certificate is one that outlines a condominium corporation’s financial and legal status. This certificate and its supporting documents can cost you up to $100.
Condominium fees: There are monthly maintenance fees for common-areas associated with condominium living.
Home Inspection fee: In many provinces home inspectors are unregulated, so fees can vary widely, from about $150-$350 for a home that costs under $300,000, larger, more expensive homes can cost more to inspect. A two-hour inspection done by a qualified engineer, providing a written report will cost a little more. Your local municipality can also provide inspection reports on the property for a cost.
Renovation and repairs: A home inspection may very well show that the home is in need of major structural repairs such as a new roof. Don’t forget to include these possible costs into the price of the home.
STEP 3: MORTGAGE BASICS 101
Mortgage costs are made up a primary amount (the total borrowed) and interest (the cost of you of borrowing money).
The best arrangement for any kind of mortgage is to decrease the sum of interest you pay-and lenders present several ways to facilitate this;
- A bigger down payment means your home ultimately costs less because a lesser mortgage equals less interest
- A shorter amortization, the time over which a loan is repaid
- A weekly or biweekly payment plan, instead of monthly
- Extra or additional lump sum payments
Minimize uncertainty with a Pre-Approved Mortgage
The most essential process:
Buying a home is likely to be one of the biggest investment decision you will ever make. For many, home ownership represents security and a better lifestyle. However it is often also a long term commitment that carries enormous responsibility.
Knowing how much of a mortgage you can afford and what your ongoing payments will be before you begin looking for a home, takes the uncertainty and anxiety out of home hunting and gives you the information you need to make informed and comfortable decision.
A pre-approved mortgage is often very common. With a pre-approved mortgage, your lender will approve the sum of your mortgage and gives you a written confirmation or certificate for a fixed time period before your start looking for a home. The pre-approval term, usually lasting from 60-90 days, this also sets the mortgage rate the lender will offer to you. If rates go down during that time period, the lender should present the new lower rate to you.
With the ideal mortgage, one that’s flexible and customized to fit your financial circumstance, you can have the comfort of owning your own home. You can also have the peace of mind and luxury of being able to relax, knowing that your money is being well spent, gaining you long term equity and stability.
STEP 4: THE DETAILED OFFER
Things to include in the offer:
- Fundamentals, for instance, your full legal name, the name of the vendor, as well as the legal and civic address of the property
- The purchase price., in the first offer the price is unfixed and negotiable, so you may want to consider starting lower than your highest affordable cost
- The chattel or items in the home which are to be included in the purchase price, these may include window coverings, appliances, fixtures, basically any items that are in or around the home that you wish to be included, these items should be specifically stated and included in writing in your offer
- All financial details, including the amount of deposit, interest to be paid on it and details of mortgage financing
- The day you take possession of the home and the closing date. This is typically 30 or 60 days from the date of the agreement, but with some home sales, it can be 90 days or longer
- Request for a up to date land survey of the property
- The expiration date and the time indicated when the offer becomes null and void
- Any condition that you want to be added in to the body of the offer
Know your financial limits before you start negotiating:
Tips on Making an Offer:
- You may want to present a conditional proposal; a typical contract with your personal conditions attached is frequently more attractive to the vendor since it is usually straightforward. Often times the vendor will alter it and return it to you, this is known as a counter-offer.
- You may agree to, reject or even modify a counteroffer. Offers and counteroffers often modify the closing dates or chattel
- It’s best to know what your total cost limit is prior to negotiating, or you may possibly get caught up in the action and propose more than you can actually afford.
STEP 5: THE CLOSING DAY
The closing day is the day you actually gain legal possession and get the keys to your new home. But keep in mind there are a few things that still need to be done:
- Your lender will supply the mortgage money to your lawyer. You must provide the balance of the purchase cost to your lawyer
- You will also be liable for paying legal fees, disbursements and land transfer taxes
- Your lawyer pays the vendor, registers the home in your name and provides you with the deed and the keys to the home Moving into a new home and neighborhood can be exciting, make sure that the transaction is a smooth one and plan ahead to avoid costly mistakes.