Reasons for buying resale:
1) The building is actually built. There is no chance of buying something that may constructed.
) You can actually see what the unit looks like & what the actual unit views are before you purchase.
3) You can see what the building culture, structure & amenities are all about before you purchase.
4) If the unit includes parking and/or locker, they are already on title, so you know where they will be.
5) You have a definite closing date, there a no building delays.
6) Usually neighbourhood amenities already exist.
7) You already have building management in place & get an idea whether they are doing a good job (maintaining the building, staff etc.)
8) There are no developer fees, or development levy costs in addition to your purchase price.
9) You can examine a status certificate, confirm a number of different things: what the current maintenance fees are, if there are any large upcoming costs, any lawsuits, the number of tenants vs. owners etc
Budget extra cash to cover the cost of obtaining a mortgage and “closing” your real estate transaction. Here are some of the extra cost items you should consider:
Mortgage lenders will usually loan a percentage of the home’s purchase price or the market appraisal of the property, whichever is lower. The appraisal is done by someone on the lender’s staff or by an outside professional approved by the lender. The cost of the appraisal is most often the responsibility of the home buyer.
Find out whether or not your lending institution charges to process your mortgage application. In many cases, if you are dealing with a bank that you have other accounts with, they will waive the application fee.
Land Survey Fee:
Lenders require a plot plan or survey of the property you intend to buy. On properties located in subdivisions in urban areas, lenders will often accept an existing survey, depending on when it was done. However, if there is no existing survey, be prepared to pay a substantial fee for a new survey.
There are several types of insurance that may be required when buying your home. If you are arranging a “high-ratio” mortgage (less than 25% down payment) you will need to purchase mortgage insurance. Mortgage lenders require you to carry fire and extended coverage insurance that exceeds the amount of the outstanding balance of the buildings. Other insurance you may want to consider include title insurance and life insurance.
Home Inspection Fee:
Many homebuyers choose to have a home inspection done prior to finalizing their offer to purchase. Some lenders require a professional home inspection as well.
You will need to pay your lawyer to arrange your mortgage as well as for his “disbursements” such as title search, drawing up the title deed and preparing and registering the mortgage.
Land Transfer Tax:
This tax is payable by anyone who purchases property in Ontario. Myself or your lawyer can assist you in calculating how much tax you will pay on your purchase.
Calculate cost Land Transfer Tax:
If you are buying a new home, you will be required to pay GST of 7%. GST does not apply to most resale homes.
You will likely have to make property tax adjustments and interest adjustments on utility bills, heating, oil, etc. Feel free to ask me any questions you might have to further explain these additional costs so you have no surprises on closing day.
Maintenance and Utility Costs:
Be sure to budget for heating, electricity, water and any immediate renovations you may have planned. Put aside any spare cash and contribute regularly to a maintenance fund so that you are prepared for any repairs or upgrades.
Article supplied by Bette Ursini
CLOSING THE Transaction
Rule of Thumb: 2 - 3% of the Purchase Price
To avoid any surprises on closing, here is a list of what to expect in the way of costs.
Part of your down payment, a deposit is due upon acceptance of your offer.
Prepared by a qualified inspector to assess the property for defects and poor maintenance.
Prepared by an appraiser chosen by the lender, CMHC or GE (if applicable).
Your lawyer will quote the fee for closing the purchase and mortgage(s) plus an approximation for the disbursements, which includes registration fees, courier costs, photocopies, etc. Ask for an estimate. Land Survey or Title Insurance: Your lawyer or the lender will specify whether a survey is necessary or if title insurance will be acceptable in lieu of a survey.
You will have to arrange and maintain fire and extended coverage insurance for the outstanding balance of the mortgage or the replacement value of the building.
Monthly mortgage payments are usually due on the first of the month. Unless the closing date is the first of the month, you must prepay the amount of the interest accruing up to the 1st day of the following month known as the “interest adjustment date” (IAD). If however, you choose biweekly or weekly payments your interest adjustment period may be much shorter.
CMHC or GE (High Ratio Insurance):
If your mortgage is insured by CMHC or GE the insurance premium will usually be added to the mortgage so it is not a cash requirement on closing.
If the Vendor has prepaid any other expenses such as utilities, water and sewage taxes, oil in tank or property taxes, they must be compensated. This will be reflected in the Statement of Adjustments.
Property Tax Hold-back:
If the lender is collecting and paying property taxes you may be required to pay to the lender an amount to ensure sufficient funds are available to pay the next instalment of property taxes when due. An alternative to a property tax holdback is for the lender to increase the tax portion of the regular payment proportionately to ensure sufficient funds are on hand in time to pay the taxes when due.
Occasionally, a lender or the broker will charge a fee for providing the mortgage. If so, these costs should be disclosed to you at the time the Statement of Mortgage is issued to you.
Is payable on all new homes, commercial properties and land. GST is NOT payable on un-renovated residential re-sales.
GST New Housing Rebate:
You may be able to claim a rebate for a portion of the GST you pay on the purchase price or cost of building your home if you buy a new or substantially renovated home, mobile home, floating or modular home from a builder or vendor. Or, you buy a share in the capital stock of a cooperative housing corporation, or construct or substantially renovate your home (or hire someone to do so). Also applicable if your home is destroyed by fire and is rebuilt. Contact the Canada Customs and Revenue Agency in your community for the Completion Guide and Application Form.
You may have to allow for the expense of a professional mover or the rental of a moving van.
You will likely need four major appliances.
Carpets, drapes, furniture and painting may be necessary.
You may have some immediate renovations to do especially if the financial institution withholds some of the mortgage money on the condition specific repairs be made.
You may need lawn tools, garbage cans and snow removal equipment.
You may have to pay to have the telephone, gas and electricity connected and in some cases, pay a deposit. Contact the local utility companies directly.
Don't Let Closing Costs Take You By Surprise
You've come up with a down payment, searched for a good lawyer, and have found a reputable mortgage broker. Well done! You're off to a great start in the house purchase process. Keep in mind that you'll also be facing -- in addition to the expected legal fees and moving costs -- a few extra payouts when the final deal is done. Knowing about these "closing costs" in advance soothes their sting. The following list covers typical costs you'll encounter when your purchase is completed or "closed".
You'll need to refund the money that the seller has already paid out on your behalf: expenses that are now fairly and rightfully owed by you, the new homeowner. In your lawyer's office, on closing day, you'll definitely run into those famous last words: "subject to the usual adjustments". Typically these adjustments include portions of municipal property and school taxes for the months you'll be resident, utility bills paid in advance, fuel oil that you will be using - that kind of thing. These expenses would have to be paid by you anyway, so they are fair.
Land Transfer Or Similar Taxes
Your province levies this tax whenever real estate changes hands. It's sometimes also called (ironically) a "welcome tax". They do literally get you coming and going! The amount of this tax is a percentage of the purchase price of your property, so the more expensive the property, the bigger the tax. Ask about Transfer Taxes in your province or the province you are moving to for full details.
This insurance, especially fire, must take effect from the moment you are the owner of the home. It's all about protecting the investment for the lender -- and in this case it works for you too. Mortgage Life and Disability insurance. This is an especially good idea for young parents or anyone else with dependents. If anything should happen to either one of you, your home ownership won't be in jeopardy. The mortgage would be paid in full - immediately - on your behalf. You'll appreciate and need this peace of mind in a time of crisis, and you'll save your family the extra burden of wondering if they would need to sell their home (even while they're coping with a loss). Your Ontario mortgage broker can often help you find a policy that works for your situation.
Home Inspection Fee
This is the fee you owe the inspector you hired to check out the physical structure and mechanicals of your home before you decided to buy it.
Home Appraisal Fee
Your lender requires this appraisal before they hand over any mortgage money. Naturally, they want to be assured that the property is worth an investment of their monies, and naturally, the cost of this appraisal is passed on to you, the customer. This fee normally ranges between one and two hundred dollars - dependent upon location and complexity of the property.
A legal survey of your land - its borders, perimeters, house placement, etc. -- is sometimes required by the lender, and will be performed by a professional surveyor. If you're lucky, a recent survey is already available; if not, a typical survey can cost you up to one thousand dollars. In the last few years, lenders have accepted title insurance (highly recommended anyway) in lieu of a survey document.
This covers a myriad number of oddball situations that could threaten your title to the property. Title insurance is much less costly than a new survey, for example, and would cover most survey concerns anyway. Most homebuyers now look at title insurance as a great way to protect their biggest investment!
Don't Forget GST
This tax is charged on all professional fees. There is no GST on the purchase price of a resale home. Legal Fees and Disbursements. Speak to your lawyer about their fee schedule. Typically between $1,000 & $1500.
Today is the day legal title to the property changes hands. You've been busy packing, cleaning, and organizing the moving procedure at either end. The last thing you need to do is traipse down to the lawyer's office... but that's exactly what you'll have to do. Your lawyer will sit down with you, carefully go through a pile of papers for signing, point out closing costs. But a good mortgage broker can help you be well-prepared for all the things that happen before the new house keys are finally in your hand.
Reasons for buying new:
1) You get a selection of floor plans, exposure & floor -not what just happens to be available on the market at the time you are looking at resale.
2) There are often various builder promotions: eg. Lower prices, free upgrades, free maintenance, cash back etc.
3) You can stagger your deposits.
4) You can plan ahead.
5) You can prioritize saving & spending to accumulate a larger down payment.
6) You get to customize your unit & pick your finishes.
7) You can plan & buy your furniture ahead of time, since you already have a floor plan to work with.
8) You can participate in the running of the board of directors, by being elected or voting for the individual members.
Most mortgages have the option to allow payments to be made on a weekly or bi-weekly basis. This option may be desirable for two reasons. The first is it can save you money as you can expect to pay off your mortgage about 4 years sooner. This can save you dramatically over the life of your mortgage. The other reason why these options are so popular is that if your employer pays you on a weekly or bi-weekly basis, you can simplify your budgeting by making the payment line up with the way you paid.
Paying extra amounts on your mortgage can make a big interest saving over time. When we select a mortgage company, privilege payments options are something that we look for. A 20% privilege payment will allow you to pay off up to $20,000 per year on a $100 000 mortgage. It is important that the privilege payment also be flexible to allow you to pay smaller payments on the mortgage and as often as you wish. An extra $1000 periodically paid on a mortgage can help you become mortgage free faster.
As mentioned above, when you put a 25% down payment on your purchase you can avoid the CMHC premium. More importantly the larger the down payment, the lower the amount of interest you will pay over the life of your mortgage. It is important to note that it may not be wise to stretch yourself to increase your down payment and end up borrowing on credit cards or a line of credit at a higher rate.
When you require a mortgage for more than 80% of the purchase price of a property, that mortgage must be insured by Canada Mortgage and Housing (CMHC) or GE Mortgage insurance. The premium charged by these company`s decreases as the down payment increases. When you finance your property at 95%, a premium of 3.75% is added to the mortgage. By increasing the down payment to 10% of the purchase price the premium can be reduced to 2.5%. If you can put down 20%, you can avoid any additional insurance fee. Depending on your situation there are ways that you can structure this financing to avoid the CMHC or GE insurance premium.
The options for mortgages available can be very confusing for most mortgage shoppers. Terms for mortgages vary between variable and fixed rate, 6-month terms to 10 year terms. Taking a variable or floating rate mortgage can have savings. Typically the shorter the term or guarantee of the rate, the lower the rate will be. This does not always happen, depending on the market place and the economy, but history has shown that short-term rates tend to be lower than long-term rates. The up side of variable rate is the strong potential for interest rate savings. The down side is the fact that you are accepting the interest rate risk without a guarantee. If you are considering a variable rate mortgage you need to look at your own risk tolerance, and your cash flow available to deal with potential increased payment. Considering projections of rates and where we see interest rates heading can also be important in this decision. Make sure you talk to an expert when you are making this decision.
Ten things you did not know about condominium living
You Buy,You Move in and then what??
Here are some things that you may not know –but should
1 Condominiums are communities living in a condominium means living with others. A sense of security,” social gatherings.” Community Spirit” and collective decision- making. But remember, people are people, different habits, different lifestyle and somethimes it may have an impact on your lifestyle.
2 Condominiums are corporations though they are slightly different then a business corporation, this community is run by a board of directors and you as an owner in your capacity similar to that of a shareholder. That includes the right to vote ,but only in certain circumstances.
3 Condominiums have rules, they are there for a reason. They must be inforced and there are penalties for not complying. Remember the rules on pets, alterations, noise and parking.
4 Condominiums require maintenance and repairs ,buildings require upkeep and over time there is wear and tear. The result is that those costs are shared by the entire community. If the budget has not included these cost and if those costs have not been anticipated and planned for the owner may be expected to pay those costs in a special assessment. Proper management can off set these expenses ,by being prepared
5 Expenses fluctuate and services may change .Gas and Electric increases, if owners decide to have additional services to the building, cost could increase.
6 Corporations are managed most of the time by a Property Management Company.A Property Manager is especially trained and skilled at running a condominium corporation.
7 Neighbors come and go. Some are good and some are difficult. It could mean the difference between staying or selling your condominium and moving on, the same holds true for homeowners. So to is best to work with Property management and resolve and issues that arise.
8 Condominiums plan for future, money is collected monthly for maintenance and a portion is used to fund a reserve fund account used for future repairs, this avoids those special assessments for major repairs down the road
9 Parking and lockers have separate rules and restrictions. Learn what they are as this could prevent you from selling or leasing to anyone outside of the building
10 Condominium Corporations have Insurance that covers some situations and not others. Owners need to obtain their owner insurance, for personal liability and personal belongings If a bathtub overflows for example and causes damage to another suite, you may want to make sure you have the appropriate insurance coverage.
Purchaser obtains ownership of an individual unit by a Deed
Purchaser gains ownership to individual unit by a Deed pursuant to the provisions of the Condominium Act
Purchaser gains a percentage interest in the common areas of the building.
Purchaser becomes a member of the Condominium Corporation which:
(a) manages the affairs of the building according to the Condominium Act ,a and more particularly the Declaration and the By Laws:
(b)Represents the interest of the owners
Purchaser can individually finance his/her own unit.
Purchaser is assessed for a percentage share (based on the size of the unit in comparison to the whole building) of common expenses
Condominium Act requires a reserve monetary fund to be established for maintenance of the building
Purchaser can participate in management decisions by sitting on the board of Directors and voting at the annual General Meetings
Purchaser is subject to the Declaration, Rules and By-laws of the Condominium Corporation.
Purchaser does not need consent of the other owners or Condominium Corporation to sell ,rent or mortgage his/.her unit.
Sales is subject to receipt of an Estoppel Certificate which identifies any outstanding pr pending payments ,assessments .or legal actions, re” the unit or the Corporation.
Condominium Corporations have a yearly audited Financial Report issued to all owners and are managed by a professional Management Company.
Information Supplied by:
"Martin Rumack" Barrister & Solicitor 416 961 3441
Q. There is a new condo project starting near where we live. We are interested, but a bit suspicious of it. How can a customer check on a project before getting too involved? I know I can go to a lawyer, but we can’t afford one at a preliminary stage every time we may be interested in a place.
A. If you are just looking at condominiums and are only considering new condominium sites (not a resale condominium unit), no lawyer is needed until you are at the stage of signing the Agreement of Purchase and Sale.
I know it is often difficult to walk into a sales office to just window shop, but that may be the best approach if you can’t find this information on their website. Tell the sales staff you want the details of the offer without signing up, so you can do a comparison with other condominiums on the market.
If that doesn’t work, it may be time to get a real-estate agent. Many purchasers are not aware they can use their own agents to work on their behalf and gather information on condominiums — even on new developments that have their own sales staff. Contact a real-estate agent with condominium experience. These agents may even have information about the sites and developers you are interested in. A good place to start is to check out with an experienced condominium agent
Remember, if you go into a sales office and sign an Agreement of Purchase and Sale for a new condo unit, you have 10 days to review the agreement, make changes or cancel the deal.