10 Reasons to Buy an Existing Home

10 Reasons to Buy an Existing Home

Rest easy when it comes to home values

Homes in established neighborhoods will have a proven track record of home values. Area ups and downs can be tracked through the years, allowing you to feel more secure in your investment.

CLOSING COSTS: HOW TO ESTIMATE YOUR CLOSING COSTS

Closing costs are a list of charges your lawyer presents to you on the closing date of your home.  Many people are surprised at the additional costs over and above the price of the home.  According to the CMHC and Genworth Financial your should allow for at least 1.5%-2.5% of the purchase price as closing costs, in addition to the down payment (have around 2.5% to be on the safe side).  The costs vary among provinces and cities.

A lawyer is the professional who can provide a more realistic estimate for your specific situation. To calculate Land Transfer taxes, simply go to: http://www.landtransfertaxcalculator.ca/ . If the property you are purchasing is in Toronto, you pay both Provincial and Municipal. If the property is outside of Toronto (Markham, Vaughan, Newmarket, Aurora, Oshawa, etc.) you pay ONLY the Municipal Land Transfer Tax.

Land Transfer Tax Rebates: First Time Home Buyers If you are a first time home buyer you are eligable for rebates for both the Municipal and Provincial Land Transfer Tax:
- Provincial Land Transfer Tax (PLTT): Maximum $2000 - Municipal Land Transfer Tax (MLTT): Maximum $3725

Some handy Calculators

Go to my PeterTarshis.com helpful-links--calculators / to calculate your mortgage, see if you should Rent or Buy, and how Prepayments will affect your mortage!

 

 

Additional Costs:

In a nutshell, please read below to see some "additional" costs: ONTARIO REAL ESTATE CLOSING COSTS when BUYING a HOUSE or CONDO:  Closing costs are the fees which you, as a BUYER, must pay when purchasing a home in Ontario. These are fees which are normally payable in full on the day you get the keys to your new home (the "Closing Day"). Here is an outline of what you should expect:

1. Purchase Price (from offer) less the deposit you have made with the offer. This would be comprised of the balance of your down payment, plus the mortgage loan funds from the bank.

2. Home inspection fee: This one is actually due before closing...if you are doing a home inspection as part of your offer, costs for this generally range from $300.00 - $500.00, and you must pay the Home Inspector on the day he or she does their inspection.

3. Appraisal fee: your bank lender will arrange an appraisal of the property at your expense, prior to advancing any mortgage loan. Approximate cost: $250.00

4. Legal fee for purchase of home: It's usually best to budget about $1600.00 in all. Lawyers are funny - these will advertise a "basic" fee, but will then add plenty of additional charges to pay for the various components of your purchase. Almost always, once these additional fees are included, which include such items as title search fees, registration fees, disbursements, photocopies, courier costs, etc., the total amount will approach about $1200.00 - $1300.00. Once the HST is added to this, the grand total usually approaches approximately $1500.00. If you budget $1600.00, and it comes in less, you will be happy! Incidently, when selling a house, the fee is usually a couple of hundred dollars less, as title search is not required. These are the regular legal fees. Lawyers' fees can increase if there are any unusual circumstances associated with the sale - delays in closing, power of sale, will probates, etc. Many lawyers offer a better rate if you are both buying and selling a home and they both close on the same day.

5. Title Insurance: More and more lawyers are including title insurance as part of their fee. Once considered optional, Title Insurance is always a good idea, as it protects you against identity theft, typographical errors, and much more, for as long as you own the home- Your lawyer will fully explain your options regarding title insurance. Cost: a one-time fee approx. $250.00.

6. Ontario Land Transfer Tax:Is the tax that must be paid to the Province of Ontario on registration of a Deed. The rate of tax is based on the price of the home purchased. The calculation is as follows:

• Under $250,000: Purchase price x 1% less $275.00
• Over $250,000: Purchase price x 1.5% less $1525.00
• Over $400,000: Purchase price x 2% less $3525.00
• Note: If you are a first time home buyer in Ontario you are eligible for an instant refund of the provincial land transfer tax up to $2,000. Any tax amount due over $2000.00 you must still pay
• If you are purchasing a home in the City of Toronto, there is a second, additional tax! Toronto Land Transfer Tax amounts are similar to the provincial tax, and you are exempt from this tax if you are a first time buyer, and the purchase price is less than $400,000

7. Prepaid Expenses: (Utilities, taxes, condo maintenance fees).  These are expenses that the seller may have prepaid and which they get reimbursed for.  This amount will be reflected in the statement of adjustments that you receive from your lawyer. For example, if the Seller has prepaid their municipal property taxes through to the end of the year, and your closing date is  60 days before the end of the year, then the Seller must be reimbursed...and you, the Buyer, are required to pay them this money back in full, at closing.

8. Mortgage Insurance: (CMHC - Canada Mortage and Housing Corporation).  If your down payment is less than 20% of the total purchase price of the home, Canadian banking regulations require that you pay a mortgage loan insurance premium to protect the lender.  This premium can be several thousand dollars, but it then allows you to buy a home for as little as 5% downpayment. These fees can be prepaid up front, but they are usually added to the mortgage loan amount, adding a relatively small amount to your monthly carrying cost. A mortgage broker will be able to answer all your questions regarding how this works.

9. PST on CMHC premium: Even though the CMHC Mortgage Insurance mentioned in #8 can be rolled into your monthly mortgage payment, there is PST tax which is assessed on the CMHC premium, and this PST amount must be paid in full at closing. So just as an example, if the CMHC fee is, say, $5000,00, you don't have to pay that fee today - it is typically added to your total mortgage loan, resulting in a small increase in your monthly payments, but there is PST to pay on it. PST in Ontario is currently 8%, and 8% of $5000.00 is $400.00 - which is the amount you would have to pay your lawyer on closing day.

10. Interest/Payment adjustment: Monthly mortgage payments are due on the 1st of the month.  Unless the closing date is the 1st, you must repay the amount of interest accruing up to the 1st day of the following month, which is the Interest Adjustment Date.  For example if the closing date is March 15th but, the IAD is April 1st, interest from March 15th to the 31st must be paid.

11. Home Insurance: all lenders will require you to have home insurance on your freehold property, before they will advance your mortgage loan funds (needed for closing). Basic home insurance for an average house can range from $600.00 - $700.00 per year, and many insurance companies will require that you pay the entire year's premium up front.. If you are buying a condo, the good news is that the building insurance is already included with your condo maintenance fees; nevertheless it is also a good idea to get contents insurance for your unit, covering fire and theft.

These are most of the typical real estate closing costs which you will need to factor in when you buy a house or condo in Ontario. Do you still have questions? I work to provide a full service for both novice and experienced buyers - my goal is to provide you with a level of service unlike no one else. I strive to make things easy, and stressfree. If you are interested in getting more detailed information about our buyers' services, or if you have any other questions, just email me at Peter@PeterTarshis.com  & call 4167051181 

Buying your next home Costs and considerations are different the second time around

Think about the associated costs buying a new home: furniture, appliances, window coverings, landscaping and utility hookup fees.

By: Kristin Kent

Breya Skinner and her soon-to-be husband didn’t think they would buy a house in need of renovations.

But they didn’t count it out either. To them, it was more important to be in a desirable neighbourhood

“It came down to price and where we wanted to be,” says the 34-year-old from Burlington, Ont.

They started with a checklist of must-haves. Real estate professionals told them to be realistic, saying they may not get everything on their list.

“We looked and looked for over a year. We were okay in the house we were in. It wasn’t a big deal,” says Skinner.

The couple wasn’t about to settle. They were on the hunt for their “last home.”

“We knew we were getting married and we knew we were going to start a family,” she says. “We knew we wanted to be in a family-centric neighbourhood. We were aiming for an area with kids.”

Then, they stumbled upon a charming tree-lined street in an older neighbourhood.

“We said, ‘Wow, wouldn’t it be amazing to be on that street?’”

A year later, they bought the oldest house on the block.

“We got everything on our checklist and we saved money,” says Skinner.

Not everyone is willing to wait or undergo a massive renovation. Each homebuyer has his or her own needs, wants and financial commitments.

Plus, many homebuyers aren’t just purchasing their next home, they’re selling a current one too.

Julie Hauser, spokesperson for the Financial Consumer Agency of Canada, says the costs of buying your next home can be different.

“This is a very involved process, more so then buying your first home. When you’re selling and buying a new place, it’s a big undertaking,” she says.

Knowing where you stand financially is a good place to start.

It may be prudent to price your current home and calculate potential net proceeds before you search for your next home.

You can easily determine an appropriate sale price by comparing your home to similar homes listed for sale in your neighbourhood. You may also want to seek advice from a real estate professional.

To define potential profit from the sale, you’ll need to know what you’re paying out of pocket.

Costs will include your realtor’s commissions (if you’re using one), your lawyer’s fees, other legal costs, adjustment costs, property taxes, condo fees, repairs, upgrades, staging, storage and utility discharge fees.

If you have time remaining on your mortgage, you’ll need to know if you have an open or closed mortgage.

This will determine whether you can take your mortgage with you to your next home. Called porting a mortgage, this refers to transferring the terms and conditions to another property.

For example, you may be comfortable with your current interest rate and want to stay with the same lender. If this is the case, speak to your mortgage specialist to determine if your mortgage is transferable.

There are ways to settle your current mortgage before moving into another one.

You can transfer your mortgage to the buyer, should that option work for both parties involved. This is called assuming a mortgage.

You can also consider breaking your mortgage. This may be an expensive task, as pre-payment charges will apply.

All federally regulated financial institutions have mortgage pre-payment calculators on their websites. They further offer toll-free numbers to help you determine the actual pre-payment charge at the time of the call.

Some people may have to consider payments to the Canada Revenue Agency (CRA) when selling their home.

If your home is your primary residence, you do not have to report gains from a sale.

However, if your home is not your primary residence or you’ve gained income from the property, you will be required to report earnings to the CRA.

Once you know where you stand with your current home, it might be wise to get a mortgage pre-approval before you begin your house hunt.

One advantage to getting pre-approval is that it allows you to lock in a given interest rate for a period of time, generally from 90 to 120 days.

This can be beneficial should mortgage rates rise while you’re looking.

Another advantage is you’ll know your maximum borrowing amount. That way, you don’t fall in love with a home you can’t afford.

“Remember too, you don’t necessarily want to spend your maximum,” advises Hauser, adding there are other fees to consider.

Make sure you can afford the additional costs related to your home and your move.

For example, you may also have to pay for new furniture, appliances, window coverings, landscaping, home improvements, utility hookup fees and such smaller fees as redirecting mail.

Your new home might come with higher taxes. Or, perhaps the home is larger and requires more electricity. Be sure you can handle the additional costs.

If you’re buying a home in need of renovation, be sure you understand all that’s involved.

Renovations can be costly and time-consuming.

To determine if this is a good route, ask yourself:

-Will you do the renovation yourself?

-Will you hire a contractor?

-What are the labour costs?

-What will the materials cost?

-Will you live in your new home as you renovate?

-Will you live in your existing house while you work on the new house?

-Can you afford to carry two properties?

For Skinner — who’s now eight months into a renovation — there’s no doubt they made the right decision.

“The houses on either side of us were easily $100,000 more,” she says.

“Where we’ve ended up is incredible.”

Keep your home healthy

Buying a home comes with the responsibility of maintaining it. The Canadian Mortgage Housing Corporation suggests you protect your investment. Here’s how:

Save for emergencies Your home will require repairs, especially as it ages. You will have expected costs, like roof repairs. Sometimes, unexpected costs come up. A good rule of thumb is to set aside five per cent of your take-home pay.

Live within your means If you spend more than you earn, you’re putting yourself at risk. Check your spending monthly and make sure you’re sticking to your budget.

Repair promptly Know how your home runs. That way, you’re not second-guessing the parts and components needed to maintain it. Never put off something in need of repair. Neglecting your home can only lead to more expensive repairs in the future.

Consider inspections Stay on top of your home’s to-do list. You can do this by inspecting your home regularly. If you’re not comfortable with this task, bring in a professional to help you learn what to look for.

Don’t go overboard Remember, your home’s value is tied to the other homes in your neighbourhood. Unless you’re planning on staying in your house for years to come, be careful not to spend too much of your money by over-renovating.

Stay fire-safe Create a fire evacuation plan for each room in the house. Share it and practise it with your family. You should be able to open doors and windows at a moment’s notice. Furthermore, place smoke alarms and fire extinguishers on each floor of the house and check them once a year.

Detect the invisible Carbon monoxide is odourless and poisonous. High levels of this gas can cause illness or death. It may be prudent to place a carbon monoxide detector on each floor of your house.

Keep valuables safe Don’t put your family in jeopardy for important papers or family heirlooms. Purchase a fire-safe box or place your valuables in a safety deposit box. This way, each member of the family can concentrate on the most important task during an emergency: exiting the premises.

Pin important numbers Keep a list of emergency phone numbers on the fridge or in a place that everyone knows about. Such numbers include 911, poison prevention, your family doctor doctors and trusted friends and family.

Construction Liens Against Properties in Ontario

If you are planning on any renovations or you are building a new home, then you need to know about theConstruction Lien Act.

First, there is a lien which can be registered by anyone who provides work or services or supplies materials which are used for your property. The lien has to be registered within 45 days of the last work being performed or the last supply of goods. Then, the lien has to be “perfected” within 90 days of that same date by instituting an action and registering that on title as well. Many liens are registered but never perfected.

Second, there is a statutory holdback under the Act. Every person responsible for payment is required to holdback 10% of the amount for 45 days to ensure that there are no liens. If you pay this amount, and a lien isregistered, then you may have to pay this again. So, be careful!

Third, there are other provisions for liens under the Act, in excess of the 10%. If a sub-contractor gives written notice of a claim for a lien, then that full amount (not just 10%) must be heldback. This is the most risky situation for homeowners.

Many contractors will tell you that you have no right to hold back any money because it’s not in the contract. But, don’t worry, the Act has you covered. Every contract is deemed to be amended so as to be in conformitywith the Construction Lien Act. So, even if it’s not in there, it’s still part of the contract, and not only do you have the right, but you also have the obligation to holdback sufficient funds. For some reason, this seems to be the provision in the Act that many contractors forget.                          

Let’s assume that you are having a hot tub installed. Your price was $10,000.00, so you are obligated to holdback $ 1,000.00 for 45 days, but you receive written notice of a lien from the manufacturer for $ 6,000.00 and one from the installer for $ 1,500.00. So, how much do you holdback? The answer is $ 8,500.00. The full amount of the written notices together with the statutory holdback. But, if you’re actually in this situation: don’t pay anything! You may still hear from the electrician and the gas installer, both of whom may still have claims. Better safe than sorry, make sure everyone has been paid and get proper releases and authorizations signed. This is a good time to involve your lawyer.

The purpose of the Construction Lien Act is to protect all the suppliers and workmen down the line, so that they all will be paid. It is an Act intended to benefit sub-contractors from the general contractor. It is also designed to protect the general contractor from you if you don’t pay. As a lien, it has priority over both unregistered and unsecured interests and it follows mortgages (provided the funds have been advanced) and taxes which have ahigher priority.

The presumption is that the value of the work (at cost) contributed to the value of the property. Actually, in fact, that’s not the case. Even a brand new kitchen may only be contributing 70% to 85% of its cost, at best. In some cases, it adds nothing!

So, where does title insurance fit in? If you have a valid title insurance policy, then you will be covered for any claims of the manufacturer or installers. You did not have a direct contract with them. However, you may not be covered for the general contractor’s claim. You have a contract here, and you may not have lived up to your side of the bargain. If you were supposed to pay in installments, and you failed to do so, then this whole lienmess, may be your fault. If you’re in breach of your obligations under the contract with the supplier, then title insurance won’t save you. However, maybe they brought the wrong unit and you were quite within your rights torefuse payment. Here, title insurance will be helpful.

There are a couple of matters that are important considerations under the Act. What is the last day work was performed and material was supplied to the property? Who certified completion? What wage rates are paid to the workmen? Have all payments been paid to date? What about WCB payments? Is there a performance bond? If these issues arise, then you will have to see a lawyer. The Act can be tricky and somewhat complicated inparts.

It is also important to note that you can’t use any of the holdback moneys for defects or repairs. Those funds are constituted as “trust funds” and may only be used for the purposes of the trust. If you borrowed money from a bank to finance the hot tub, then those funds may be subject to the trust provisions under the Act. It would be better just to arrange a general loan from the bank. It’s far less risky! It’s bad enough not to get what you paid for, but it’s even worse to have to pay twice.

Ultimately, if a homeowner refuses to pay for proper work, services or materials supplied, the Court has authority to order the sale of the property. Before this occurs, the mortgagee will likely have intervened. And, there’s an interesting provision contained in the mortgage, they have the right to pay the claim and add it to your mortgage with interest.

Brian Madigan LL.B., Broker

www.iSourceRealEstate.com