Buyer’s Guide to Real Estate


 

Purchasing a home is one of the biggest financial decisions you will make and it pays to make an informed decision by knowing the basics. Outlined below are topics that may be of importance to you and your current situation.  Click on the tabs below to learn more about the following topics: Closing Costs, First Time Home Buyer Rebate, Making an Offer, Financing, and Home Inspections.

Homebuyers often forget about the additional costs associated to purchasing a home, which goes beyond just the purchase price.  Closing costs can range from 1.5% to 4% of your purchase price and it’s important to ensure you put aside some money to cover the costs for closing.

 

Additional costs include:

  • Land Transfer Tax (click here to learn more)
  • Closing Adjustments (e.g. prepaid utilities, property taxes, etc.)
  • Legal Fees
  • Lawyer Fees
    • Title Insurance
    • Registrations
    • Disbursements

Congratulations on deciding to buy your first home!  The beauty of being a first time homebuyer is you save money.  Ontario has two programs for first time homebuyers:

      1. Land Transfer Tax Rebate
      2. Home Buyers’ Plan

Below are details of each program and how you can benefit from them.

Land Transfer Tax Rebate – Provincial

The Ontario land transfer tax rebate is equal to the full value of the land tax up to a maximum of $2,000.  This is equivalent to the Provincial Land Transfer Tax on a $227,500 home.

To be eligible for this rebate:

    • The buyer must be older than 18 years
    • The buyer must occupy the home within 9 months of purchase
    • The buyer cannot have owned a home anywhere in the world
    • The buyer’s spouse cannot have owned a home while being your spouse
    • If you are purchasing a new home, it must be eligible for home warranty
Land Transfer Tax Rebate – Municipal

If you are buying in the City of Toronto, you will be required to pay an additional land transfer tax.  The good news is, first time homebuyers are also eligible for a rebate up to $3,725.

To be eligible for this rebate:

    • The buyer must be older than 18 years
    • The buyer must occupy the home within 9 months of purchase
    • The buyer cannot have owned a home anywhere in the world
    • The buyer’s spouse cannot have owned a home while being your spouse
    • If you are purchasing a new home, it must be eligible for home warranty
Home Buyers’ Plan

The government created a program that allows first time homebuyers an opportunity to borrow up to $25,000, from their Registered Retirement Savings Plan (RRSP), for a down payment, tax-free.  The caveat is you must pay this back within 15 years, and the first payment due in year 2 after you first withdrew the money.

To be eligible for this, you must meet the following criteria:

    • You cannot have owned a home
    • You must sign an agreement to buy a home
    • You must intend to live in the home within 1 year after buying or building it
Other Rebates
    • Enbridge Gas
    • Ontario Power Authority

Once you’ve found the right home, we would submit an offer also known as the Agreement of Purchase and Sale.  This is a legal document that outlines everything including the purchase price, the conditions (e.g. financing, home inspection, etc), items that you want included (e.g. appliances, electrical light fixtures, etc.) and the closing date.  The Seller can either choose to accept your offer, counter it or reject it.  If they choose to counter the offer, both sides will continue to go back and forth and negotiate until both parties are satisfied.

Once the offer has been accepted, you’ll be required to provide a deposit (typically 5% of the purchase price), which will be held in the Listing Brokerage’s trust account until closing.  Additionally, we’ll need to ensure the conditions outlined in the Agreement of Purchase and Sale Agreement are met.  Typical conditions include financing and home inspection.

There are 3 very important steps needed when it comes to financing your home:

 

Step 1: Get a mortgage pre-approval

The first step is understanding how much you can afford.  When getting a mortgage pre-approval, your mortgage advisor will look at things such as your household income, your current assets and debts, your credit history and your downpayment.  Knowing how much you can afford will allow us to focus on homes that are within your price range and reduces the risk of financial uncertainty when you find your ideal home.

Step 2: Make a decision on a mortgage

Learning about mortgages can get overwhelming, however knowing a few key concepts will facilitate an easier discussion when it comes time to making a decision on a mortgage. Below is a quick summary of the key concepts you should familiarize yourself with (source: Ratehub.com)

Mortgage term: The length of time you are committed to a mortgage rate, lender, and conditions set out by the lender – the typical timeframe is 6 months to 10 years.

Amortization: The length of time it takes you to pay off your entire mortgage.  The maximum amortization period in Canada is 35 years, however the maximum on a CMHC insured mortgage has been reduced to 25 years. The longer your amortization period, the less you pay every month.  However, this means you end up paying more interest over the life of your mortgage.

Fixed vs. Variable Mortgage Rates:

Fixed Mortgage Rates: A fixed rate set for the duration of the mortgage term – e.g. your rates and payments are fixed.  Great for those who want peace of mind without having to worry whether rates will increase or decrease.

Variable Mortgage Rates: Rates fluctuate with the market interest rate also known as the ‘prime rate’.  This has proven to be less expensive over time, however any changes to the prime rate will impact your payments

Step 3: Choose a Lender (Bank vs. Mortgage Broker)

Homebuyers have traditionally gone to their banks for their mortgages, however mortgage brokers have become quite popular in recent years. What’s the difference between the two?

Bank: A financial institution that offers various financial products such as personal banking, credit cards, loans, mortgage services, etc.

Mortgage Broker: An independent licensed mortgage agent who has access to multiple lenders and rates – they essentially shop around and negotiate for the best rate on your behalf.

It is recommended that you shop around to see what each can offer you.

One of the most important things to have in the Purchase and Sale Agreement is the home inspection clause.

A house may show well on the surface, however skipping the inspection will leave you at risk of uncovering costly repairs in the future.  The role of a home inspector is to provide an in-depth assessment of the property that goes beyond the repairs needed, they’ll also highlight things that may become a problem down the road.  The home inspector will assess things such as the heating, cooling, electrical and plumbing.  The purpose of this clause is to protect your interests – waiving this clause means you’re essentially buying the house “as is”.

Address
Century 21 Atria Realty Inc., Brokerage*
1550 16th Ave. #C200 South
Richmond Hill, ON L4B 3K9
Contact
D 416.684.5372
O. 905.883.1988
E. info@cynthiahu.ca
Century
*Each office is independently owned and operated
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