Home Loan Basics

Homebuying Step by Step

      Your Housing Requirements

Location, Location, Location ( Location is an investment too)

Your choice of location depends primarily on where you work and whether you want to commute, and also on your family lifestyle ( ie. schools, public transportation, Hospital, Work).

• Take time to drive or walk around during the day & evening. It’s also a good idea to travel the route to and from your work.
• Have property values risen or fallen in the neighbourhood?
• Future development can also affect property values & taxes, so consider whether there are any changes to zoning proposed or any major developments planned, by contacting the local municipal office.
• Some real estate representatives suggest that, if you’re considering the future resale value of your home, it’s wiser to buy a modest home in the best neighbourhood you can afford than the most expensive home in a modest neighbourhood.

New or Resale

New Home Advantages:

• You may be able to upgrade or choose certain items such as siding, finish materials, flooring, cabinets, plumbing.

• The latest building code, electrical and energy-efficiency standards will apply, and major systems are under warranty.

New Home Disadvantages:

• Neighborhood amenities, like schools or shopping, may not be complete if the house is in a new development.
• There may be construction noise and traffic & little to no landscaping or trees.
• The 7% GST applies to new housing. However, there is a rebate, to a maximum of 2.5%, on homes which cost less than $450,000. In many cases, the Builder may incorporate the GST into their price, but make sure you find out.

Resale Home Advantages:

• It will probably be in an established neighbourhood & landscaping is usually done and fencing installed.
• It may have upgrades such as a built-in swimming pool or finished basement.
• There is no GST unless the house has been renovated substantially, and then the tax is applied as if it were a new house.

New Home Disadvantages:

• Maintenance costs will likely be higher than for a new house.
• You may require a professional home inspector to check for structural or other problems, such as a leaky basement or faulty roof.
• You may need to redecorate, or even renovate.

  The Homeowner’s Inspection Checklist is a practical,  will assist you in identifying symptoms, causes & cures to common problems.

  The Home Hunting Worksheet is a valuable tool to help you evaluate the details of each of the homes you view.(i.e. Exterior Condition, Energy Efficiency, Air Quality, Basement Conditions, Structural, Water, Parking)

  The Home Features Checklist can help you.

        Understanding Your Local Housing Market & Calculate Costs
  What’s happening around you (house price trends, mortgage rate movements, new home construction) 

  In a buyer’s market, the number of homes available for sale exceeds the demand, so prices will either stabilize or drop. With fewer buyers and more homes, you not only have more options to choose from, you also have greater negotiating leverage. You have more time to look for the right home and you can evaluate the choices without feeling pressure to act too quickly

  Market Analysis Service offers timely home buying information

          

  At a glance, you can see how housing prices can fluctuate.

  These figures apply in a single geographic market. Similar fluctuations appeared in other Canadian Centres at different levels.

  Calculate Your Costs

  The Down Payment (Homebuying Costs): A down payment of 25% or more, you may qualify for a Conventional Mortgage loan which does not require mortgage loan insurance.

      A minimum down payment of 5% is required for a High-Ratio Mortgage. These types of mortgage loans — for any amount in excess of 75% of the value of the home — are required to be insured against default.   Your mortgage consultant will give you this info.

  Don't forget the tax: The 7% GST applies to new housing. However, there is a rebate, to a maximum of 2.5%, if your home costs less than $450,000. There is no GST on resale housing unless the home has been substantially renovated.

  Appraisal fee: If your loan is not insured, your lender may require a property appraisal at your expense. A basic appraisal for mortgage purposes will probably cost between $150–$250. Actual cost should be confirmed as it may vary with the location and complexity

  Property taxes: Taxes are always a certainty. If you have a high-ratio mortgage, your lender may require that you have your property tax installments added to your mortgage payments.

  Survey fee: Your lender will require an up-to-date survey. Ask the vendor to provide one as a condition of your Offer to Purchase, or you will have to pay to have one done.

  Property insurance: This insurance covers the replacement value your home & its contents. This is mandatory by your lender.

  Prepaid taxes/utility bills: You will have to reimburse the vendor the prorated portion of bills that have been prepaid beyond closing date.

  Land transfer tax: This applies in most provinces. It varies as a percentage of the property's purchase price. It is usually about 1% – 4%.

  Service charges: You'll be charged a fee to hook up new services and utilities, such as your telephone, at your new home.

  Lawyer (notary) fees: A lawyer should review the Offer to Purchase, search the title, draw up mortgage documents and tend to the closing details. Lawyer's fees for a mortgage range widely depending on the complexity of the deal but will probably be at least $500.

  Mortgage loan insurance premium and application fee: If you have a high-ratio mortgage, your lender will require 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 (additional charges may apply) and can be included in the mortgage. The application fee will range from $75 to $235 depending upon how the lender processes your application (consult your local lender for further details)

  Moving costs: Don't forget the cost of a professional moving company or a rental truck if you move yourself. Fees for a professional mover can range from $50 – $100 an hour for a van and three movers.

  Estoppel certificate: A certificate that outlines a condominium corporation's financial and legal state. The certificate and supporting documents will cost you up to $50. (Does not apply in Quebec.)

  Condominium fees: Condominiums charge monthly fees for common-area maintenance, such as groundskeeping and carpet cleaning. Fees range widely depending on the type of structure but will probably be at least a few hundred dollars per month.

  Home inspection fee: Inspectors are unregulated in many provinces, so fees range widely, from about $150 – $350 for a home priced under $300,000. Larger, more expensive homes cost more to inspect. A two-hour inspection carried out by an engineer who provides a written report will cost closer to the upper limit. Municipalities can also supply any available inspection reports on the property for a fee.

  Renovation and repairs: A home inspection may indicate that the home needs major structural repairs such as a new roof. Don't forget to factor these costs into the price of the home.

  Possible Extra Costs After You Move In

  Maintenance costs
  You may want to start a separate maintenance fund — particularly if you're buying an older home — by setting aside $500 – $1,000 and adding to it regularly. This reserve can be used to cover the costs of anticipated or unexpected repairs.

  Renovation costs
  You may find a "fixer-upper" — an inexpensive home in need of repair. One general rule is that renovation always takes longer than, and costs more than, you think.