BUYING REAL ESTATE
The bottom line is that buying real estate in Canada is very easy.
From a residency point of view, if you plan to stay in Canada for 6 months or less each year, the government considers you a non-resident, which means that you can still open a bank account and buy property, etc. If you plan to live in Canada for more than 6 months per year, you must apply for immigrant status.
It is important to note, however, that while the majority of Provinces (British Columbia, Ontario, Quebec, Nova Scotia, Newfoundland, New Brunswick) have no restrictions on foreign ownership of real estate in Canada, some do limit the amount of property/land that a non-resident can purchase. On Prince Edward Island, non-resident buyers must apply to the Island Regulatory and Appeals Commission for land over 5 acres in size, or land with a shore frontage greater than 165 feet. In Manitoba, non-residents are prevented from owning farmland unless they actually plan to move there within 2 years. Non-residents may not own land over 10 acres in size in Saskatchewan, whilst in Alberta they may only own up to 2 plots of land not exceeding 20 acres in total.
Once you have chosen a REALTOR®, secured a mortgage and found your property, an offer is made and once accepted, a deposit is payable. When buying a house in Canada, an offer must be made in writing so that all aspects of the transaction are clearly outlined within the offer. Once you (the buyer) have signed the document, it becomes legally binding. If you withdraw from the offer at this stage, you may lose your deposit and may also be sued. Make sure that every item staying in the property, i.e. carpets, fixtures and appliances, is written on the offer as ‘chattels included’. Your REALTOR® should also insert two clauses stating that the offer will only proceed subject to building inspection and that you as the buyer are able to meet your financial obligations. Once your offer is complete, it will be presented to the seller and negotiations will be made. This may include changes in price, completion date and chattels. The changes are initialed by the seller and returned to you (the buyer) for your initials. The resulting Agreement of Purchase and Sale will state the purchase price and the deposit. The deposit is placed in a trust account and is credited towards the purchase price once the offer has been accepted by both the seller and the buyer and the transaction is complete.
Most REALTORS® are self-employed and are on negotiable rather than fixed commission (payable by the seller). A purchaser can buy property using any REALTOR®, regardless of whether that REALTOR® originally listed the property. There are usually 2 REALTORS® involved in a sale – the seller’s agent and the buyer’s agent. The commission received upon the sale of the property is divided between the 2 REALTORS®. Some agents can also be dual agents but must declare this to buyers and sellers alike.
It is essential as a first time home buyer in the real estate market that you work with someone who is experienced with first time buyers. First time buyers will usually have more questions than people who have purchased real estate previously. Buying a home is not a simple process, especially when you are not familiar with it. You may not know what price range of properties you can look at, what mortgage payments you can afford, or how the general home buying process works. For a first time buyer, we generally recommend getting to a bank or seeing a mobile mortgage specialist as soon as possible to determine what you can afford and what you are comfortable with paying each month. You can then be ‘pre-approved’, which is the first step to getting you into an affordable home and getting you started in the market.
We can provide the answers to your questions and walk you through the entire process, from viewing potential homes, to making an offer, to setting up mortgage financing. Although buying your first home can be overwhelming, you can be confident that we will be available to help you every step of the way. We enjoy the process as much as you do, and find it very exciting! We still remember buying our first homes and all of the questions that we had. Having a real estate agent that was willing to be available and answer our questions made the process so much easier and calming. This is the same commitment we make to all of our first time buyers, and anyone that we work with.
There are many reasons a person should buy a home, but the most common are:
It is a great investment. With the steady increase in real estate and the limited amount of rental properties in our cities, it is important to get into the market as soon as you can. It is smart to get your foot on the first rung of the property ladder. Chances are you will not be able to start out by buying your dream home, but it is the first step in advancing to that dream and to build some equity to put towards your next home.
Two out of three Canadian families own a home – one of the highest rates of home ownership in the world.
You don’t have to worry about getting kicked out or having your monthly payments increased suddenly and permanently. You lock in your monthly payments for several years and your house will generally get more valuable over that time.
Don’t forget pride and comfort in owning your own home. You can customize it however you want and can do what you want inside your own home! If you are someone that is interested in getting into the real estate market and buying your first home we would be happy to work with you and make the process as simple as possible. For additional information on buying a home, please contact us anytime.
To Quit Renting
Why contribute to someones mortgage payments when you could be paying off your own? With the current market increase in rent it can sometimes be cheaper to own than it is to rent and there is no fear of your mortgage payments suddenly increasing.
You don’t have to worry about your house being sold out from under you to out-of-province investors. If renting and faced with this scenario, you could find yourself faced with an unreasonable increase to your rent, thereby leaving you potentially homeless or too poor to eat. These increases could continue indefinitely so the investors can make more money or so that you will feel forced to leave and they can turn your building into a condominium.
The price of real estate continues to increase every year, therefore purchasing real estate is one of the safest long-term investments a person can make. If you had the choice between putting money towards a new car or a new house, a house should win every time as it will appreciate in value over the years whereas a car does the opposite. Once you own one house and build some equity you may also be in a financial position to buy another and rent one out.
Low Interest Rates
Right now we have some great interest rates which will help you get your foot on the first rung of home ownership. It is a great time to get into the market and lock into a really good interest rate and build equity.
Pride of Ownership
One of the biggest reasons people buy properties is the pride of saying they own something. Even if it is a little starter home or apartment style condo, it is yours and you can do with it as you please, and for that, a person should be proud, as ownership is an accomplishment.
If you own your own house, you don’t ever have to worry about the owners checking up on you, since you are the owner! You will gain much more independence and privacy when you have your own property.
One of the best things about owning a home is that you are building equity, which gives you more freedom financially as you can access a home equity loan. You may then borrow against the equity you have built in your home for a wide variety of reasons including home improvements, paying for school for your children, medical reasons, or even starting your own business. Check with your lender, as these vary from one to the next.
You are free to do what you want in your own home, whether you want to paint the walls in pink and black zebra or put carpet on the ceiling (not recommended of course!) You have the freedom to express yourself and your personal tastes and change the house to suit your needs. You can hang as many pictures as you want and do renovations as you please. Just keep in mind that when you are ready to sell your home, not everyone may like what you do.
Sense of Community
Owning a house gives you a feeling of belonging in that neighborhood and gives you the sense of putting down roots and getting established. There are also many neighborhood groups that you can become involved in, and if you have children it may be of benefit for schools and friends.
Don’t “low-ball” your initial offer
Vendors tend to give less of a counter offer (closer to list price), if they feel insulted. Understand the current market value of the home and comparable SOLDS.
A pre-approved mortgage can be done for 90 days for FREE. You can usually negotiate your mortgage rate between 1/2-1% off the posted rates with your lender.
Have your agent arrange a home inspection
A home inspection with a qualified engineer costs about $300.00 (approx). It could very well be your best money spent. You want to know exactly what you are bidding on.
Avoid buying the most expensive home on the street
The most advantageous situation is to purchase the worst home in a good area, rather than the best house in the worst area. “Location, Location, Location” is true!
Prepare a down payment of at least 25%
When you have a down payment that is almost 25%, it is usually less expensive to arrange a first and second mortgage and save on CMHC insurance fees.
Arrange an accelerated Bi-weekly payment plan on your mortgage
On your mortgage, you will save the most money if you opt for an accelerated Bi-weekly payment plan, or if you double up one payment per year. This will shorten your amortization periods by over 6 years!
Take advantage of tax credits
Place up to $20,000.00 per person of your down payment in a short term RRSP to be held for at least 90 days, or until closing.
Try and stretch to the maximum you can afford
Try and stretch to the maximum you can afford
Be sure to check into your lawyer’s fees ahead of time
These are separate from disbursements. Ask your agent, who will be able to refer you to reliable professionals.
Moving can be very exciting but it can also be very stressful as there are so many things to remember to do! Don’t despair; whether you are doing it on your own, asking friends for some help, or hiring professionals, here is a quick guide to help you get through the buying process.
Avoid 9 critical mistakes that could cost you thousands of dollars when buying your home!
It is important when you decide to buy a home that you have a full understanding of the costs associated with your purchase. People often assume the only cost of buying a home in our real estate market is the price of the home, and that is it.
There are a lot of additional costs that you must be prepared for when buying a home, and it is important that you are fully aware of them. You will need to have some additional money set aside to cover these costs unless you have already made arrangements with your bank to cover these costs and absorb them into your mortgage.
Your largest initial expense will be your deposit. As a first time buyer (or even a repeat buyer) this should generally be approximately 5% of the purchase price; however, it will be up to the seller to determine how much they want in order to feel confident that you won’t walk away from the deal without your deposit if you need to.
You should also be prepared to pay:
Legal fees and disbursements
When buying a new home (newly built / never lived in) you are sometimes responsible for GST and/or PST if applicable
Property or land transfer tax
Adjustments (payable to the vendor, such as taxes)
If in a Condominium type of ownership, condo or strata fees
Home inspection fees or any other ancillary service fees requested by you as the buyer (furnace inspection, appraisal fee, water quality/quantity tests for acreages)
Mortgage broker’s fees (if applicable)
Mortgage loan insurance premium (if less than 25% down) plus application fee
Renovations, repairs, paint, carpeting, and window coverings
Additionally, once you have purchased your home you will incur regular expenses on a monthly, quarterly, or yearly basis such as:
Mortgage payments (you can do these weekly, bi-weekly, or monthly)
Electricity and gas services
Strata or Condo fees
Don’t let this list of additional expenses worry you about buying a new home. All of these costs are part of purchasing a home and are well worth it. If you are interested in buying real estate, be sure to contact me. When working with you, we will sit down and go over a detailed list of expenses you will incur when buying a home. There are different expenses depending on the type of home you purchase. We can also put you in contact with many different vendors throughout the city that will be able to provide you competitive pricing on many of the associated costs. Be sure to contact us if you are looking to buy in the local real estate market.
ONGOING COSTS ASSOCIATED WITH OWNERSHIP
Sample annual expenses when owning a $500,000.00, single family residence.
Property Taxes: Conservatively budget 1% of value of house
++ Monthly mortgage payments
Annual house & fire insurance $600/year
Monthly condo maintenance fees if applicable.