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Heather Fuller
Broker, CRA

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Helpful Tips For Buyers


Buying a Home? Relax!

Buying a home is an adventure and it should be fun! It represents new beginnings, new expectations, new hopes, new neighbours B in many respects, a new way of life. That makes it most important to buy the right house. It's also probably the largest single investment you'll ever make, so choosing the right home can affect more than your peace of mind.
The housing market is subject to many influences that will affect your choice: interest rates, inflation, supply and demand, the urgency to buy, the economy, neighbourhood characteristics and amenities, transportation facilities, schools and many others. Our skill in identifying and evaluating these influences is one of the two bases of our success. The other is service.
When you select Martin & Meredith to help you find your new home, our first step is to listen to your needs and understand your resources. Budgeting is essential for firsttime homebuyers and advisable for any house purchase. We will help you assess your wants and needs in relation to your financial comfort level.
We make it a point to ensure that all buyers understand our role in acting on their behalf. As your agent, our principal obligations, including confidentiality and obedience, are to you, the buyer. At the earliest opportunity we will explain our working relationship and ask you to sign a buyer agency and representation agreement, and explain that any payment for our services will come from the seller.
Even before you begin searching for a home, you should see a mortgage broker or loan officer at your financial institution to inquire about mortgage rates and terms available for your particular circumstances. The mortgage broker will discuss your financial situation and risk tolerance, and will explain the types of mortgage options for you to consider, such as, the RRSP Home Buyers' Plan, CMHC 5% Down Payment Plan, conventional or high ratio mortgage, fixed or variable rates, open or closed mortgage, term of the mortgage and amortization period, accelerated payment options, such as monthly, biweekly or weekly, prepayment privileges, and portability.
Most importantly, the mortgage broker will be able to prequalify you for the maximum purchase price you can afford. Once you have received a written confirmation for the amount of your preapproved mortgage at a set interest rate, guaranteed for a fixed period of time (usually 60 to 90 days), you can then proceed to make an offer with confidence in your financial situation. And, if you find yourself in competition with other prospective buyers for a home, you may be in a position to remove the offer condition relating to mortgage financing.
We will search the Toronto MLS database for homes, email you with the most uptodate information about what's available that meets your criteria, personally inspect likely properties and show qualifying homes to you. This will require time and effort on your part as well as ours -- but you will find that, with us, buying is interesting and enjoyable.
Ask us about everything that affects the value of properties. We can also provide you with specific information on the most important home insurance concerns of today. These include:
knob-and-tube wiring, aluminum wiring, 60 amp electrical service;
fuel oil tanks (whether indoor or buried outside);
25year old furnaces, wood stoves;
galvanized plumbing, old roofs;
mould, asbestos and vermiculite;
Urea Formaldehyde Foam Insulation (UFFI);
grow houses, income properties or student housing, and homebased businesses.
When you have decided on the property you want to buy, we will help prepare your offer and negotiate an agreement on your behalf. Our role at this stage is to explain the legalities of your offer document and to ensure that it specifies the exact amount of your offer and your deposit; any conditions, financial or other that you want to include; the date on which you want to close the deal; and the date and time your offer expires. We will also discuss price strategy in the context of a buyers' vs. sellers' market, and the merits of submitting an offer without conditions.
When your offer is completed and signed, we will register it with the listing salesperson and present it to the owner as soon as possible. When accepted, your deposit cheque will be placed in a trust account where it will be held until the transaction is completed or terminated.
The art of negotiation is deciding which terms are most important to you and less important to the seller, and vice versa. In an offer, everything is negotiable! In practice, here are some of the terms that are usually open for negotiation:
purchase price
deposit amount, and perhaps a further deposit amount
closing date
fixtures and chattels
Throughout the entire process, we will be always be available to answer your questions.
Once we have negotiated a deal, we remain involved until the deal closes. We:
Deliver the certified deposit cheque or bank draft to the listing broker;
Coordinate and attend at the home inspection;
Prepare waivers when inspection, financing or any other conditions have been fulfilled to your satisfaction;
Ensure that all documents are properly signed, witnessed, sealed and delivered to you;
Send all documentation to your lawyer;
Schedule and supervise your visits to the home before closing, as you requested in the Agreement of Purchase and Sale;
Help you find a home insurance broker, if necessary; and
Advise you on moving concerns.
Your lawyer will prepare a Statement of Adjustments showing exactly how much you have to pay to the seller on the day of closing. This amount will include the balance of the purchase price, mortgage and property appraisal fees, mortgage insurance, title insurance, land transfer tax, legal fees and disbursements, adjustments for prepaid property taxes or utility bills or rents, plus applicable GST.
Just prior to closing day, you will need to take a certified cheque for the balance of the purchase price to your lawyer in trust (your mortgage lender will also provide funds to the lawyer), and sign the documents. On closing day, your lawyer registers your mortgage and purchase on title (electronically) and hands you the keys and the deed to your new home.
When you decide to buy, we'll be with you every step of the way to help you avoid missteps and make the right decisions. Now that you know the process, you can relax!

Should I buy or sell first?

It all depends on market conditions at the time you are thinking of moving. If it is a buyers' market, then you probably want to sell first since you will have plenty of choices of homes available to purchase. If it is a sellers' market where the supply of good homes is small, then you may wish to buy first in order to be sure of having a home to move into while knowing that your existing home will sell within the time frame you have to move. Occasionally, there is a stable market where supply and demand are more or less equal -- in which case, it doesn't matter whether you buy or sell first. The choice is yours.

How much deposit do I need?

When you find the home you want to buy, you must write a negotiable cheque for an amount, usually between 5% and 10% of your offer price, in order to bind your offer. Since events take place very quickly in buying and selling, it is important to be prepared by having the funds readily available.

What goes in an offer?

You need to know you are signing a binding contract, under seal, and that everything that is important to you is put in the offer. You may insert conditions and clauses to cover anything that you are uncertain about. Once it is accepted and all conditions have been met, it is legally binding on both parties.
We will explain all parts of the offer and counsel you on the various ways an offer can be drawn. We will do our best to find out anything you wish to know prior to drawing up an offer, and advise you when to seek professional advice.

What conditions should I have in the offer?

Conditions are included in the agreement for your protection. Some of the typical conditions are for arranging financing, arranging household insurance, receiving a satisfactory home inspection report, reviewing the Status Certificate (for a condominimum), selling your current property, receiving probate of the seller's estate or your lawyer's approval.

Why do I need to be pre-qualified?

You need to be pre-qualified in order to know the limit you can borrow in a mortgage, and therefore how much you will be able to spend on your home.
There is also the possibility that you may be in competition with another offer for the same property, and in normal circumstances, a "clean" offer without conditions will be successful over an offer that is conditional on financing.

When do I need a lawyer?

You need a lawyer to search title and close the transaction, so it is advisable to contact one as soon as you begin searching for a new home. You may wish to have a lawyer advise you on your offer prior to signing it. The offer form containes pre-printed clauses that protect both buyer and seller, but you will add clauses that are specific to your situation and to the property you want to buy. As soon as the offer is accepted, the agreement is sent to both the buyers' and sellers' lawyers.

Do you recommend a home inspection?

A home inspection educates you about the property and gives you an indication of the expenses of ownership. If there is a major defect, you can withdraw your offer.
If you are buying a condominium, the inspector can only advise you on the interior of the building, since the exterior and common elements are the responsibility of the condominium board. Information about the building is contained in the Status Certificate you will receive.

What happens if someone else wants to make an offer?

In the event that you are in a competing or multiple offer situation, the offer that comes closest to meeting the sellers wishes usually wins. Price, closing date and conditions are the most important influencing factors. Only one offer can be accepted, so strong bids and speed are important.

What costs do I have to pay when buying a home?

It is impossible to predict all closing costs, however, we can tall you how the set costs are determined and what extra expenses you can expect. For example, as a buyer you pay Land Transfer Tax (both to the provincial government and to the City of Toronto, if applicable), legal fees and disbursements. You might also have to have a new survey of the property, and your lawyer usually recommends title insurance. Finally, there is the cost of the movers.

What is title insurance?

Title insurance protects you against defects in the title of the property you are buying, and it also protects you from certain types of fraud including those that can occur after you buy your home. It saves your lawyer from costly searches of government records, and reduces the need for a survey. Many real estate lawyers today insist that you take out title insurance for yourself and your lender.

Will I have trouble finding home insurance?

Obtaining home insurance these days is becoming more difficult and more expensive, especially if you are buying an older home with out-dated knob-and-tube wiring. One good reason to have a home inspection done on the property before you buy it is to satisfy the insurance company as to the condition of the home. Be sure to allow plenty of time before closing your transaction to obtain several insurance quotes in order to find an acceptable insurer.

What if I buy a condominium?

In a condominium, you own your own unit and a proportionate share of the common areas of the complex, such as lobby, elevators, recreational facilities, outside grounds, and heating and air conditioning systems. You may own your own parking space, or have exclusive use of one. You automatically belong to the condominium corporation which manages the affairs of the complex. Your monthly maintenance fee covers the regular expenses to look after the common areas and building insurance, and also contributes to the condominium's Reserve Fund, which is available to replace major heating or electrical systems, roofs, or the underground parking garage.
Before you buy a condominium be sure to check out the condominium by-laws and recent board minutes to see what major issues or repairs have been discussed. (This is part of the Status Certificate your lawyer will request.)

How many homes do I need to see before I buy?

That depends on how particular you are about the features your dream home must have -- it may be as few as six properties or as many as 100! As you visit the first few homes with your salesperson, we both bet a better idea of what features you are really looking for, and we can narrow the search.
If you are serious about making a move, we have two pieces of advice: Be available to see a new listing as soon as we tell you about it; and once you make your decision to buy a particular home, act quickly before it sells.

Bi-weekly and weekly payments

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.

Making Extra payments

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.

Reducing the CMHC fees on your purchase

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.

Advantages of bigger down payments

As mentioned above, when you put a 20% 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.

Short term rates vs. Long term rates

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.
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