Thursday, December 6, 2012

Market Comentary

Canada’s housing market is showing great staying power in the face of the global economic slowdown and concerted federal efforts to cool it off.

The real estate firm RE/MAX and the Canada Mortgage and Housing Corporation have both issued reports indicating this year will end almost on par with last year and that there will be some modest increases for 2013.

In its annual forecast, the real estate company says 2012 will finish within 1% of 2011 with sales of 454,000 existing homes and it predicts that will hold steady for 2013.

In its third-quarter outlook CMHC comes in slightly higher at 457,400 homes and projects more than 461,000 sales next year. The Crown Corporation also tracks new home construction and is putting housing starts in the range of 214,000 this year. It expects starts to fall to 194,000 for 2013.

Both groups are forecasting home price increases of between 1% and 1.5% for 2013.


Amy Wilson
yourmortgagegirl@gmail.com
780-919-0475
 

Wednesday, December 5, 2012

Three tips for first-time homebuyers


Three tips for first-time homebuyers

By Shannon Gormley | Mon Nov 26 2012

Julia Thomson hasn’t won the lottery. She hasn’t been reunited with a long lost, fabulously wealthy, and remarkably generous uncle. And she hasn’t discovered oil in her backyard. All of which is surprising, considering this declaration: “We paid off our mortgage in four and a half years.”

When Thomson and her husband were approved for their first mortgage, they didn’t have any assets, but they did have a desire to be mortgage-free as soon as possible. According to her, as well as experts from banks and consumer agencies, first-time homebuyers can take a few steps to ensure that their mortgage is manageable.

Tip #1: Buy the house you can afford

Don’t confuse your budget with your bank’s budget, says Thomson.

“Going in for our mortgage, I was astounded at how much we were approved for. The bank approved us for an amount high enough that it scared us.”  (Come to Amy Wilson - yourmortgagegirl and I will help you creat a budget that works for you!  I am not the bank, I only represent you!)

Julie Hauser, of the Financial Consumer Agency of Canada, confirms that homebuyers need to budget realistically. “Make the right decision for your own needs,” she advises.

Eventually, Thomson and her husband decided to buy a house far less expensive than what the bank would have allowed, and their decision meant they could sacrifice less and pay the mortgage off faster.

Tip #2: When budgeting, consider flexibility on amortization, monthly expenses and financial goals

This year, the maximum amortization on high-ratio-insured mortgages was reduced from 30 years to 25. Colette Delaney, executive vice-president of Mortgage, Lending, Insurance and Deposit Products at CIBC, notes that while this will increase the monthly payment on a mortgage, it will also help homeowners pay it off sooner.

“You can give yourself added flexibility on your amortization by establishing a 25-year mortgage, and then increasing your regular payments to help you reduce that amortization as you begin paying down your mortgage. Should you later need to reduce your payment temporarily – for example, as you welcome a new baby into the family – you can reduce your payment while remaining within your 25-year amortization,” she says.

And, of course, don’t forget to calculate your monthly expenses, possibly with the help of a Amy Wilson - your mortgage girl, to make sure that your payments stay within your comfort zone.

“Your mortgage payments should fit your life – you shouldn’t have to fit your life into a mortgage payment,” Delaney says.

Tip #3: Take the time to get pre-approved

Now more than ever, it’s important to get pre-approval before you even start house hunting. Delaney explains how preapproval will ensure you’re within the ratios for an insured mortgage:

“A pre-approval gives you a guaranteed rate before you begin the process of looking at properties, and allows you to uncover any items that could be an issue for you later in the process,” she says. “For example, if you need some additional documentation to support your income or need to finalize arrangements for your down payment, a pre-approval conversation would identify those issues and give you the time to address them before you make an offer on a property.”

Finally, if new homeowners are looking for tips after they’ve secured their mortgage, Thomson has a big one: “Prioritize it.

“It hurt, but we did it,” she says, remembering large lumps of cash leaving her bank account the week after Christmas. She doesn’t have as many pairs of shoes as she would have otherwise, she admits. “But we weren’t paupers – because we prioritized our mortgage.”

And at least she has bragging rights to having paid it off in four and a half years.

Call Amy Wilson today
780-919-0475

Friday, November 23, 2012

Canadian homes are getting more affordable


TORONTO — Royal Bank says the cost of home ownership became more affordable in the most recent quarter due to a modest decline in home prices and gains in Canadian household incomes.

RBC’s affordability index for a detached bungalow stood at 42% of income nationally in the second quarter.

That means an owner would need to spend 42% of pre-tax annual income to pay for mortgage payments, utilities and property taxes — one percentage point lower than in the third quarter of 2011.

The index fell even more for two-storey homes, by 1.2 percentage points to 47.8% and eased 0.6 percentage points to 28% for condos.

The bank, which publishes the index on a quarterly basis, says ultra low interest rates have been the key factor in keeping affordability levels from reaching dangerous levels in recent years.

Despite the recent improvement in affordability, RBC said the amount of income to service home ownership costs continues to be higher than long-term averages.

RBC notes that Canada’s housing market cooled further in the third quarter, partially because of the effects of a fourth round of rule changes to government-backed mortgage insurance.

The bank expects the negative effect of the changes on home sales will ease by the end of the year and that resale activity will stabilize next year.

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The July-September quarter fully reversed the mild erosion in affordability that occurred during the first half of 2012, said RBC chief economist Craig Wright.

“The broad affordability picture has been somewhat stationary over the last two years, alternating between periods of improvement and deterioration, resulting in an affordability trend that is, on net, essentially flat,” Wright said.

Wright expects the Bank of Canada to begin raising its overnight lending rate for banks — which affects bank’s prime lending rates — from the current 1% in the second half of next year, assuming the euro crisis remains in check and U.S fiscal issues are addressed.

“This, along with the expected continued growth in household income, will lessen the risk of marked erosion in affordability,” he said.


Despite the recent improvement in affordability, RBC said the amount of income to service home ownership costs continues to be higher than long-term averages,

As is often the case, Vancouver’s extremely expensive real-estate skewed the national figures.

“The cost of owning a home took a smaller bite out of household pocketbooks in the third quarter as home prices fell — most notably in the Vancouver area, though it remains the least affordable market in Canada by a wide margin,” explained Wright.

The index in Vancouver stood at 83.2% of income, followed by Toronto at 52.4%, Montreal 40.2%, Ottawa at 38.7%, Calgary at 38.3% and Edmonton at 31.1%.

Monday, November 5, 2012

A quote I like to run my business and life by!


Goals give us a target and bring meaning to our mission. Without goals, life simply happens. But when we have a target, we can move with purpose, helping us achieve more. “People often complain about lack of time, when lack of direction is the real problem,” Ziglar says. “Time can be an ally or an enemy. What it becomes depends entirely upon you, your goals and your determination to use every available minute.”

Amy Wilson
Verico Brokers For Life
780-919-0475
yourmortgagegirl@gmail.com or amy@brokersforlife,ca
www.yourmortgagegirl.ca

Thursday, November 1, 2012

Home Buying Step by Step - Step Four

Step 4: The Buying Process

Step 4: The Buying Process


Starting Your Search

Here are some ways to begin looking for your new home:  The best option is to contact Amy  Wilson and we can work on this together. 780-919-0475 - yourmortgageggirl@gmail.com
  • Word-of-mouth
    Tell everyone you know that you are looking for a new home. Surprising things sometimes happen. For example, you might hear about a home that is just becoming available on the market.
  • Newspapers and real estate magazines
    Check the new homes section in daily newspapers. Look for the free real estate magazines available at newsstands, convenience stores and other outlets. These publications are free and give pictures and short descriptions of homes for sale.
  • The Internet
    Check out real estate websites, such as realtor.ca. These websites give information and pictures of a wide range of properties. Most sites let you search by location, price, number of bedrooms, and other features.
  • “For Sale” signs
    Drive, bike or walk around a neighbourhood that interests you and look for “For Sale” signs. This is a good way to find homes that are being sold by the owner and are not listed with an agent.
  • Visit new development sites
    If you are looking for a newly built home, you can see available models and get information from builders.
  • Work with a realtor
    For most buyers, a realtor is key to finding the right home.

Useful Tips for Your Search

  • Keep records
    Whether you have a realtor or are looking by yourself, visit lots of homes before choosing one. Some things to compare are the home’s energy rating, utility costs, property taxes and major repairs. These will affect your monthly housing expenses. You can ask to see copies of utility and other bills. Use the CMHC Home Hunting Comparison Worksheet to make sure you get all the information you need to compare homes.
  • Check out the property’s current financing
    If the existing mortgage on the home is favourable, it may be possible to take it over from the vendor. It may even be possible to get a vendor take back mortgage, to help close the deal.
  • Think twice
    Even if a home seems perfect, go back and take a closer, more critical look at it. Visit it on different days and different times of the day. Chat with the neighbours. Look deeper — don’t be distracted by attractive surface details.
  • Energy Rating
    Some houses and most new homes in Canada have an Energy Rating that describes the energy efficiency of the home. An energy-rated home usually has a sticker with the rating on the electrical panel. The energy rating is on a 0 – 100 scale. The higher the rating, the more energy-efficient is the home, and the less it costs to operate.
  • CMHC statistics and analysis
    CMHC has the latest statistical information and analysis of housing trends. Our Market Analysis Centre tracks information for local, provincial and national markets.

Making an Offer to Purchase

After you have found the home you want to buy, you need to give the vendor an Offer to Purchase (sometimes called an Agreement of Purchase and Sale). It is very helpful to work with a realtor (and/or a lawyer/notary) to prepare your offer. The Offer to Purchase is a legal document and should be carefully prepared.
These items are typically included:
  • Names
    Your legal name, the name of the vendor and the legal civic address of the property.
  • Price
    The price you are offering to pay.
  • Things included
    Any items in or around the home that you think are included in the sale should be specifically stated in your offer. Some examples might be window coverings and appliances.
  • Amount of your deposit
  • The closing day
    The closing day is the date you take possession of the home. It is usually 30 – 60 days after the date of agreement. But, it can be 90 days, or even longer.
  • Request for a current land survey of the property.
  • Date the offer expires
    After this date the offer becomes null and void — that means it’s no longer valid.
  • Other conditions
    Other conditions may include a satisfactory home inspection report, a property appraisal, and lender approval of mortgage financing. This means that the contract will become final only when the conditions are met.

What Happens After You Make an Offer to Purchase?

Imagine that your realtor has helped you prepare an Offer to Purchase. This offer includes all the details of the sale. To be extra cautious (since you know an Offer to Purchase is legally binding) ask your lawyer to look at it before showing it to the vendor. The realtor presents the offer to the vendor. What can you expect to happen next? There are three possible responses.
  • Response 1
    The vendor accepts your offer. The deal is concluded and you move on to the next steps in the buying process.
  • Response 2
    The vendor makes a counter-offer. The counter-offer might ask for a higher price, or different terms. You can sign the offer back to the vendor, offering a higher price than your original offer, but lower than the vendor’s counter-offer. If the vender accepts this counter-offer, the deal is concluded.
  • Response 3
    The vendor makes a counter-offer, asking for a higher price or different terms. If a counter-offer is returned to you at a higher price, ensure that you know exactly how much you can afford before you start negotiating. You don’t want to get caught up in the heat of the moment with costs you can’t afford. You reject the counter-offer because the price is still too high, or you can’t agree to the conditions. The sale doesn’t go through, and your deposit is returned.

Rita: A Homeowner’s Experience

Rita made an Offer to Purchase on an older property. Her real estate agent, Nissa, suggested that a home inspection should be done and that approval of mortgage financing be a condition of the offer. The inspection showed repairs that would have cost more than Rita could afford.

Getting a Mortgage

Once your Offer to Purchase has been accepted, go to see your lender. Your lender will verify (and update, if necessary) your financial information and put together what’s needed to complete the mortgage application. Your lender may ask you to get a property appraisal, a land survey, or both. You may also be asked to get title insurance. Your lender will tell you about the various types of mortgages, terms, interest rates, amortization periods and, payment schedules available.
Depending on your down payment, you may have a conventional mortgage or a high-ratio mortgage.

Types of Mortgages

Conventional Mortgage

A conventional mortgage is a mortgage loan that is equal to, or less than, 80% of the lending value of the property. The lending value is the property’s purchase price or market value — whichever is less. For a conventional mortgage, the down payment is at least 20% of the purchase price or market value.

High-ratio Mortgage

If your down payment is less than 20% of the home price, you will typically need a high-ratio mortgage. A high-ratio mortgage usually requires mortgage loan insurance. CMHC is a major provider of mortgage loan insurance. Your lender may add the mortgage loan insurance premium to your mortgage or ask you to pay it in full upon closing.

Mortgage Term

Your lender will tell you about the term options for the mortgage. The term is the length of time that the mortgage contract conditions, including interest rate, will be fixed. The term can be from six months up to ten years. A longer term (for example, five years) lets you plan ahead. It also protects you from interest rate increases. Think carefully about the term that you want, and don’t be afraid to ask your lender to figure out the differences between a one, two, five-year (or longer) term mortgage.

Mortgage Interest Rates

Mortgage interest rates are fixed, variable or adjustable.

Fixed Mortgage Interest Rate

A fixed mortgage interest rate is a locked-in rate that will not increase for the term of the mortgage.

Variable Mortgage Interest Rate

A variable rate fluctuates based on market conditions. The mortgage payment remains unchanged.

Adjustable Mortgage Interest Rate

With an adjustable rate, both the interest rate and the mortgage payment vary, based on market conditions.

Open or Closed Mortgage

Closed Mortgage

A closed mortgage cannot be paid off, in whole or in part, before the end of its term. With a closed mortgage you must make only your monthly payments — you cannot pay more than the agreed payment. A closed mortgage is a good choice if you’d like to have a fixed monthly payment. With it you can carefully plan your monthly expenses. But, a closed mortgage is not flexible. There are often penalties, or restrictive conditions, if you want to pay an additional amount. A closed mortgage may be a poor choice if you decide to move before the end of the term, or if you want to benefit from a decrease of interest rates.

Open Mortgage

An open mortgage is flexible. That means that you can usually pay off part of it, or the entire amount at any time without penalty. An open mortgage can be a good choice if you plan to sell your home in the near future. It can also be a good choice if you want to pay off a large sum of your mortgage loan. Most lenders let you convert an open mortgage to a closed mortgage at any time, although you may have to pay a small fee.

Amortization

Amortization is the length of time the entire mortgage debt will be repaid. Many mortgages are amortized over 25 years, but longer periods are available. The longer the amortization, the lower your scheduled mortgage payments, but the more interest you pay in the long run. If each mortgage term is five years, and the mortgage is amortized over 20 years, you will have to renegotiate the mortgage four times (every five years).

Payment Schedule

A mortgage loan is repaid in regular payments — monthly, biweekly or weekly. More frequent payment schedules (for example weekly) can save some interest costs by reducing the outstanding principal balance more quickly. The more payments you make in a year, the lower the overall interest you have to pay on your mortgage.

New Home Warranty Programs

Each province has new home warranty programs.
British Columbia
See the Homeowner Protection Office at www.hpo.bc.ca for the most up-to-date list of warranty programs. These include:
Lombard Canada New Home Warranty Program: www.lombard.ca
Travelers Guarantee Company of Canada (formerly London Guarantee Insurance Company): www.travelersguarantee.com
National Warranty Program Ltd.: (includes Royal and Sun Alliance) www.nationalhomewarranty.com
Pacific Home Warranty Insurance Services Inc. (Echelon General Insurance Company): www.pacificwarranty.com
Willis Canada Ltd (Commonwealth Insurance): www.williswarranty.com
Alberta
Progressive New Home Warranty Program (Echelon General Insurance Company): www.progressivewarranty.com
National Home Warranty Program Ltd.: www.nationalhomewarranty.com
New Home Warranty Program of Alberta: www.anhwp.com
Blanket Home Warranty Ltd.: www.blankethomewarranty.ca
Saskatchewan
Progressive New Home Warranty Program (Echelon General Insurance Company): www.progressivewarranty.com
National Home Warranty Program Ltd.: www.nationalhomewarranty.com
New Home Warranty Program of Saskatchewan: www.nhwp.org
Blanket Home Warranty Ltd.: www.blankethomewarranty.ca
Manitoba
Progressive New Home Warranty Program (Echelon General Insurance Company): www.progressivewarranty.com
National Home Warranty Program Ltd.: www.nationalhomewarranty.com
New Home Warranty Program of Manitoba: www.mbnhwp.com
Blanket Home Warranty Ltd.: www.blankethomewarranty.ca
Ontario
Tarion Warranty Corporation: www.tarion.com
Quebec
Garantie des maisons neuves de l ’APCHQ: www.gomaison.com
Garantie des maisons neuves de l’ACQ: www.acq.org
La garantie des maîtres bâtisseur: www.maitresbatisseurs.com
New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador
Atlantic Home Warranty Program: www.ahwp.org
Lux Residential Warranty Program: www.luxrwp.com
Progressive New Home Warranty Program (Echelon General Insurance Co.): www.progressivewarranty.com

Closing Day

Closing day is the day when you finally take legal possession and get to call the house your home. The final signing usually happens at the lawyer or notary’s office.
These are the things that happen on closing day:
  • Your lender will give the mortgage money to your lawyer/notary.
  • You must give the down payment (minus the deposit) to your lawyer/notary. You must also give the remaining closing costs.
  • Your lawyer/notary
    • Pays the vendor
    • Registers the home in your name
    • Gives you the deed and the keys to your new home

Moving

Hiring a Mover

When planning your move, friends or relatives may be able to recommend a professional moving company. Don’t forget to ask the mover for references. Ask the mover for an estimate and outline of fees (Do they charge a flat rate or hourly fee?). Once you’ve chosen a mover, ask them to come to your home to see what will be moved in case the estimate needs to be changed.
You’ll want to ensure that your belongings are insured during the move. Your home or property insurance may cover goods in transit. Call your broker or insurance company to be sure. Ask if you are fully covered. Many moving companies offer additional insurance coverage. Be aware that professional movers are not responsible for items such as jewellery, money, or important papers. Move these yourself to keep them safe.
If you decide to do your own packing, keep in mind that you will need the proper materials, and that packing can take up a lot of time.

Moving Day

On moving day, go through the house with the van supervisor and give him (or her) any special instructions. The supervisor will note the condition of your goods on an inventory list. Go through the house with the supervisor to make sure the list is complete and accurate. When the van arrives at your new home, mark off the items on the mover’s list as they are unloaded. If you paid for the movers to unpack boxes and remove packing materials, remember that they will not put dishes or linens into cupboards.
Moving day is almost always tiring. But, planning ahead will make the transition as smooth as possible.

Moving Costs

The amount you spend depends on your decisions about many things. Here are some to think about:
  • Do you want to hire professional movers?
  • If so, will it be a large company, or a smaller local moving company?
  • Will you need to buy insurance to protect your items in transit?
  • If you plan to move yourself, will you rent a vehicle?
  • Will your current auto or home insurance policy cover your items during the move?
  • Will you have to pay utility companies a fee to connect their services in your new home? Are there other utility charges (such as a deposit)?

Post-Closing Costs

Changing the Locks

When you move into your new home you’ll want to change the exterior door locks for security. After all, you want only the people you choose to have the key to your new home. You can change the locks yourself, or call a locksmith to do the job.

Cleaning

Both your old home and your new home should be given a thorough cleaning at moving time. Whether you’re buying cleaning supplies and doing it yourself, or hiring someone to clean for you, the costs can really add up. Plan for this expense.

Decorating

You might want to re-paint, replace some light fixtures, refinish the floor, re-carpet, or do any number of other re-decorating tasks. Plan your budget, and consider postponing some projects for a period of time.

Appliances

If your offer to purchase didn’t include appliances, and if you don’t have your own, you will have to buy them when you move into your new home. Some appliances might have installation charges.

Tools and Equipment

When you own your own home, you can no longer call the landlord to do repairs. You’ll need to own some basic hand tools and possibly some gardening and snow clearing equipment.

Tuesday, October 30, 2012

Home Buying Step by Step - Step 3

Step 3: Which Home is Right for You?

Step 3: Which Home is Right for You?


Once you have a good idea about your finances, you’ll need to think clearly about the home you’d like to buy.

Your Needs — Now and in the Future

Try to buy a home that meets most of your needs for the next 5 to 10 years, or find a home that can grow and change with your needs.
Here are some things to consider.
Size
How many bedrooms do you need?
How many bathrooms do you need?
Do you need space for a home office?
What kind of parking facilities do you need? For how many cars?
Special features
Do you want air conditioning? If so, what type?
Do you want storage or hobby space?
Is a fireplace or a swimming pool high on your list?
Do you have family members with special needs?
Do you want special features to save energy, enhance indoor air quality, and reduce environmental impact?
Lifestyles and stages
No matter what type of housing you choose, you must have a clear idea of your needs today, as well as your possible future needs. These are some examples of questions homebuyers might ask:
Do I plan to have children?
Do I have teenagers who will be moving away soon?
Am I close to retirement?
Will I need a home that can accommodate different stages of life?
Do I have an older relative who might come to live with me?
The CMHC worksheet Home Features Checklist can help you think about what you need today, and what you may need in the future. Complete the worksheet and print it.
FlexHousing™ is a housing concept that incorporates, at the design and construction stage, the ability to make future changes easily and with minimum expense, to meet the evolving needs of its occupants.

 

What Location Should You Choose?

Location is a critical factor. A home with everything you need, in the wrong location, is probably not the right home for you. Here are some things to consider about location.
  • Do you want to live in a city, a town or in the countryside?
  • How easy will it be to get to where you work? How much will the commuting cost?
  • Where will your children go to school? How will they get there?
  • Do you need a safe walking area, or recreational facility, such as a park, nearby?
  • How close would you like to be to family and friends?
Download a copy of the Your Next Move: Choosing a Neighbourhood with Sustainable Features fact sheet.

What is a Sustainable Neighbourhood?

A sustainable neighbourhood meets your needs, while protecting the environment. Homes in a sustainable neighbourhood are located near shops, schools, recreation, work and other daily destinations. This helps reduce driving costs and lets residents enjoy the health benefits of walking and cycling. Land and services, like roads, are used efficiently. Sustainable neighbourhoods also feature a choice of homes that are affordable.
In your search for a sustainable neighbourhood, here are some questions to ask:
  • Easy transportation
    • Are stores, schools, recreation facilities, restaurants, and health services within walking or cycling distance? Will your children need to take a bus to school? Can they walk to the park? Can you do most of your shopping without a car?
    • Are there nearby bus stops and cycling lanes? How long is the bus ride to work, or school? Can you safely bike?
  • House size and features
    • Are the homes compact with shared walls to reduce heating costs?
    • Are homes reasonably sized with lots requiring less upkeep?
    • Are there different dwelling types (such as single-detached, semi-detached, townhouse and apartments) in the neighbourhood?
    • Are the lots modestly sized? Roadways narrow? Driveways/parking areas small? Do natural drain ways lead to streams and storm water ponds or park lands? Is there native vegetation and streams with woodland edges?
  • “Look and feel”
    • Do the buildings have a friendly face to the street? Are the community centres, shops and meeting places welcoming?
    • Are there trees lining the street? Do you find the homes interesting to look at? Do the building sizes feel comfortable to you? Are the roads easy to walk along or cross?
  • Safety
    • Do the homes have “eyes on the street”? (In other words, are there people around who might watch out for you? Is there somewhere to go in an emergency?)
    • Is there adequate street lighting?
    • Are there safe places for children to play?
    • Are the streets safe for cyclists and pedestrians?
    • Is traffic slow moving and light?
Use the CMHC worksheet What’s Important to You to figure out the things that are important in your neighbourhood.

Do You Want a New Home or a Previously-Owned Home?

A new home is one that has just been built – no one else has lived in it yet. You might buy a new home from a contractor who has built it, or you might hire a contractor to build it for you. A previously-owned home (often called a resale) has already been lived in. Here are some characteristics of each type of home.

New Home

  • Up-to-date
    • A new home has up-to-date design that might reflect the latest trends, materials and features.
  • Choices
    • You may be able to choose certain features such as style of siding, flooring, cabinets, plumbing and electrical fixtures.
    • You may have to pay extra if you want to add certain features, such as a fireplace, trees and sod, or a paved driveway. Make sure you know exactly what's included in the price of your home.
  • Costs
    • Taxes such as the Goods and Services Tax (GST) (or, in certain provinces, the Harmonized Sales Tax (HST)) apply to a new home. However, you may qualify for a rebate of part of the GST or HST on homes that cost less than $450,000. For more information about the GST New Housing Rebate program, visit the Canada Revenue Agency website at www.cra-arc.gc.ca.
    • A new home will have lower maintenance costs because everything is new, and many items are covered by a warranty. You should set aside money every year for future maintenance costs.
  • Warranties
    • A warranty may be provided by the builder of the home. Be sure to check all the conditions of the warranty. It can be very important if a major system such as plumbing, or heating, breaks down.
    • New Home Warranty programs are generally provided by provincial and territorial governments. There are also private new home warranty programs. In some provinces a warranty may be provided by the builder of the home. Check with your realtor or lawyer/notary to find out what the new home warranty program in your province or territory covers.
  • Neighbourhood amenities
    • schools, shopping malls and other services, may not be completed for years.

Building Your Own Home

Some people prefer the challenge and flexibility of building their own home. On one hand, you make all the decisions about size, design, location, quality of material, level of energy-efficiency and so on. On the other hand, expect to invest lots of time and energy.

Resale Home

  • When the home already exists, you can see what you are buying. Since the neighbourhood is established, you can see how easy it is to access services such as schools, shopping malls, libraries, etc.
  • Landscaping is usually done and fencing installed. Previously owned homes may have extras like fireplaces or finished basements or swimming pools.
  • You don't have to pay the GST/HST unless the house has been renovated substantially, and then the taxes are applied as if it were a new house.
  • You may need to redecorate, renovate or do major repairs such as replacing the roof, windows and doors.

What Type of Home Should You Buy?

What types of homes will you be visiting with the idea of buying? Do you see yourself living in a detached single-family home? Or, perhaps a townhouse? Maybe, a duplex?

Single-family Detached

A single-family detached home is one dwelling unit. It stands alone, and sits on its own lot. This often gives the family a greater degree of privacy.

Single-family Semi-detached

A semi-detached home is a single-family home that is joined on one side to another home. It can offer many of the advantages of a single-family detached home. It is often less expensive to buy and maintain.

Duplex

A duplex is a building containing two single-family homes, located one above the other. Sometimes, the owner lives in one unit and rents the other.

Row House (Townhouse)

Row houses (also called townhouses) are several similar single-family homes, side-by-side, joined by common walls. They can be freehold or condominiums. They offer less privacy than a single-family detached home, although each has a separate outdoor space. These homes can cost less to buy and maintain, even though some are large, luxury units.

Stacked Townhouse

Stacked townhouses are usually two-storey homes. Two two-story homes are stacked one on top of the other. The buildings are usually attached in groups of four or more. Each unit has direct access from the outside.

Link or Carriage Home

A link, or carriage home, is joined by a garage or carport. The garage or carport gives access to the front and back yards. Builders sometimes join basement walls so that link houses appear to be single-family homes on small lots. These houses can be less expensive than single-family detached homes.

Manufactured Home

A manufactured home is a factory-built, single-family home. It is transported to a chosen location, and placed onto a foundation.

Modular Home

A modular home is also a factory-built, single-family home. The home is typically shipped to a location in two, or more, sections (or modules).

Mobile Home

Mobile homes, like manufactured or modular homes, are built in factories, and then taken to the place where they will be occupied. While these homes are usually placed in one location and left there permanently, they do retain the ability to be moved.

Apartment

A self-contained unit in part of a building consisting of a room or set of rooms including kitchen and bathroom facilities.

Forms of Ownership

People who do not rent their home, own it. There are two forms of ownership.

Freehold
Freehold means that one person (or two, such as joint ownership by spouses) owns the land and house outright. There is no space co-owned or co-managed with owners of other units.
Freehold owners can do what they want with their property — up to a point. They must obey municipal bylaws, subdivision agreements, building codes and federal and provincial laws, such as those protecting the environment.
Detached and semi-detached homes, duplexes and townhouses are usually owned freehold.
Condominium
Condominium ownership means you own the unit you live in and share ownership rights for the common space of the building. Common space includes areas such as corridors, the grounds around the building, and facilities such as a swimming pool and recreation rooms. Condominium owners together control the common areas through an owners’ association. The association makes decisions about using and maintaining the common space.
Condominium ownership is ownership of a unit, usually in a highrise but can also be a townhouse or in a lowrise.

Contact Amy Wilson 780-919-0475, yourmortgagegirl@gmail.com

to see more of this article at http://www.cmhc-schl.gc.ca/en/co/buho/hostst/hostst_003.cfm
 

Monday, October 29, 2012

Home Buying Step by Step

Step 2: Are You Financially Ready?

Step 2: Are You Financially Ready?


How can you know if you are financially ready to become a homeowner?
This step guides you through some simple calculations to figure out your current financial situation, and the maximum home price that you should consider.  You can lso go rght ot CMHC website to use many of their online tools or contact Amy Wilson and I can show ou how to use these tool to ensure you are ready for your home purchase. 780-919-0475 or yourmortgagegirl@gmail.com.

How Much are You Spending Now?

Calculate Your Household Expenses

Start figuring out your financial readiness by evaluating your present household budget. How much are you spending each month? Knowing exactly how much, will give you a better idea about whether you can afford to become a homeowner.
The Current Household Budget worksheet helps you take a realistic look at your current monthly expenses.
Or, you may also use the CMHC Household Budget Calculator to complete your current household budget now.

Calculate Your Monthly Debt Payments

Do you know how much debt you are carrying? You need this information to figure out whether you are financially ready for homeownership. If you decide to buy a home, mortgage lenders will ask for this information.  See below for ideas of monthly debt, If you go to CMHC's website you can fill the chart in that you see below:

Monthly Debt PaymentsAverage Monthly Amount

Calculate Your Total Monthly Expenses

Your total monthly expenses are your household expenses plus your debt payments. To calculate your monthly expenses, add the total from the Current Household Budget as Homeowner to the total from Monthly Debt Payments form, using the form below.
Household expenses
(Total from Current Household Budget)
Debt Payments
(Total from Monthly Debt Payments form)
TOTAL

How Much Can You Afford?

Before you begin shopping for a home, it’s important to know how much you can afford to spend on homeownership. You will want to plan ahead for the various expenses related to homeownership. In addition to purchasing the home, other significant expenses will include heating, property taxes, home maintenance and renovation as required. Two simple rules can help you figure out how much you can realistically pay for a home. You must understand these rules to understand if you will be able to get a mortgage.

Affordability Rule 1 - THis is a great place to get me involved - these rules are important to understand but can get a bit complicated and I am here to navigate you through them - AMY WILSON 780-919-0475 or yourmortgagegirl@gmail.com.

The first rule is that your monthly housing costs shouldn't be more than 32% of your gross monthly income.   This is your income before you pay your personnal taxes. Housing costs include your monthly mortgage payments (principal and interest), property taxes and heating expenses. This is known as PITH for short — Principal, Interest, Taxes and Heating.

If you are thinking of buying a condominium or leasehold tenure

For a condominium, PITH also includes half of the monthly condominium fees.
For leasehold tenure, PITH also includes the entire annual site lease.
Lenders add up your housing costs and figure out what percentage they are of your gross monthly income. This figure is called your Gross Debt Service (GDS) ratio. To be considered for a mortgage, your GDS must be 32% or less of your gross household monthly income.

Affordability Rule 2

The second rule is that your entire monthly debt load should not be more than 40% of your gross monthly income. Your entire monthly debt load includes your housing costs (PITH) plus all your other debt payments (car loans or leases, credit card payments, lines of credit payments, etc.). You have calculated these on the Monthly Debt Payments form. This figure is called your Total Debt Service (TDS) ratio.
Fill in the tables below to determine your GDS and TDS ratios.
GDS Ratio

(before deductions)
* Gross salary is income before taxes.


TDS Ratio
Add up your monthly payments for loans, credit cards and other debts

Your Maximum House Price

The maximum home price that you can realistically afford depends on a number of factors. The most important factors are your household gross monthly income, your down payment and the mortgage interest rate. For many people, the hardest part of buying a home — especially their first one — is saving the necessary down payment.
Note: For CMHC-insured mortgage loans, the maximum purchase price or as-improved property value must be below $1,000,000, when the loan-to-value ratio is greater than 80%.

Calculate Your Maximum House Price

Use the Mortgage Affordability Calculator below to figure out the maximum home price you can afford, the maximum mortgage amount you can borrow, and your monthly mortgage payments (including principal and interest).
  1. Interest is compounded semi-annually not in advance. The interest rate is fixed for the term of the mortgage. The interest rate is usually renegotiated at the end of the term of the mortgage.
  2. Minimum down payment may vary.
  3. These calculations are approximate. They do not account for the payment of CMHC Insurance Premiums, applicable sales taxes, closing costs, or other fees that may be required.
CMHC Mortgage Calculator is for general illustrative purposes only. The amounts it projects are based upon assumptions and estimates made according to generally accepted principles for mortgages in Canada. CMHC cannot guarantee the projections. Actual payment amount must be obtained from your lender. Neither CMHC nor any of its advisors shall have any liability for the accuracy of this information.

Mortgage Loan Insurance

Mortgage loan insurance helps protect lenders against mortgage default, and enables consumers to purchase homes with a minimum down payment of 5% — with interest rates comparable to those with a 20% down payment.
The CMHC Mortgage Loan Insurance premium is calculated as a percentage of the loan and is based on the size of your down payment. The higher the percentage of the total house price/value that you borrow, the higher percentage you will pay in insurance premiums. The cost for Mortgage Loan Insurance premiums is usually offset by the savings you get from lower interest rates.
Financing Required
Premium % of Loan
Up to and including 65%
0.50
Up to and including 75%
0.65
Up to and including 80%
1.00
Up to and including 85%
1.75
Up to and including 90%
2.00
Up to and including 95%
Traditional Down Payment
Non-traditional Down Payment
2.75
2.90
Extended Amortization Surcharges
Add 0.20% for every 5 years of amortization beyond the 25 year mortgage amortization period.
Note: The amortization cannot exceed 25 years for mortgage loan-to-value ratios > 80%.
* Premiums in Manitoba (effective July 15, 2012), Ontario and Quebec are subject to provincial sales tax. The provincial sales tax cannot be added to the loan amount.

Do Your Calculations Look Encouraging? I can help!  If you are ready, I can get you working with an excellent realtor or if you are looking for a new home I have all the connections to get you started there as well.  First Step - contact me ( Amy Wilson at 780-919-0475 or yourmortgagegirl@gmail.com to be pre qualified!)

What is your current financial situation? After doing the calculations, do you feel fairly confident about beginning the homebuying process? You’re ready to proceed with homeownership.

Do Your Calculations Look Discouraging?  I can help!  Contact me ( Amy Wilson) and we can work out a plan together with a set time frame and goals so we can get you into a home!

You may need to step back and make some improvements. Did your calculations show that you might have trouble meeting monthly debt payment? If that’s the case, you may find it difficult to get approved for a mortgage. Here are some things you can do to improve your situation:
  • Pay off some loans first.
  • Save for a larger down payment.
  • Take another look at your current household budget to see where you can spend less. The money you save can go towards a larger down payment.
  • Lower your home price — remember that your first home is not necessarily your dream home.
Here are some more helpful strategies:
  • Meet with a credit counsellor. He (or she) can help you figure out how to minimize your debts.
  • Buy your home through a rent-to-own program. These are sometimes provided by the builder or a non-profit sponsor.
  • Find out about programs through which you can help build your own home.
  • Ask the housing department of your municipality if any special programs exist.

What are Your Next Steps?

Get a Copy of Your Credit Report

Before approving a mortgage, lenders will want to see how well you have paid your debts and bills in the past. To do this, they consider your credit history (credit report) from a credit bureau. This tells them about your financial past and how you have used credit.
Before looking for a mortgage lender, get a copy of your own credit history. There are two main credit-reporting agencies: Equifax Canada Inc. and TransUnion of Canada. You can contact either one of them to get a copy of your credit report. There is often a fee for this service.
Once you receive your credit report, examine it to make sure the information is complete and accurate.

If you have no credit history

If you have no credit history, it is important to start building one by, for example, applying for a standard credit card with good interest rates and terms, making small purchases and paying them as soon as the bill comes in.

If you have a poor credit history

If you have poor credit, lenders might not be able to give you a mortgage loan. You will need to re-establish a good credit history by making debt payments regularly and on time. Most unfavourable credit information (including bankruptcy) drops off your credit file after seven years.
Consider getting some credit counselling if you have a history of poor credit or talk to your lender to discuss options.

Get a Mortgage Pre-Approval

It’s a very good idea to get a pre-approved mortgage before you start shopping. Many realtors will ask if you’ve been approved. A lender will look at your finances and figure the amount of mortgage you can afford. Then the lender will give you a written confirmation, or certificate, for a fixed interest rate. This confirmation will be good for a specific period of time. A pre-approved mortgage is not a guarantee of being approved for the mortgage loan.
Even if you haven’t found the home you want to buy, having a pre-approved mortgage amount will help keep a good price range in mind.
Bring these with you the first time you meet with a lender:
  • Your personal information, including identification such as your driver's license
  • Details on your job, including confirmation of salary in the form of a letter from your employer
  • All your sources of income
  • Information and details on all bank accounts, loans and other debts
  • Proof of financial assets
  • Source and amount of down payment and deposit
  • Proof of source of funds to cover the closing costs (these are usually between 1.5% and 4% of the purchase price)

Make Your Mortgage Work for You

Your lender or broker will offer you several choices to help find you the mortgage that best matches your needs. Here are some of the most common. Amy Wilson - yourmortgagegirl@gmail.com

Amortization Period

Amortization refers to the length of time you choose to pay off your mortgage. Mortgages typically come in 25 amortization periods. However, they can be as short as 15 years. Usually, the longer the amortization, the smaller the monthly payments. However, the longer the amortization, the higher the interest costs. Total interest costs can be reduced by making additional (lump sum) payments when possible.

Payment Schedule

You have the option of repaying your mortgage every month, twice a month, every two weeks or every week. You can also choose to accelerate your payments. This usually means one extra monthly payment per year.

Interest Rate Type

You will have to choose between “fixed”, “variable” or “protected (or capped) variable”. A fixed rate will not change for the term of the mortgage. This type carries a slightly higher rate but provides the peace of mind associated with knowing that interest costs will remain the same.
With a variable rate, the interest rate you pay will fluctuate with the rate of the market. Usually, this will not modify the overall amount of your mortgage payment, but rather change the portion of your monthly payment that goes towards interest costs or paying your mortgage (principal repayment). If interest rates go down, you end up repaying your mortgage faster. If they go up, more of the payment will go towards the interest and less towards repaying the mortgage. This option means you may have to be prepared to accept some risk and uncertainty.
A protected (or capped) variable rate is a mortgage with a variable interest rate that has a maximum rate determined in advance. Even if the market rate goes above the determined maximum rate, you will only have to pay up to that maximum.
Use the Mortgage Payment Calculator to find how much and how often your payment will be. Compare options and find one that's right for you.
CMHC Mortgage Calculator is for general illustrative purposes only. The amounts it projects are based upon assumptions and estimates made according to generally accepted principles for mortgages in Canada. CMHC cannot guarantee the projections. Actual payment amount must be obtained from your lender. Neither CMHC nor any of its advisors shall have any liability for the accuracy of this information.

Mortgage Term

The term of a mortgage is the length of time for which options are chosen and agreed upon, such as the interest rate. It can be as little as six months or as long as five years or more. When the term is up, you have the ability to renegotiate your mortgage at the interest rate of that time and choose the same or different options.

“Open” or “Closed” Mortgage

An open mortgage allows you to pay off your mortgage in part or in full at any time without any penalties. You may also choose, at any time, to renegotiate the mortgage. This option provides more flexibility but comes with a higher interest rate. An open mortgage can be a good choice if you plan to sell your home in the near future or to make large additional payments.
A closed mortgage usually carries a lower interest rate but doesn’t offer the flexibility of an open mortgage. However, most lenders allow homeowners to make additional payments of a determined maximum amount without penalty. Typically, most people will select a closed mortgage.

Up-front Costs

TED AND SHAYLA

Ted and Shayla have found a newly built home. The asking price is $200,000 including the GST.
After adding together wedding gifts, a small inheritance and other savings Ted and Shayla found that they have $28,900.

Figure Out the Up-front Costs

There are many up-front costs when you buy a home. Early planning will help make sure things go smoothly.

Down Payment

A down payment is the part of the home price that does not come from the mortgage loan. The down payment comes from your own money. You can buy your home with a minimum down payment of 5%, if you have mortgage loan insurance from CMHC. You need a down payment of at least 20% for a conventional mortgage.

Deposit

The deposit is paid when you make an Offer to Purchase to show that you are a serious buyer. The deposit will form part of your down payment with the remainder owing at time of closing. If for some reason you back out of the deal without having covered yourself with purchase conditions, such as financing, home inspection, etc., your deposit may not be refundable and you may be sued for damages. The size of the deposit varies. Your realtor or lawyer / notary can help you decide on the amount.

Appraisal Fee

Your mortgage lender may ask you to pay for a recognized appraisal in order to complete a mortgage loan. An appraisal is an estimate of the value of the home. The cost is usually between $250 and $350 and must be paid when you contract for those services.
Having an independent appraisal done on a property before you make an offer is a good idea. It will tell you what the property is worth and help ensure that you are not paying too much.
The appraisal should include:
  • Assessment of the property's physical and functional characteristics
  • Analysis of recent comparable sales
  • Assessment of current market conditions affecting the property
Ask your realtor or other member of your team to help you find an appraiser.

Mortgage Loan Insurance Premium

If you make less than a 20% down payment, you have a high-ratio mortgage. With a high-ratio mortgage your lender will need mortgage loan insurance. Mortgage loan insurance lets you buy a home with a minimum down payment of 5%.
Most Canadian lending institutions require mortgage loan insurance because it protects the lender. If the borrower defaults (fails to pay) on the mortgage, the lender is paid back by the insurer. You pay a premium for mortgage loan insurance. Your lender will add the mortgage loan insurance premium to your monthly payments, or ask you to pay it in full upon closing.

Mortgage Broker’s Fee

You may have decided to use a mortgage broker. The job of the mortgage broker is to find you a lender with the terms and rates that will best suit you.

Home Inspection Fee

CMHC recommends that you make a home inspection a condition of your Offer to Purchase. A home inspection is done by a qualified home inspector to provide you with information on the condition of the home. It generally costs about $500, depending on the age, size and complexity of the house and the condition that it is in. For example, it may be more costly to inspect a large, older, home, or one in relatively poor condition or that has many pre-existing problems or concerns.

Survey or Certificate of Location Cost

The mortgage lender may ask for an up-to-date survey or certificate of location. If the seller has a survey, but it is more than five years old, it will probably need to be updated. You should ask the seller to provide an updated survey, especially if there has been a new addition, deck or fence built close to the property line. If the seller does not have one, or does not agree to get one, you may have to pay for it yourself.
Remember, you must have permission from the property owner before hiring a surveyor to go onto the property. Ask your realtor to help co-ordinate this with the owner. A survey or certificate of location can cost $1,000 to $2,000.

Title Insurance

Your lender, lawyer, or notary may suggest that you get title insurance. This will cover loss caused by defects of title to the property.

Land Registration Fees

Land Registration fees are sometimes called Land Transfer Tax, Deed Registration Fee, Tariff or Property Purchases Tax. In some provinces and territories, you may have to pay this provincial or municipal charge when you close the sale. The cost is a percentage of the property’s purchase price. Check on the internet or with your lawyer (or notary) or other team member to find out about the current rates. These fees can cost a few thousand dollars.

Water Tests

If the home has a well, you will want to have the quality of the water tested to ensure that the water supply is adequate and the water is drinkable. You can negotiate these costs with the vendor and list them in your Offer to Purchase.

Septic Tank

If the house has a septic tank, it should be professionally checked to make sure it is in good working order. You may negotiate the cost with the vendor and list it in your Offer to Purchase.

Estoppel Certificate Fee (does not apply in Quebec)

This applies if you are buying a condominium, or strata unit, and could cost up to $100. Also called a Status Certificate it outlines a condominium corporation’s financial and legal state.

Prepaid Property Taxes and/or Utility Bills

Property taxes are charged by the municipality where the home is located. They are based on the value of the home. The seller may have already paid property tax or other expenses that apply to the time after the house passes into your hands. You need to pay back the seller for taxes and other costs (including items like filling the oil tank).

Property Insurance

The mortgage lender requires you to have property insurance because your home is security for the mortgage. Property insurance covers the cost of replacing your home and its contents in case of loss. Property insurance must be in place on closing day.

Legal Fees

Legal fees and related costs must be paid on closing day. The minimum cost is $500 (plus GST/HST). In addition, your lawyer or notary will charge you direct costs to check on the legal status of the property.

Other Costs

Depending on your situation, you may have some other initial expenses to consider:
  • Moving expenses
    Whether you’ll be hiring a moving company, or renting a truck and asking friends for help, there are likely to be moving expenses.
  • Renovations or repairs
    Can renovations, or repairs, be delayed, or are some necessary to do immediately?
  • Condominium Fees
    Do you have to make the initial payment for these monthly fees?
  • Service connection fees
    Telephone, gas, electricity, cable TV, satellite TV, Internet, and so on, may charge service connection fees. Some utilities may ask you to pay a deposit.
  • Appliances
    Does your new home come with appliances? Do you already have your own?
  • Gardening equipment
    Will you need to buy gardening equipment, the first summer in your new home?
  • Snow-clearing equipment
    Will you need to buy snow-clearing equipment, the first winter in your new home?
  • Window treatments
    Do blinds, or curtains come with the house?
  • Decorating materials
    Do you want to re-paint or apply wallpaper? Do the floors need to be refinished or re-carpeted? Do you have all the tools you need for redecorating?
  • Hand tools
    Do you have the basic hand tools you’ll need for your new home?
  • Dehumidifier
    Will you need a dehumidifier to control moisture levels?