DETERMINING YOUR NEEDS
Your Lifestyle
So, you've decided you want to own a home. It's a popular dream. For most people, with the right planning, it can become reality. But there is a lot to know before you begin moving. We’ll take you through the planning process step-by-step, to determine exactly the kind of home that's perfect for you. We'll ask you some questions and we've provided worksheets that you can print out and use with your EXIT Realty agent.
What Does Your Future Lifestyle Hold?
How many bedrooms will you one day require? Your preschoolers will be teens some day. Are you planning to stay in your home that long? Perhaps your teens are ready to move out on their own. What will you do with all the extra space? When you're thinking about accommodating your family's needs, think of things like parking. How many cars will require space? You'll also want to consider proximity to -- and the reputation of -- schools in the area.
How is your work situation? These days people tend to change jobs frequently, and sometimes the best way to get a promotion is to move to another company. If you might be transferred, will you be able to sell quickly? Keeping work in mind, how long do you want to spend commuting? Do you drive or rely on public transportation?
As you can see, you will want to give some thought to how long you intend to stay in your home. It may be difficult to answer before you've even found your home, but if it's your first home give some thought to the resale value when it is time to upgrade. On the other hand, if you're planning to stay in your home for a long time, consider your future needs and purchase a home that will accommodate them.
Do You Live a Maintenance-Averse Lifestyle?
When you're looking at homes, take a look at the garden. If you don't enjoy cutting grass, then an expansive lawn may not fit into your lifestyle. You can also evaluate the possibility of future maintenance and repairs based on the age of the house. If you don't like the idea of major renovations, a newer home may be your best option.
Is Your Lifestyle More Geared to a Fixer-Upper Fantasy?
Many first time buyers have them. It goes something like this: You find a big home in a great neighborhood that's well below what you'd expect to pay for that house in that neighborhood. You see a couple of coats of paint, new broadloom, a few repairs and voilà, a dream home without the nightmare price.
Before you jump headlong into this 'once-in-a-lifetime opportunity' consider how you'll do all of the work. Will it be weeknights after a long day at the office, or will you hire someone? Are you ready to live in a dusty mess as you renovate? Do a realistic assessment of the job at hand and be sure to have the house inspected. The last thing you want is a bargain home that turns into a money pit. You're far better to find a house that costs a little more each month but doesn't need much work than to buy a fixer-upper that eats up hundreds of dollars each month. For example, lets say you could buy a really nice house with minimal work required for $10,000 more than a fixer upper. At today's mortgage rates, assuming you could stay within your monthly budget, that really nice home would cost you only about $48 per month more than the fixer-upper. If you buy the fixer-upper, you'll be spending a lot more than $48 each month to whip it into shape, as well as the strain your family will go through living in an unfinished home.
Arranging a mortgage
What is a Mortgage?
A mortgage is made up of two parts: principal and interest. Principal is the actual amount borrowed. Interest is the lender's fee you are charged for borrowing.
You'll have to decide on an amortization period (the length of time it will take to completely pay off the mortgage) and the term, or length of time each mortgage agreement guarantees the interest rate.
Before you go to a financial institution or mortgage broker, keep in mind that there are many mortgage options available. Shop around for the best rates and the best terms. Negotiate. Everyone wants your business, but it's up to you to look after your interests. Of course, the key thing to remember is to negotiate a mortgage that fits into your lifestyle, and doesn't take over your life! Your mortgage broker can help guide you through this process and supply you with information. Remember though, every time you go to a different lender and they do a credit check; it affects your credit score – and your credit score is vital
Amount of the Mortgage
With lower interest rates, you may qualify for a larger mortgage because your monthly payments will be lower. But always keep in mind that the larger your mortgage, the more interest you'll pay in the long run. That simply means your house will cost more. Also, what if interest rates rise? Will you still be able to carry the payments comfortably?
Down Payments
Before considering any mortgage, consider your down payment. If you're a qualified home buyer, you can purchase a house with a minimum 5% down payment. On a $160,000 home that would be an $8,000 down payment, leaving you with a $152,000 mortgage. Now let's say you decide to wait until you save another $10,000 before you buy because you think the bigger down payment will lower your monthly payments. Your payments will change so little that you might be better off saving $10,000 for a rainy day or a vacation or that hot tub you've been dreaming about. With today's interest rates, it just doesn't make sense to tie up your cash, a very small amount. You might be better off putting your extra money to work for you in another investment with a higher rate of return.
Conventional and High Ratio Mortgages
To qualify for a conventional mortgage, you simply have to have a 20% down payment of the purchase price, with the mortgage not exceeding 80% of the appraised value, or purchase price. If your down payment is less than 25%, then you qualify for a high-ratio mortgage. This type of mortgage requires loan insurance, which can cost an additional 0.5% to 3.75% of the mortgage amount. With this type of mortgage you could also be limited to a maximum house price.
Pre-Approved Loans
Obtaining a Pre-Approved Mortgage
Why go house hunting only to find that you don't qualify for a mortgage on the dream home you've found? Having a pre-approved mortgage will give you the confidence of knowing exactly what you can spend on a home before you start looking. You will also be protected against interest-rate increases while you look for your new home. With all the options for mortgages out there, you should never have to pay the mortgage company an upfront fee.
Once you've done your homework and shopped for the best rate, meet with the loans officer to arrange a pre-approved mortgage and discuss the features you're looking for to tailor payments to your needs. At EXIT REALTY ON THE ROCK we have our own in house mortgage facility. There are no fees and they don’t work bankers hours. Your agent can arrange a meeting.
Pre-Approved Mortgage Features to Look For
Competitive interest rates. You may be willing to pay a little more to get the flexible features you desire.
A 90-day rate guarantee. This will protect you against rising interest rates while allowing you to take advantage of falling rates.
Flexible payment options. These enable you to tailor the mortgage to your lifestyle. Discuss payment frequency and lump-sum payment options. Find out if your lending institution will allow you to skip a payment in special circumstances or double-up on your payments.
The offer
For some, this is a stressful experience. After all, you and the seller may not be able to come to an agreement and you won't get your dream home. There are eight basic elements to an offer and there are various offer strategies that you may want to use during your negotiations.
When you've found your home, you will make a formal, written offer to purchase. This is a legally binding contract outlining what you will give (a combination of price and terms) in exchange for the home. Your associate will probably use a pre-printed form covering all of the legalities and will modify it to cover what you want to offer.
Remember, everything is negotiable. You should ask for what you want, but keep in mind what you're willing to give up. If you are competing in an offer, if you can live without it, don’t ask for it. It could mean a rejected offer. Your EXIT REALTY ON THE ROCK associate will put everything in writing. Of course, the more contingencies in your offer, the less attractive it will be to the vendor. In a buyers' market, that's OK.
The vendor may counter your contingency with an escape clause. For example, the vendor may wish to continue showing the house and if they receive another offer, you'll have the option of backing out or removing your contingency.
The Offer Can be Firm or Conditional
A firm offer means that you are prepared to purchase the home without any conditions. If the offer is accepted, the home is yours. Although a firm offer to purchase is usually preferable to the seller, if you are unable to close you will lose your deposit and may get sued. Take time to confirm your financing and to think twice about the investment.
A conditional offer to purchase means that you have placed one or more conditions on the purchase, such as subject to home inspection, financing or sale of your existing home. The home is not sold until all the conditions have been met.
Acceptance of the Offer
Your offer to purchase will be presented within the time frame set out in the offer. After the seller has reviewed the offer, it may be accepted as is, rejected, or returned with a counter offer.
The counter-offer may be in reference to the price, the closing date or any number of variables. The offers can go back and forth until both parties have agreed or one ends the negotiations.
It is best to know your absolute upper limit before you begin negotiations, so that in the heat of the moment you don't end up with a home you really can't afford or just get stubborn and loose your dream home over a crazy condition that in the full scheme means nothing.
Closing
It's a day filled with nervous anticipation. This is the day on which all of the legal and financial promises in the offer are met. It's the day when you get the keys and begin a new phase in your life. Your EXIT Realty agent and your lawyer will give you all of the details on steps and timings. All of the small details will be taken care of ahead of time, so in most cases it will be just a day of waiting by the phone. Find a lawyer you can communicate with. It’s good to have an open line between realtor, lawyer and client.
Also, remember that this is a hectic day for the seller, too! Very often it's moving day and they're trying to gather all of their belongings to leave as the purchaser is trying to move in.
In brief, here's what takes place before the actual closing day:
1. A copy of the offer will have been forwarded to the office of your lawyer. Your lawyer will have reviewed the conditions of the sale. You will have made your lawyer aware of how you, and any co-buyers, will be registered on the title of the property.
2. All of the conditions in the offer to purchase must be satisfied by the closing date. If one of the conditions in your offer was a house inspection, it should have been completed by the date shown in offer, and you should be satisfied with the report.
3. All of your financing details will have been finalized and ready to fall into place on the closing date.
4. If the vendor did not have an up-to-date land survey, you'll have had one done. Your lender will insist on it. Ideally, buyer and seller should split this cost 50/50.
5. Your lawyer will search the title of the property to ensure that you can purchase the home without any legal problems. Your lawyer will also make sure that tax payments have all been made and there are no liens on the home or the personal property the vendor has agreed to sell you as part of the deal.
6. You'll want to make sure that you've contacted all of the utility, cable, and phone companies to ensure an easy transition of service and billing.
7. Your lawyer will prepare a statement of adjustment. This confirms the selling price, adjustments, and the balance (less the deposit you provided with the offer). Your lending institution will draw up a certified cheque for your lawyer to hold in trust.
8. Additional settlement charges will have to be paid:
Your lawyer's fee and disbursements
Tax and utility adjustments; if they have been pre-paid, you'll have to pay the vendor for the portion of the service you assume
You'll want to make sure your homeowner's insurance policy will be in place to cover your new home and property once the deal is closed. Your lawyer will need a copy of the policy before closing.
The Move
What to Expect on Moving Day
Saying good-bye to one neighbourhood and discovering a new one is an exciting adventure. But let's face it, at the end of your home-buying process you may find yourself exhausted. After all, the other obligations in your life have not paused.
What's more, now there's another cost -- moving. Whether you hire professionals or strong-arm friends into helping, be prepared for the cost of the move. Here are some suggestions on how to reduce the cost of your move, but let's first look at how to prepare for the big day.
You will have noticed that your possessions expand to fill the space allotted. Guess what, if you're moving into a larger home, you'll be gathering more stuff, so start out right.
Don't take it all. Before you pack it all into boxes and cart it to a new location, take a good look at everything and find out what you can live without. This is a great time to have a garage sale and what doesn't sell, you can give away to charity.
Have all of your change of address cards filled out well in advance. You'll want to notify friends, family, businesses, organizations you're a member of, etc. Have the cards ready to mail once the deal is closed. Redecorate before the move. Sometimes it isn't possible, but if you have the chance to work without the obstructions of furniture, you'll find that you can get twice the work done in half the time.
Put the utilities in your name. Hydro, water, gas are the first companies to call. But don't forget to coordinate your telephone and cable service. Of course, you'll want to let the companies servicing your old home know when to disconnect service there.
Get Packing
You'll want to ensure that each item you own is well packed to minimize damage during travel. Whether you're moving around the corner, across town or across the country, the moving process is always the same.
To Hire Movers or Not to Hire Movers?
If you hire movers to pack for you, they'll descend on your home with a crew of experienced packers who will seal, pad and itemize everything you own in a day or two.
During the move
You will want to make sure you're insured while your belongings are in transition. Many moving companies also offer additional insurance.
On moving day, go through the house with the crew supervisor and have him take note of any special instructions. If there are items you will need first in your new home (like a crib) make sure they put it in the moving van last. The movers will also make note of the condition of your goods on a master list. It is your responsibility to make sure it's accurate.
Make sure medications are in your possession and plants are not put in a van to freeze in cooler temperatures. Fridge and freezer contents – keep them to a minimal.
After the van is unloaded and your goods are unpacked, inspect everything and make note of any damage. While movers do unpack, they don't put dishes or linens away.
If you are undertaking the packing process by yourself, it will take time. Pack well in advance, and take note of what you can really live without. You'll have items that need special attention and other items that need to be disassembled. Label each box in detail and, if you know where it will go in your new home, put the destination on the box.
Pack what you need most last!
Label each box carefully!
Designate a destination!
You'll also want to pack a box of essentials. These are items you're likely to use once you arrive in your new home. Include items like:
Toilet tissue
soap
toothbrushes and toothpaste
paper towels
garbage bags (a lot of them!)
paper plates, cups and plastic utensils
can opener
hammer, screwdrivers, pliers
a flashlight
some light bulbs
snacks and drinks
a radio
pet leash & food
Phone & charger
Legal Services
A lawyer is a vital part of any property transaction. A lawyer's duties include a "title search" of the property which will indicate any covenants, easements, liens or other conditions which may apply to the property. Your lawyer can also obtain a legal survey or location certificate of the property, which is, required by most mortgage lenders.
Your lawyer's fees cover a variety of services and HST will apply to these fees.
Your lawyer will probably want an initial meeting with you regarding the purchase. He will cover such things as:
Agreement of Purchase & Sale to ensure everything is in order;
Secure a copy of the legal description;
Correspond with the seller's lawyer;
Search the title at the country registry office;
Prepare closing documents;
Prepare a Statement of Adjustments;
Obtain a Certificate of Title;
Meet with you for signing of the closing documents;
Forward closing funds to the seller's lawyer;
Peruse the deed received from the seller's lawyer;
Record the deed and mortgage at the Registry Office;
Forward the deed to you with a final report.
Additional Costs
In addition to the purchase price of your new home, there are a number of costs, some mandatory and some optional, that you will incur.
*Inspection Costs
An inspection of your home is not mandatory, but it's a very wise step to make it a condition of your offer. A home inspector provides you with a written report after checking that the building is sound, and will identify potential repairs and their estimated costs. An inspection usually costs in the vicinity of $300.
*Property Survey Cost
A survey indicates the property boundaries and measurements, position of major structures, and any registered or visible easements or encroachments on the property. An easement is, among other things, a right to access your land for a specific purpose such as a driveway or public utilities. An encroachment is any intrusion on your land by a neighbor's fence, structure or overhang. If there isn't a current survey available from the seller, which there often is, this can cost you approximately $500-$700.
*HST
There is no HST payable on existing homes. HST is payable on new construction, but many buildres include it in the purchase price.