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OFFER
Homebuyers’
road map
Navigatingwith a REALTOR
®
reaLTors® are experienced in everything you
need to know and do when
buying a home.
your reaLTor® can help you:
• Navigatethehomebuyingprocessandpaperworkfromstarttofinish,ensuringeverythingflowssmoothlywithoutanysurprises.
• Findtherighthome,intheneighbourhoodyouwant,atapriceyoucanafford.
• Compareyourpropertywithsimilarpropertiesthathavesoldoverthepastyear.
• Getafeelfortheneighbourhoodincludingschools,parksandotheramenities.
• Findoutifyouareeligibleforgovernmenthomeownershipincentiveprograms.
• Assessmortgageproductsanddifferenttypesoflenderstoseewhatfitsyourneeds.
• Negotiatepurchasepriceandcontractterms,suchasdateofpossession,requiredrepairs,includedfurnishingsorequipment.
• Directyouthroughcomplexcontracts.
• Findqualifiedindustryprofessionals,suchasrealestatelawyers,homeappraisersandhomeinspectors.
• Planforclosingcostsandotherrelatedexpenses.
Homebuyers’ road map 2 Thefollowinginformationisforinformationpurposesonlyandisnotlegaladviceorasubstituteforlegalcounsel.
What do lenders require? mortgagelendersusetwocalculationstohelpdetermineyoureligibilityforamortgage–yourGrossDebtservice(GDs)ratioandyourTotalDebtservice(TDs)ratio.
yourGDsratioisthepercentageofyourgrossmonthlyincomeusedformortgagepayments,taxesandheatingcostsor-ifyouarebuyingacondominium-halfofthemonthlymaintenancefees.Asageneralruleofthumb,yourGDsratioshouldnotbemorethan32%ofyourgrossmonthlyincome.
yourTDsratioisthepercentageofgrossmonthlyincomerequiredtocovermonthlyhousingcosts,plusallyourotherdebtpayments,suchascarloansorleases,creditcardpayments,linesofcreditpaymentsandanyotherdebt.Generally,yourTDsratioshouldnotbemorethan40%ofyourgrossmonthlyincome.Have you been pre-approved?Gettingpre-approvedforamortgagebeforelookingatpropertiesgivesyouamorerealisticexpectationofwhatyoucanafford.
However,keepinmindthatthepre-approvedamountscanoverestimatewhatyoucanactuallyaffordtopay.
Pre-approvaldoesnotguaranteeyouwillbeapprovedonceyouactuallyapplyifmarketconditions,interestrates,oryourpersonalcircumstanceschange.do you know your credit rating?orderacopyofyourcreditreporttomakesureitdoesnotcontainanyerrorsbecauselenderswillcheckitbeforeapprovingyouforamortgage.Acreditreportisasummaryofyourfinancialhistoryandshowswhetherornotyouhavehadanyproblemsinthepastpayingoffdebts.
TheFinancialConsumerAgencyofCanada(FCAC),afederalgovernmentagency,hastipsonhowtoorderyourcreditreportforfreeandhowtoimproveyourcreditrating.VisitFCAC’swebsiteat:www.itpaystoknow.gc.ca.
OFFER
Assess your present household budget and your
annual income to determine if you are eligible for a
mortgage and how much you can comfortably afford.
Also check out the Mortgage Affordability Calculator
at www.REALTOR.ca.
1. assess Financial readiness
Homebuyers’ road map 3
What type of mortgage is best for you?• Fixedratemortgages:yourinterestrateislockedinforaspecifiedperiodcalledaterm.yourpaymentsstaythesameforthemortgage’stermsoyouwillnotpaymoreifinterestratesincreaseovertime.
• Variableratemortgages:rateofinterestyoupaymaychangeifratesgoupordown.
• Conventionalmortgages:requireadownpaymentofmorethan20%oftheproperty’svalue.youarenotrequiredtogetmortgagedefaultinsurancewithaconventionalmortgage.
• Closedmortgages:Themortgagecannotbepaidoffearlywithoutpayingaprepaymentcharge.
• openmortgages:Amortgagethatcanbepaidoffatanytimeduringtheterm,withouthavingtopayacharge.Theinterestrateforanopenmortgagemaybehigherthanforaclosedmortgagewiththesameterm.
What mortgage features are best for you?• Portablemortgages:Ifyousellyourexistinghome,youcantransferyourmortgagetoyournewhomewhilekeepingyourexistinginterestrate.youmaybeabletoavoidprepaymentchargesbyportingyourmortgage.
• Prepaymentprivileges:youcanmakelump-sumprepaymentsorincreaseyourmonthlypaymentswithouthavingtopayacharge.Thiscanhelpyoupayoffyourmortgagequickerandsaveoninterestcharges.
How often can you make your payments?• byswitchingfrommonthlypaymentstoacceleratedweeklyorbiweeklypayments,youcanpayoffyourmortgagefaster.exploreyouroptionsformortgagepaymentsandseehowmuchinterestyoucouldsavebyusingFCAC’smortgageCalculatorToolat:www.itpaystoknow.gc.ca.
2. Consider mortgage options
Homebuyers’ road map 4
OFFER
A mortgage is a loan, generally used to buy a
property. How much you pay depends on how much you borrow (the principal), the
loan’s interest rate, and how long you take to pay it back
(the amortization period).
Do not be afraid to negotiate interest rates and mortgage terms with different lenders.
They are offering you a product and talking to more
than one lender helps you make an informed decision.
What types of mortgage charges might you have to pay?youmayhavetopaychargesifyouprepaylargeportionsofyourmortgageearlyorifyoubreakyourmortgageduetounforeseenlifechanges,suchasmaritalbreakdown,deathofaspouseorrelocatingforajob.
Itisyourrighttoknowhowlenderscalculateprepaymentcharges.readyourmortgagecontractcarefullyandmakesureyouunderstandhowchargeswillbecalculatedbeforeyousign.How much do you need for your down payment?Adownpaymentistheportionoftheproperty’spricenotfinancedbythemortgage.youwillneedadownpaymentofatleast5%ofthepurchasepriceofthehome.Forexample,tobuyahomefor$200,000,youwillneedatleast$10,000asyourdownpayment.Ifyourdownpaymentislessthan20%,youwillneedmortgagedefaultinsurance.
Homebuyers’ road map 5
are you planning to purchase a property with less than a 20% down payment? Ifyes,yourequiremortgagedefaultinsurancewhichgenerallyadds0.5%to3%tothecostofthemortgagedependingonthetotalamountborrowed.
mortgagedefaultinsuranceenablesyoutopurchaseahomewithaminimumdownpaymentof5%(10%formulti-unitdwellings)withinterestratescomparabletothoseofaconventionalmortgage.
majorprovidersofmortgagedefaultinsuranceincludeCanadamortgageandHousingCorporation(CmHC),GenworthFinancialCanada,andCanadaGuarantymortgageInsuranceCompany.
3. mortgage default Insurance
Homebuyers’ road map 6
OFFER
When you buy a home with less than a 20% down
payment, the mortgage needs to be insured
against default. This type of insurance protects the mortgage lender in case
you are not able to make your mortgage payments.
It does not protect you.
• First-TimeHomebuyers’TaxCredit–a$5,000non-refundableincometaxcreditonaqualifyinghome.Thecreditprovidesupto$750intaxrelieftoassistfirst-timebuyerswithpurchasecosts.Formoreinformation,checktheCanadarevenueAgency’s(CrA)website:www.cra-arc.gc.ca.
• Homebuyers’Plan–aone-timewithdrawalupto$25,000fromaregisteredretirementsavingsPlan(rrsP)byfirst-timebuyerstohelppurchaseorbuildahome.Generally,youhavetorepayallwithdrawalsfromyourrrsPwithin15years.Formoredetails,visitCrA’swebsiteat:www.cra-arc.gc.ca.
• CmHCGreenHomeprogram–whenyouuseCmHC-insuredfinancingtobuyorbuildanenergy-efficienthomeormakeenergy-savingrenovations,youmayqualifyforapremiumrefundof10%onyourmortgagedefaultinsuranceandapremiumrefundforalongeramortizationperiod(ifapplicable).CheckoutCmHC’swebsiteformoreinformation:www.cmhc.ca.
Governmentprogramscanchangeovertime.Forthemostup-to-dateinformation,refertoserviceCanada’swebsite:www.servicecanada.gc.ca.
4. research Government programs
Homebuyers’ road map 7
OFFER
The federal government
has assistance programs
to help homebuyers.
Research government
program requirements to
see if you are eligible.
Where do you want to live?• urban,suburbanorcountry?
• Willyouneedtocommute?Doyouneedaccesstopublictransit?Howmuchwillcommutingcost?
• Arethereschoolsnearby?Howwillyourchildrengetthere?
What type of home do you prefer?• single-familydetachedhomesstandaloneontheirownlot.
• single-familysemi-detachedhomesarejoinedononesidetoanotherhome.
• Duplexescontaintwosingle-familyhomes,oneabovetheother.
• rowhouses(townhouses)areseveralsingle-familyunits,locatednexttooneanotherandjoinedbycommonwalls.
• othertypesofhomesincludestackedtownhouses,linkorcarriagehomes,condominiumsandco-opapartments.
What are the types of ownership?Freehold
youownthelandandhouseandareresponsibleforeverythinginsideandoutsideofthehome.
Condominium ownership
youownyourunitandshareownershipofcommonspaces.Thecondominiumassociationisresponsibleforupkeepofthebuildingandcommoninteriorelements,suchashalls,elevators,parkinggaragesandthegrounds.youpayamonthlyfeetothecondominiumassociationtocovermaintenancecosts.Thefeevariesbutcanoftenincludeutilities,TVservicesandtaxes.youmayalsohavetobuyorrentyourparkingspace.
Condosoftenhavestrictrulesregardingnoise,useofcommonareasandrenovationstounits.beawareofyourcondo’srulesbeforeputtinginanoffer.
5. Finding a Home
Homebuyers’ road map 8
OFFER
Finding your perfect home can be a long process. Your REALTOR® will help identify
the right type of home for you and continually research new listings in
neighbourhoods that meet your needs.
Check out www.howrealtorshelp.ca
to see how your REALTOR® can make the home buying
process easier for you!
Co-operatives
similartocondosbutinsteadofowningyourunit,youownsharesintheentirebuildingorcomplexwiththeotherresidents.Co-opresidentspayformaintenanceandrepairsthroughmonthlyfeesandaresubjecttotherulesandregulationsoftheco-opboard.
beawarethatifyoudecidetosellorrentyourshares,theco-opboardhastherighttorejectyourprospectivebuyerortenant.readtheco-op’srulesbeforemakinganoffer.
Check out www.REALTOR.ca to see
personalized listings for a variety of different
housing and homeownership types.
Homebuyers’ road map 9
What is an offer?Anofferisaformal,legalagreementtopurchaseahomeandislegallybindingonceacceptedbytheseller.offerstopurchaseahomecanbemadeconditionalonfactorssuchasfinancingorahomeinspection.Ifanyoftheconditionsarenotmet,youcanchangeorcanceltheoffer,evenifthesellerhasalreadyacceptedit.do you have your money ready?youwillneedtopresentadepositalongwithyouroffer.Theamountvariesbasedonthehome’spurchasepriceandthemarket.do you have up-to-date identification?ThefederalProceeds of Crime (Money Laundering) and Terrorist Financing Act(PCmLTFA)requiresreALTors®toidentifyclientsinvolvedinthebuyingandsellingofrealestate.reALTors®needtorecordyourname,address,dateofbirthandoccupationfortheirfileswhicharekeptforatleastfiveyears.Theyneedtoseevalidgovernment-issuedID.
TheFinancialTransactionsandreportsAnalysisCentreofCanada(FINTrAC)providesmoreinformationabouttheActonitswebsite:www.fintrac-canafe.gc.ca.
Homebuyers’ road map 10
6. making an offerOFFER
After seeing many different homes, you
have finally found one worthy of an offer! What
are the next steps?
How much land transfer tax will you have to pay? Thelandtransfertaxisaone-timetaxleviedbyyourprovincewhenyoupurchaseaproperty.Thetaxisbasedonapercentageofthepurchasepriceoftheproperty,andvariesfromprovincetoprovince.somemunicipalitiesalsochargealandtransfertax(forexample,Toronto).Have you budgeted for the associated legal costs?Legalcostscoveryourlawyer’sfeesor,inQuebec,yournotary’sfees.Thesemayinclude:
• reviewingthetermsoftheoffer• Conductingatitlesearchontheproperty• registeringanewtitle• obtainingrelevantdocuments,suchassurveysandevidenceofliensontheproperty
• Checkingthestatementofadjustmentsfortaxes,utilityandfuelbills,andothercoststhathavebeenpre-paidbytheselleratthedateofclosing
do you need a home inspection?Ahomeinspectorassessesaproperty’sconditionandcantellyouifsomethingisnotworkingproperly,needstobechanged,orisunsafe.Theymaybeabletoidentifywheretherehavebeenproblemsinthepast,suchasaleakingbasementortermitedamage.What other costs can you expect?• Interestadjustmentsbetweendateofclosingandfirstmortgagepayment
• GsT/HsTonanewhomeorahomethat’sbeenextensivelyrenovated
• servicechargesfromutilitycompaniesforhook-upsonelectricity,gas,internetandtelephoneservices
• Appraisalfees• movingcosts• storagecostsifyoumustleaveyourcurrentresidencebeforeyouareabletomoveintoyournewhome
• Furnitureandappliances• realestatecommissions
Homebuyers’ road map 11
7. Closing and related CostsOFFER
Closing costs are the legal, administrative
and disbursement fees associated with buying
a home. Understanding these fees will help you
budget more accurately. Remember these are additional costs over
and above the price of the home.
Now that you have arrived at your destination, it’s time to enjoy your new home!
OFFER
Homebuyers’
road mapwww.crea.cawww.itpaystoknow.gc.ca
ThetrademarksreALTor®,reALTors®,andthereALTor®logoarecontrolledbyTheCanadianrealestateAssociation(CreA)andidentifyrealestateprofessionalswhoaremembersofCreA.