Buying a home can be a long and daunting process. Luckily, we’re here to guide you every step of the way.
There are different options one can pursue to finding a home.You can choose to do a home search on your own or with a real estate agent.There is a lot of technology available to let you automate your search if you have it defined in terms of budget/ building type and geography, etc. A real estate agent adds value only if they are familiar with the area you are interested in, and has a knowledge of the area and contacts that will help you expedite your home search.
Some good Canadian sites for home searches online include the following:
(CREA) Canadian Real Estate Association MLS
an independent aggregator for various home types
a technology driven search tool, broker operated
a site focused on pre-build condominium offerings
a valuable search tool, broker operated
a MLS feed search tool, a division of Metroland media
(*broker operated – indicates that a real estate broker is operating the search tool. So that while residential properties available for sale will be displayed, the site is designed to generate leads of homebuyers to match with their local real estate agents for commercial purposes)
With over 100 real estate associations across Canada, you may want to check for home search options that are available with your local board. For example, in Toronto, the Toronto Real Estate Board offers a search tool for their market specifically: www.listings.trebhome.ca
Define your needs prior to starting the home search process:
A.What do you want/ need in a home?
Make a list of your requirements and preferences for a home. Consider the following factors and questions in your list
B.Type of home you are searching for:
Options vary slightly between provinces, but the following are some of the most common ownership types in Canada.
Leasehold: You own the building or unit and rent or lease the land it sits on. This type of ownership is common for townhouses or apartments built on city-owned land and mobile units on leased land.
Co-operatives (co-ops): Instead of purchasing a specific unit, you buy a share in the entire building and are assigned a unit to live in. When you decide to sell your share, the co-operative’s board members can reject buyers they feel will not be an asset to the community. Mortgage loan insurance is not available for co-operatives, so you’ll need a down payment of at least 20% of the purchase price.
Freehold: You own the building and the land it rests on. You are responsible for the costs and maintenance of the property, but you also have full use and control of the land and the building. This is subject to any rights of the Crown, local bylaws and any other restrictions in place at the time you purchase the property.
Condominium (or “strata”): You own your unit and share ownership of the common areas with other unit owners. Common elements can include exterior walls, windows, gardens, driveways, hallways, elevators, lobbies and social areas. The condominium corporation is responsible for the repair and maintenance of the common property. The corporation may also regulate the types of changes you can make to your unit.
Making an Offer + Negotiate the Close
When you are ready to make an offer on a home, ensure that your demands are clear and you bid smartly. This means be up-front about the extras such as fixtures and furnishings even, you would like to have with the house. Work off of comparable data (through research or via your agent) on recently sold properties – and start a tad lower than those figures.
Ask the seller for additional points for peace of mind such as the inclusion of a home warranty or covering the costs of home inspection if one hasn’t been completed.
Use the closing date as a negotiating point. If you don’t have to move by a certain date, be flexible on when you move in to your new home. This is a good way to get other concessions from the seller, if they have different timelines they need to meet.
What to Include in the Offer
You should include the following information in your offer:
• Names and Address: Your full legal name, the legal name of the vendor and the civic address of the property.
• Price: The amount you are offering for the purchase of the home.
• Things Included: List any items that you think should be included in the purchase price, such as appliances, furniture, the shed, window blinds, or anything else that might reasonably come with the home. It’s important to include all items you want in the offer, even if you’re unsure as to whether or not it comes with the house, to avoid misunderstandings and disputes later on. If the seller disagrees, they will let you know.
• Deposit Amount: How much you’ll put down as a deposit.
• Closing Date: The day you would take possession of the home.
• Offer Expiry Date: The date after which the offer is no longer valid if the seller fails to respond.
Conditions of the Offer: These are the conditions that must be met for the offer to be valid. Place a time limit on the conditions, and ensure the offer can be cancelled if any of the conditions are not met. While an offer without conditions will likely be more appealing to the seller, conditions are not uncommon and you should protect yourself. Here are some things you might want to consider as conditions:
• Satisfactory land survey results
• Satisfactory home inspection results
• Mortgage and mortgage loan insurance approval
Once You’ve Made the Offer
After you’ve had your real estate agent (and maybe even your lawyer, to be safe) look over the offer, your agent will send it to the seller.
The seller can respond in one of three ways:
Accept the Offer: If the seller accepts the offer as you’ve made it, you’ll receive the signed copy and the contract becomes legally binding (provided the conditions are met).
Reject the Offer: If the offer is very far from what the seller is seeking, it may get rejected outright. At that point you will not be legally bound to any of the terms in the offer.
Send a Counteroffer: If the seller likes some of the terms in the offer but takes exception to others, you may receive a counteroffer with a modified sales price, modified conditions or modified list of things included. At this point you are yourself free to accept, reject, or send another counteroffer.
Mortgage & Closing Costs
Before applying for a mortgage or even a pre-approval for a mortgage- You should get a copy of your credit report before applying for a mortgage. Credit reports can sometimes include errors. Before you go to a lender, take the time to go over your report. If you find possible mistakes, contact the credit- reporting agency who issued it to have your information corrected.
How to Find Out Your Credit Score
In Canada, there are two major credit-reporting agencies: Equifax Canada and TransUnion. You might have to pay a fee to get a copy of your credit report.
It’s a good idea to check your credit rating with both companies, as they don’t necessarily include the same information and your rating might differ a little from one to the other.
Depending on the province you are in and specific regional requirements, your deposit requirement for a new home will be anywhere from 10% to 20% down-payment of the selling price of the home.
You can look to get a mortgage to cover the purchase of the property and closing costs. To do this you can choose to work with a lending institution directly or work with a mortgage broker. Mortgage brokers work across various institutions and can in many circumstances be more flexible than working with a bank directly.
You will have many options when it comes to choosing a mortgage. Your lender or broker will help you find the mortgage that best matches your needs.
Become familiar with the following terms and options to help with your decisions.
Amortization period: The length of time you agree to take to pay off your mortgage (usually 25 years).
Payment schedule: How often you make your mortgage payments. It can be weekly, every two weeks or once a month.
Types of interest rates:
• Fixed rate—The rate doesn’t change for the term of the mortgage.
• Variable rate—The interest rate fluctuates with market rates.
• Protected (or capped) variable rate—The rate fluctuates but will not rise over a preset maximum rate.
Mortgage term: The length of time that the options and interest rate you choose are in effect. It can be anywhere from 6 months to 10 years. When the term is up, you can renegotiate your mortgage and choose the same or different options.
Open and closed mortgages:
• Open mortgage—Lets you pay off your mortgage in full or in part at any time without any penalties.
• Closed mortgage—Offers limited (or no) options to pay off your mortgage early in full or in part, but it usually has a lower interest rate. Get pre-approved It’s a good idea to get pre-approved for a mortgage before you start looking for a home. But first you need to understand exactly what being “pre-approved” means. A pre-approved mortgage lets you know how much you can afford, what your interest rate will be and what your monthly mortgage payments will look like. Getting pre-approved can help you narrow your search down to a specific home type, size or neighbourhood. Getting pre-approved is not a guarantee of final approval for a mortgage.
Pre-payment options: The ability to make extra payments, increase your payments or pay off your mortgage early without incurring a penalty.
Portability: An option that lets you transfer or switch your mortgage to another home with little or no penalty when you sell your existing home. Mortgage loan insurance can also be transferred to the new home.
There are three mortgage loan insurance providers in Canada: the government-owned housing agency Canada Mortgage and Housing Corporation (CMHC), Genworth, and Canada Guaranty.
In addition to the deposit and the down payment, there are many costs you’ll incur around closing time. This list will help you plan for them, so you have one less thing to worry about the day you take possession of your new home. Please note that these are estimates only and can vary greatly from province to province and from home to home. There may also be other closing costs unique to your transaction, municipality, or province.
Your local agent will be well versed in explaining the typical closing costs in your market. The amounts below are only general estimates. Buyers should obtain quotes, confirm actual local costs and seek professional local advice before committing to a transaction.
Approximate cost: $200-$600, depending on property
The mortgage lender may require an appraisal fee before approving your loan application. The appraisal is an evaluation of the value of the home, which may or may not be the same as the purchase price. It takes into account the characteristics of the home, a comparison between your home and similar sales, and current market conditions that might affect the value of the home.
Home Inspection Fee
Approximate cost: $300-$500
A home inspection is not mandatory but is nevertheless very important to protect yourself against damages in the home that you may not notice and may not be able to afford. The inspector can check the foundations, ensure there’s no water damage, and let you know whether you’ll have to make expensive repairs in the near future. It’s not a fee to skimp on.
Approximate cost: $1,000-$2,000
The property survey is an assessment of the land boundaries and measurements, and it details the structures on the property, as well as encroachments.
The property survey may be required by your mortgage lender. You may be able to obtain the necessary documentation from the seller, if a survey has been done within the last five years.
Approximate cost: (will vary)
You’ll have to pay the premiums for any insurance you took out in relation
to the home, including your mortgage loan insurance premium, the property insurance premium, the title insurance premium, and the mortgage life insurance.
Land Transfer Tax
Approximate cost: 0% to 4%
The land transfer tax is levied in some provinces or municipalities when property is transferred from one owner to the next. It is calculated as a percentage of the property’s purchase price. Don’t forget to check whether this applies in your province or municipality. In some provinces, this tax, or some of this tax may be waived for first-time home buyers.
Prepaid Property Taxes and Utility Bills
Approximate cost: $400-$2,000
You will have to pay back the seller for any prepaid property taxes or utility bills.
Approximate cost: $500-$2,500
You’ll need to hire a lawyer to handle the transfer of money on closing day. You may also want to rely on a lawyer when drafting your offer and at other points throughout the home purchase process, to make sure you’re making legally sound decisions.
To avoid a surprise when you receive the bill, make sure the price your lawyer quotes you includes all related expenses, not just legal fees.
Approximate cost: $300 to $600
Title insurance protects you against title fraud, errors in public surveys, encroachment issues with neighbours and more. Speak to your lawyer during the closing period for more details.
New Home Warranty Programs
Approximate cost: $500 to $1200
Many new homes carry some form of New Home Warranty Program. The warranty protects new home buyers against various issues that may emerge, including structural defects in the home. On occasion it will also offer deposit protection to buyers of new homes. Sometimes the enrollment fee is included in the purchase price and other times it is due at closing – check with your home builder.
Approximate cost: 0.5% to 2.5%
If the down payment on your home is less than 20 per cent of its sales price, you will be required to buy mortgage insurance. Rates depend on how much you are borrowing. For more information, visit www.cmhc-schl.gc.ca.
Approximate cost: (will vary; only applicable in some provinces)
GST or HST is not charged in all provinces, and not on all types of homes. Where applicable, generally the tax will apply to new homes but not to resale properties. It’s a good idea to check before signing an offer, or you may end up paying thousands of dollars above what you had anticipated.
Approximate cost: $10-$1,000
If there’s a difference in the interest rate on your closing date and the date of your first mortgage payment, you’ll have to pay the difference. You can avoid this extra cost by having your first mortgage payment be exactly one payment period after your closing date.
The Inspection & Beyond
1.Find a qualified inspector.
Contact one of the professional organizations to find an accredited, self-employed expert who has performed at least 1,000 inspections. Expect to pay about $300 to $750 for a general inspection.
2.Request a detailed report in advance.
Find out what the finished report will look like first. You want it to be at least 10 pages and include photographs of anything that’s wrong.
3.Consider additional assessments.
Ask your real estate agent if they recommend additional inspections above and beyond the standard one. This will depend on the style of the house and when it was built.
4.Attend the inspection.
This is your opportunity to ask questions about the infrastructure of the house. Be sure to learn about the operation and locations of the gas and water shut-off valves and the breaker box.
5.Ask the repairman to provide written estimates for all fixes.
Your real estate agent will submit to the seller the anticipated costs of any problems found during the inspection.
6.Ask for a price credit.
You can control the quality if you schedule the repairs yourself. Request that the cost of any fixes be deducted from the sale price and have the work done after the purchase is final.
Taking possession of the title of the property, is an important day. As of that day, you own the property.There are many preparations to make when moving.
You might need to hire movers.
If so, it’s a good idea to research moving companies in your area, to avoid scams. Will you get movers to pack and transport your belongings, or will you do the packing yourself? You’ll save money by packing yourself, but it can also be time consuming, and the moving company won’t replace or repair damaged items they haven’t packed themselves.
If you take possession of the house later than you are required to leave your current residence, you might have to put your belongings in storage.
Repairs and Renovations
If there are major repairs and renovations to be done on the house, getting those taken care of before your family and furniture move in might save your family a lot of discomfort. For example, if you wish to have the walls painted, doing that before you start living in the house might be a good idea, if you can afford not to move into the home on possession day.
You’ll probably need to get certain services connected, such as hydro, phone, internet, cable, and so on. It can sometimes take several weeks to get connection, depending on the service and the company providing it, so it’s a good idea to plan ahead.
If the Offer to Purchase didn’t include the appliances and you don’t have your own, you might want to purchase those ahead of time and have the delivery date coincide with the day you move into your home.
If you need to purchase furniture, you might, as with the appliances, be able to buy it ahead of time and have it delivered the day you move in.