Buyer's Guide

Buying a home is more than looking at houses. It's finding the right home, at the right price, in the right location; hopefully with a minimum amount of time and inconvenience. The best way to achieve these objectives is to work with a professional realtor who understands your needs and wants, your time frame, and the financial boundaries to work within.

Selecting a Sales Associate

It is important that the salesperson understands your needs. A good salesperson will ask the questions they need to know, before they start to show you homes.

Questions you should ask a salesperson when making your selection:

• Will you be representing my interests?
• Do you have access to M.L.S. information?
• Would you provide market evidence to support the price?
• Will you look after the details to closing and possession?
• Can you be contacted at any time?

A Sales Associate's Function

• Provide information on the property.
• Provide information on the area.
• Negotiate a price and terms, agreeable to buyer and seller.
• Assist in arranging a source of financing.

Book the movers

You can choose to have your movers pack everything, or just the breakables, or you can pack yourself. It is a good idea to obtain estimates from several different companies.

If you own your present home

Arrange to have your gas, water and electric meters read on the day you leave and have the bills forwarded to your new address.

Have the oil tank read and filled before your sale closes, and provide a receipt to your legal professional if required.

If the water heater or furnace is rented, arrange for a transfer of the rental agreement to the purchaser. Disconnect your telephone, cable TV, and water softener.

If you rent your present home

Give the necessary written notice to your landlord and make arrangements for the return of any money you have on deposit.

At your "new" home

Make arrangements for the gas and electric utilities, water softener, telephone, and cable TV to be connected on the day the sale closes.

General

• Get "Change of Address" cards from the post office and send out well before moving day.
• Have the post office forward your mail to your new address.
• Cancel any contracted services and pre-authorized cheques.
• Inform gardening, dry cleaning, garbage pick-up, newspapers, magazines, and other home services. Arrange for services at your new address.
• Cancel or transfer social, athletic, civic, religious, or business affiliations, and memberships.
• Arrange for transfer of medical, dental, prescription, and optical records.
• Change the address on your driver's license, effective the day of the move.
• Collect all items out for cleaning, repair, or storage, e.g. dry cleaning.
• Make special arrangements for the moving of perishables, such as plants.
• Safely dispose of all flammable liquids as it is illegal for movers to carry them

Buying your first home is one of the most important investment decisions you will make in your lifetime. As such, it makes sound financial sense to enlist the services of a qualified home inspection company to ensure your home is as solid and secure on the inside as it is on the outside.

A home inspection will determine the structural and mechanical soundness of your home. Your home inspector will identify existing and potential problem areas, suggest practical low-cost solutions, and provide estimates regarding the cost for any work required.

Shortly after the inspection has taken place, a report summarizing the findings is generally provided to the potential purchaser.

By commissioning a home inspection prior to purchase, you're protecting both yourself and your investment, as well as buying a little peace-of-mind.

Home inspection costs often range from $350.00 to $500.00.

Rob Chris and Lisa recommend: Cana-Spec Home Inspectors, Robin Hopkins (613) 327-HOME (4663).

Legal Fees: May range from $650.00 - $750.00 plus disbursements. A Real Estate lawyer will provide you with details, contact your agent and he/she will put you in touch with lawyers he/she has used in the past.

Disbursements: Include City Tax Certificate, City Zoning Reports, City Engineering Report, Registry Office searches, deed registration, mortgage registration, copies, postage, long distance calls, etc. Your lawyer will explain these.

Land Transfer Tax*:

If under $55,000 multiply by $5 per $1000 (e.g. $40,000 x $5 per $1000 = $200)

From $55,000 to $250,000, multiply by $10 per $1000 then subtract $275 (e.g. $200,000 x $10 per $1000 = $2000 - $275 = $1725)

From $250,000 to $400,000, multiply by $15 per $1000 then subtract $1525 (e.g. $400,000 x $15 per $1000 = $6000 - $1525 = $4475)

Over $400,000, multiply by $20 per $1000 then subtract $3525 (e.g. $500,000 x $20 per $1000 = $10,000 - $3525 = $6475)

Survey: If no recent survey is available, a new one will cost approximately $700 - $1200, or you can buy title insurance. Fees for larger and recreational properties vary; additional charges apply for sightline tree clearing. Individual quotes are required. Rob Chris and Lisa recommend: John H. Kennedy Ltd. Land Surveyors, (613) 258-1717 \

Adjustments: Money owed for pre-payment of taxes, hydro, gas, fuel oil, etc.

Home Inspection: Will cost between approximately $250 and $400.

Arranging the Mortgage: Usually there is an appraisal fee of about $200, plus an administration fee bewteen $200 and $300. An up-to-date survey may also be necessary.

The Move: May vary depending on your choice of movers (i.e. professional movers or packing yourself).  List with us and you can use our moving van for free!

Purchasing a home involves one-time costs and monthly expenses.

The largest one-time cost is the down payment. It usually represents between 5-25% of the total price of the property.

In addition to the actual purchase price, there are a number of other expenses that you might be expected to pay for. These are listed in the following table:

Typical monthly costs incurred with home ownership are mortgage payments, maintenance, insurance, condo fees (when applicable), property taxes and utilities. Call Rob Chris and Lisa for the "What you can afford" worksheet to help you estimate the approximate purchase price of a home you can afford.

Price: depending on the local market conditions, your opinion of value and market information provided byRob Chris and Lisa, the price you offer may be different from the seller's asking price.

Deposit: the deposit shows your good faith and will be applied against the purchase price of the home when the sale closes. Rob Chris and Lisa can advise you on an appropriate amount.

Terms: includes the total price offered and the financing details. You may arrange your own financing or ask to assume the seller's mortgage, especially if it has an attractive interest rate.

Conditions: these might include "subject to home inspection", "subject to you obtaining financing" or "subject to you selling your property" also water potability and septic inspection.

Inclusions and Exclusions: these might include appliances and certain fixtures or decorative items, such as window coverings or mirrors.

Closing and Possession Date: generally, the day the title of the property is legally transferred and the transaction of funds finalized unless otherwise specified.

How to Make an Offer

When it comes time to make an offer, Rob Chris and Lisa can provide current market information and will assist you in drafting your offer.

Rob Chris and Lisa will communicate your offer, to the seller, or the seller's representative, on your behalf. Sometimes there may be more than one offer on a property coming in at the same time. They can guide you through this process.

The offer can be Firm or Conditional.

Your Offer to Purchase will be presented as soon as possible. The seller may accept the offer, reject it, or submit a counter-offer.

The counter-offer may be in reference to the price, the closing date, or any number of variables.

The offers can go back and forth until both parties have agreed or one of you ends the negotiations.

Amortization Period: The actual number of years it will take to pay back your mortgage loan.

Appraised Value: An estimate of the value of the property conducted for the purpose of mortgage lending by a certified appraiser. This appraisal is not to be confused with a building inspection.

Assumability: Allows the buyer to take over the seller's mortgage on the property.

Closed Mortgage: Is a mortgage that locks you into a specific payment schedule. A penalty usually applies if you repay the loan in full before the end of a closed term.

Condominium Fee: A common payment among owners which is allocated to pay expenses.

Conventional Mortgage: A mortgage loan issued for up to 75% of the property's appraised value or purchase price, whichever is less.

Down Payment: The buyer's cash payment toward the property (the difference between the purchase price and the amount of the mortgage loan).

Equity: The difference between the home's selling value and the debts against it.

High-Ratio Mortgage: A mortgage that exceeds 75% of the home's appraised value. These mortgages must be insured for payment.

Interest Rate: The value charged by the lender for the use of the lender's money expressed as a percentage.

Land Transfer Tax, Deed Tax or Property Purchase Tax: A fee paid to the municipal and/or provincial government for the transferring of property from seller to buyer.

Maturity Date: The end of the term, at which time you can pay off the mortgage or renew it.

Mortgagee: The person of the financial institution that lends the money.

Mortgage Insurance: Applies to high-ratio mortgages. It protects the lender against loss if the borrower is unable to repay the mortgage.

Mortgage Life Insurance: Pays off the mortgage if the borrower dies.

Mortgagor: The borrower.

Open Mortgage: Allows partial or full payment of the principal at any time, without penalty.

Portability: A mortgage option that enables borrowers to take their current mortgage with them to another property, without penalty.

Pre-Approved Mortgage: Qualifies you for a mortgage before you start shopping. You know exactly how much you can spend and are free to make a "firm" offer when you find the right home.

Prepayment Privileges: Voluntary payments in addition to regular mortgage payments.

Principal: The amount borrowed or still owing on a mortgage loan. Interest is paid on the principal amount.

Refinancing: Paying off the existing mortgage and arranging a new one or re-negotiating the terms and conditions of an existing mortgage.

Renewal: Re-negotiation of a mortgage loan at the end of a term for a new term.

Second Mortgage: Additional financing. Usually has a shorter term and higher interest rate than the first mortgage.

Term: The length of time the interest rate is fixed. It also indicates when the principal balance becomes due and payable to the lender.

Title: Legal ownership in a property.

Variable-Rate Mortgage: A mortgage with fixed payments, but fluctuates with interest rates. The changing interest rate determines how much of the payment goes towards the principal.

Vendor Take-Back Mortgage: When the seller provides some, or all, of the mortgage financing in order to sell their property.

A mortgage is simply a loan that you obtain to purchase a home. The loan is secured by the value in the property you purchased as well as your ability to repay the loan amount. The amount that you borrow is called the principle and the cost to borrow the loan amount is called the interest. The lender is referred to as the mortgagee and the borrower as the mortgagor.

Types of Mortgages
There are two types of mortgages. The first is referred to as a conventional mortgage. This type of mortgage requires the purchaser to have a minimum of 25% of the purchase price as a down payment. The second type of mortgage is known as a high ratio mortgage. The high ratio mortgage allows a purchaser to obtain financing up to 95% of the value of the property. In order to obtain a high ratio mortgage, the mortgage amount in full will have to be insured. This insurance is provided through the Canada Mortgage and Housing Corporation (C.M.H.C.) or G. E. Mortgage Insurance. This insurance protects the lender in the event that the mortgagor is unable to make the payments on the loan. Depending on your down payment, the cost for this insurance will vary. The less of a down payment the more the insurance will cost. Ask your mortgage specialist for updated cost. With high ratio mortgages the minimum down payment required is 5%. There are also 100% financing available, ask your mortgage specialist for details.

Your Down Payment
As mentioned previously, the minimum down payment required to purchase a home is 5%. This down payment must come from your resources and cannot be borrowed. A financial institution will not lend 100% of the purchase price of property. In the event that the purchaser does not have a down payment of their own, it is permissible for them to obtain a gift from a relative. This money is required to be a true gift and there is to be no requirement to repay this money. Purchaser may also access their RRSP programs to get their down payment.

Amortization
Amortization defined is the number of years it will take the mortgagor to repay the loan in full. The standard amortization period is normally 25 years. The longer the amortization the lower your monthly payment will be and the greater the overall amount of interest that will be paid on the debt. If your monthly cash flow will allow for a greater amount to be paid towards your mortgage, the mortgagor can greatly reduce the overall cost of borrowing by shortening the amortization period.

Payment Options
Everyone gets their income in their own way throughout the month. For this reason lenders have recognized this and will generally offer payment plans to suit your income frequencies. The most common are monthly, by-weekly and weekly. By increasing the frequency of your payments you will lower the amount of overall interest paid during the term as well as increasing the amount of principle paid off over the term. Be sure to choose a frequency that fits with your lifestyle - say one which matches your pay schedule.

Prepayment Privileges
The lenders will allow a mortgagor to prepay a portion of the mortgage on the anniversary date annually. These moneys are applied directly against the principle portion, thus paying off the mortgage quicker. It is not a requirement for these payments to be made. It is voluntary in nature.

Mortgage "Term"
The term of your mortgage refers to the length of time that the interest rate is and/or the point in time that the mortgagee has set for the renewal and renegotiation of the terms and conditions of the mortgage. The following are the basics of the "Term" of a mortgage.

Open versus Closed Term
A closed mortgage is one where the interest rate is set for the full term and a set repayment schedule is preset for the full term of the mortgage. The lender will normally assess a penalty for prepayments of the mortgage before end of term. Open mortgages allows payment of the principle in part or in full at any time without penalty. Most open mortgages are for shorter terms, since the flexibility given normally comes with a higher interest rate than closed mortgages.

Short versus Longer Term
The length of the term taken normally is affected greatly by the current market conditions and current interest rates. For example, when interest rates are high most people tend to take shorter terms in the hope interest rates fall by their renewal dates. This strategy also applies when rates are falling. When interest rates have been low or stable for a long period, a longer term allows the security of not having to deal with your mortgage cost for a longer period of time and maintaining continuity of payments. The basic rule of thumb is that the longer the term the greater the interest rate will be. This does not always hold true as lender will try to position their financial portfolios to secure longer more stable mortgages by offering favorable long term rates similar or close to the shorter term mortgages. When shopping for your mortgage make sure to have all the options presented to you before you negotiate the final rate.

Homeowner's Insurance
Most mortgage lenders insist on fire insurance coverage at least equal to the loan amount or the building value, whichever is less. You should also consider a homeowner's policy which combines fire insurance on the building and its contents with personal liability coverage. Consult your general insurance agent or broker for professional advice on home insurance.

Mortgage Life Insurance
When lenders refer to mortgage insurance, they're referring to coverage that's provided by CHMC or MICC for a high ratio mortgage. Mortgage life insurance (MLI) is inexpensive coverage on your life which protects your family or beneficiaries by paying off your outstanding mortgage in the event of your death. For just pennies a day, you will have peace of mind knowing your beneficiaries will be mortgage free. MLI premiums are based on two factors: your age and mortgage amount. Your premium is added to your mortgage payment so there's no extra paperwork, and it remains the same until your mortgage is paid off. Joint coverage for spouses is also available.

Disability Insurance
Disability Insurance is important if your mortgage payments depend entirely or in part on your income. Disability insurance provides replacement income if an accident or illness prevents you from working.

Job Loss Mortgage Insurance
Recently, insurance companies have started to offer Job Loss Mortgage Insurance. This insurance covers the mortgage payments in the event that you involuntarily lose your job.