Buying Your First-Home in the Greater Toronto Area
Owning a home may be your dream, but in order for the purchase to be the happy and satisfying experience it was meant to be, you need to ensure that you are financially and mentally prepared for the responsibilities that come with it.
Some people have a notion that homeownership is like renting, but with the power to have pets and paint the walls whatever color you like. However, while these privileges are available to homeowners in most municipalities, they come with the responsibilities of a mortgage, taxes and home maintenance. Preparing for home ownership requires you to take critical stock of your finances and your expectations.
We know that the process of buying your first home in Ontario can be stressful, especially since it’s your first time! That is why we have a team prepared to help you along the way, with professionalism, expertise, and minimal stress.
Our team is uniquely qualified to help with buying a house in Ontario for the first time, to secure the perfect place, at the best price, in a timeframe that suits your needs.
This is a decision which many people face, and the decision is not as easy to make as it may sound.
As a homeowner, you can reasonably expect the equity in your home to increase over time as your mortgage is paid down. That, combined with regular appreciation in property values, can be a rapid and rewarding way to increase your net worth. In contrast, the person renting over the same amount of time is left with no property investment but may have enjoyed lower living expenses and the opportunity to invest in other opportunities.
When comparing owning to renting, you have to add up all of the figures, including the cost of your home, the size of your down payment, utilities, immediate repairs, interest rates and insurance, and compare them with how much you are currently spending on rent.
Of course, you also have to place a value on the enjoyment and satisfaction that you will derive from owning your own home.
We know that you might have questions about buying your first home in Ontario, and we would be happy to answer them.
You need a good agent who will work hard for you. Our real estate team is dedicated to helping you find the right home, at the best price. We want you to find the home that will make you happy and successful in real estate ownership.
When you hire us to help you buy your first home, we want to know what you want and how much you can afford. Then we'll find a way to merge these two priorities and find a residence that you'll enjoy owning.
We are here to help you out with everything you need to know about the homebuying process:
1. Define Objectives
The process can be overwhelming, which is why you should have clear goals outlined before you buy. Need a backyard? A rec room? Two bedrooms or three? Make a list and keep it close at hand.
Keep a list handy of the features that you need and want in a home, and judge each home by the list instead of by details that could distract you from your goal. When you're alone with your agent, you can go over the pros and cons of each home. We can help you stay on track while still keeping our eyes out for a great property.
2. Retain Counsel
A lawyer is often your best defense against future legal troubles – always have one before you buy. Our team is equipped to recommend several in the area that we trust to help you.
We can recommend several lawyers in the area who might be a good fit for you. Interview them to ensure that you get someone you can work with. The legalities of transferring land ownership can be dodgy, and a lawyer can be your best defense against future legal troubles. A good lawyer can charge several hundred to over a thousand dollars for their services, but the thousands of dollars saved in legal fees later on makes this a good expense.
3. Making Offers
Preparing the paperwork and making the best offer for you depends on the professionals you work with. We can handle all the paperwork, all the discussions, to secure the best price possible for you.
Remember, the seller may reject or counter your offer, so even at this late date, avoid setting your heart on the home you hope to own. You'll probably have to write a deposit check to the seller's broker that proves the seriousness of your offer.
You need to know everything you can about your potential home, so never skip the inspection! A home inspector can bring any red flags to your attention, and there are many in the area that we can heartily recommend.
A home inspector will check for signs of harmful materials like asbestos, lead paint and mold. They'll also check for evidence of pests, faulty wiring and leaks. This is a crucial part of the home purchase. Not getting an inspection done means that you could be stuck in a home with a bad case of black mold and no recourse other than to pay for its removal. Inspections will cost a few hundred dollars, but again, this is more than worth it in the end. There are several inspectors in the area that we'd be happy to recommend.
5. Final Walkthrough
Before closing the deal, a final walkthrough can ensure that you are not missing a thing. Our team can help you do this, keeping the process simple while using our trained eye to identify any issues.
From the first interview that determines your requirements to the moment that you receive the keys, we can help you with the complicated process of buying a home. Don't hesitate to contact us to find out more about how we can make the home buying process easier!
6. Preparation is Key
The real estate market is always changing, which is why top-to-bottom preparation is key. We will help keep you prepared while considering all the first-time home buyer rules to safeguard your interests.
Here's the truth - whether you’re a first-time homebuyer, or this is your 10th home, the process can be stressful! If you feel anxious or stressed out, you aren't alone!
The real estate market is always evolving with ebbs and flows along the way. As a result, lenders offer a variety of mortgage options for a variety of needs. It's important that you know which is the right product for you and your situation.
When you're looking to move-up from a home you already own, there are certain factors that can complicate the situation. It's very important for you to understand these issues before you put your home on the market.
A new report has just been released which identifies the 6 most common and costly mistakes that homebuyers make when moving up to a larger home.
1. Rose-colored glasses
Most of us dream of improving our lifestyles and moving to a larger home. The problem is that there’s sometimes a discrepancy between our hearts and our bank accounts. You drive by a home that you fall in love with only to find that it’s already sold or that it’s more than that you are willing to pay. Most homeowners get caught in this hit or miss strategy of househunting when there’s a much easier way of going about the process. For example, find out if your agent offers a Buyer Profile System or “House-hunting Service,” which takes the guesswork away and helps to put you in the home of your dreams. This type of program will cross match your criteria and ALL available homes on the market and supply you with printed information on an on-going basis. A program like this helps homeowners take off their rose-colored glasses and, affordably, move into the home of their dreams.
2. Failing to make necessary improvements
If you want to get the best price for the home you’re selling, there will certainly be things you can do to enhance it in a prospective buyer’s eyes. These fix-ups don’t necessarily have to be expensive. But even if you do have to make a minor investment, it will often come back to you ten-fold in the price you are able to get when you sell. It’s very important that these improvements be made before you put your home on the market. If cash is tight, investigate an equity loan that you can repay on closing.
3. Not selling first
You should plan to sell before you buy. This way you will not find yourself at a disadvantage at the negotiating table, feeling pressured to accept an offer that is below-market value because you have to meet a purchase deadline. If you’ve already sold your home, you can buy your next one with no strings attached. if you do get a tempting offer on your home but haven’t made significant headway on finding your next home, you might want to put in a contingency clause in the sale contract which gives you a reasonable time to find a home to buy. If the market is slow and you find your home is not selling as quickly as you anticipated, another option could be renting your home and putting it up on the market later – particularly if you are selling a smaller, starter home. You’ll have to investigate the tax rules if you choose this latter option. Better still find a way to eliminate this situation altogether by getting your agent to guarantee the sale of your present home (see point number 5 below).
4. Failing to get a preapproved mortgage
Preapproval is a very simple process that many homeowners fail to take advantage of. While it doesn’t cost or obligate you to anything, preapproval gives you a significant advantage when you put an offer on the home you want to purchase because you know exactly how much house you can afford, and you already have the green light from your lending institution. With a preapproved mortgage, your offer will be viewed far more favorable by a seller – sometimes even if it’s a letter lower than another offer that’s contingent on financing. Don’t fail to take this important step.
5. Getting caught in the “Real Estate Catch 22
Your biggest dilemma when buying and selling is deciding which to do first. Point number 3 above advises you to sell first. However there are ways to eliminate this dilemma altogether. Some agents offer a Guaranteed Sale “Trade-Up” Program that actually takes the problem away from you entirely by guaranteeing the sale of your present home before you take possession of your next one. If you find a home you wish to purchase and have not sold your current home yet, they will buy your home from you themselves so you can make your move free of stress and worry.
6. Failing to coordinate closings
With two major transactions to coordinate together with all the people involved such as mortgage experts, appraisers, lawyers, loan officers, title company representatives, home inspectors or pest inspectors the chances of mix-ups and miscommunication go up dramatically. To avoid a logistical nightmare ensure you work closely with your agent.
We know you might have questions about the home buying process, which is why we have put some of them together right here. Have more questions? All you have to do is reach out.
How do I know if I’m ready to buy?
Buying your first home in Ontario is about more than simply being able to decorate it; it’s about maintaining your new residence over the years, and realizing that part of your income will now be routed into this investment. It’s about willing to take measured risks – with realistic expectations of the rewards.
How much home can I afford?
It’s discouraging to find out that your salary will not stretch as far as the ideal home you want to own. However, sacrificing a huge part of your income just to pay the mortgage turn home ownership from a blessing to a burden. It's better to buy a modest home now, and look at purchasing your "dream home" in a few years – when you’re prepared to make the move up.
What is a debt-to-income ratio?
Your overall debt should not be more than 40% of your income, and your housing debt should not be more than 32%. What 32% of your income will buy depends on where you want to live. In rural areas, for example, it can buy a very comfortable residence and ample acreage. In sought-after urban areas, it may not even buy a bachelor suite.
How do I know what to look for?
Buying a house in Ontario for the first time comes with a lot of questions: Do you like the idea of cleaning your own gutters? Do you shudder at the thought of lawn care? Would you rather just pay a fee every month and have everything done for you? The answers to all these questions can help you narrow down the search for the right type of property for you – along with the help of experts.
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 you should have at least 1.5% of the purchase price for 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.
Below you will find a brief explanation of these costs. Please note these are some of the closing costs you may encounter depending on your specific situation. Use this as a guideline then talk with your lawyer who can provide a more realistic estimate for your situation.
An appraisal provides the lender with a professional opinion of the market value of the property. This cost is normally the responsibility of the homeowner and it can cost between $100 - $300.
A professional inspection of the home, top to bottom, is for the benefit of the buyer. A home inspection can cost anywhere from $300 - $400 and is well worth the investment. When hiring a home inspector make sure the inspector has liability insurance just in case they overlook something.
Mortgage lenders require a certificate of fire insurance to be in place from the time you take possession of the home. The amount required is generally the amount of the mortgage or the replacement cost of the home. This cost can vary on the property size, amount of coverage, the insurance company and the municipality. The cost can vary anywhere from $250-$600 annually for most properties.
If your mortgage is insured, (CMHC or Genworth Financial), you will be required to pay the applicable taxes on the insurance premium on closing. While the insurance premium can be added to the mortgage amount, the tax must be paid at closing.
A recent survey of the property is usually required by lenders. If one is not available the cost can range between $600 - $900 for a new survey. In lieu of the survey most lenders today will accept title insurance which can cost considerably less.
Lawyers and notaries charge fees for their services involved in drafting the title deed, preparing the mortgage, and conducting the various searches.
Disbursements are out-of-pocket expenses incurred during the process such as registrations, searches, and supplies.
Purchasers in most large Canadian centres can add Land Transfer Taxes to their list of closing costs.
Unless you live in Alberta, Saskatchewan, or rural Nova Scotia, land transfer taxes (or property purchase tax) are a basic fact of life. These taxes, levied on properties that are changing hands, are the responsibility of the purchaser. Depending on where you live, taxes can range from a half a per cent to two per cent of the total value of the property.
Many provinces have multi-tiered taxation systems that can prove complicated. If you purchase a property for $260,000 in Ontario, for example, 0.5% is charged on the first $55,000, 1% is charged on $55,000 - $250,000, while the $250,000 - $400,000 range is taxed at 1.5%. Your total tax bill? $2,375.00.
The following list shows Land Transfer Taxes by province.
- Land Transfer Tax
- Up to $55,000 X .5 % of total property value
- From $55,000 to $250,000 X 1 % of total property value
- From $250,000 to $400,000 X 1.5 % of total property value
- From $400,000 up X 2 % of total property value
- Property Purchase Tax
- Up to $200,000 X 1 % of total property value
- From $200,000 up X 2 % of total property value
- Land Transfer Tax
- Up to $30,000 N/A
- From $30,000 to $90,000 X .5 % of total property value
- From $90,000 to $150,000 X 1 % of total property value
- From $150,000 up X 1.5 % of total property value
- Transfer Tax
- Up to $50,000 X .5 % of total property value
- From $50,000 to $250,000 X 1 % of total property value
- From $250,000 up X 1.5 % of total property value
- Land Transfer Tax
- 1.5 per cent on total property value
Outside Halifax County
- Check with local municipality.
In most provinces new homes are covered by a new home warranty program. The cost to the purchaser for this warranty is approximately $600 and should the builder default or fail to build to an agreed-upon standard the fund will finish or repair the deficiencies to a maximum amount. For more information on Ontario new home warranty visit http://www.tarion.com.
HST is payable on the purchase of a newly constructed homes only. If you are purchasing a new home make sure you know who pays this, you or the builder. On the offer the purchase price will say "Plus HST" or "HST Included" and who gets any HST rebates. Many builders have included this cost into the purchase price so the buyer does not have to come up with it at closing.
An estimate should be made for closing adjustments for bills the seller has prepaid such as property taxes, utility bills, and other charges. Any bills after the closing date are the responsibility of the purchaser. A lawyer will let you know what they are once the various searches have been completed.
Title insurance is growing in popularity in Canada. But what is it exactly? Should you get it? Do you need it? Whether title insurance is right for you is something you should discuss with your lawyer, as it depends on the circumstances of your transaction. This article will provide you with some background information about title insurance to help you make an informed decision.
Title to Property
Title is the legal term for ownership of property. Buyers want "good and marketable" title to a property - good title means title appropriate for the buyer's purposes; marketable title means title the buyer can convey to someone else. Prior to closing, public records are "searched" to determine the previous ownership of the property, as well as prior dealings related to it. The search might reveal, for example, existing mortgages, liens for outstanding taxes, utility charges, etc., registered against the property. At closing the buyer expects property that is free of such claims, so normally they must be cleared up before closing. For example, the seller's mortgage will be discharged and outstanding monetary expenses (such as taxes and utility charges) will be paid for (or adjusted for) at closing.
Sometimes problems (or defects) regarding title are not discovered before closing, or are not remedied before closing. Such defects can make the property less marketable when the buyer subsequently sells and, depending on the nature of the problem, can also cost money to remedy. For example, the survey might have failed to show that a dock and boathouse built on a river adjoining a vacation property was built without permission. The buyer of the property could be out-of-pocket if he is later forced to remove the dock and boathouse. Or, the property might have been conveyed to a previous owner fraudulently, in which case there is the risk that the real owner may come forward at some point and demand their rights with respect to the property.
Who is Protected With Title Insurance?
Title insurance policies can be issued in favour of a purchaser (on new/resale homes, condos and vacation properties), a lender, or both the purchaser and lender. Lenders will sometimes require title insurance as a condition of making the loan. Title insurance protects purchasers and/or lenders against loss or damage sustained if a claim that is covered under the terms of the policy is made.
Types of risks that are usually covered under a title insurance policy include: survey irregularities; forced removal of existing structures; claims due to fraud, forgery or duress; unregistered easements and rights of-way; lack of pedestrian or vehicular access to the property; work orders; zoning and set back non-compliance or deficiencies; etc. For a risk to be covered, generally it has to have existed as of the date of the policy. As with any type of insurance policy, certain types of risks might not be covered, for example, native land claims and environmental hazards are normally excluded. Be sure to discuss with your lawyer what risks are covered and what are excluded.
The insured purchaser is indemnified for actual loss of damage sustained up to the amount of the policy, which is based on the purchase price. As well, some policies have inflation coverage, which means that if the fair market value of the property increases, the policy amount will also increase (up to a set maximum).
How Long is the Insurance Coverage?
In the case of title insurance covering the purchaser, title insurance remains in effect as long as the insured purchaser has title to the land. Some policies also protect those who received title as a result of the purchaser's death, or certain family members (e.g., a spouse or children) to whom the property may have been transferred for a nominal consideration.
In the case of title insurance covering a lender, the policy remains in effect as long as the mortgage remains on title. A lender covered under a title insurance policy is insured in the event the lender realizes on its security and suffers actual loss or damage with respect to a risk covered under the policy. Lenders are usually covered up to the principal amount of the mortgage.
The premium for title insurance is paid once (at the time of purchase). Generally speaking, in Canada the purchaser of the property pays for the title insurance, though there can be situations where the seller pays for it. Some policies automatically cover both the purchaser and lender; others will cover both for a small additional fee.
Protection and Peace of Mind
Title insurance can help ensure that a closing is not delayed due to defects in title. And, if an issue relating to title arises with respect to a risk covered under the policy, the title insurance covers the legal fees and expenses associated with defending the insured's title and pays in the event of loss.
We have helped first-time buyers secure the right homes for their needs, as well as their future goals. Reach out to us today, and we can help you determine where you can buy, where you should buy, and any of the other first-time homebuyer incentives and rules you should consider along the way.
Interested in purchasing your first home? Reach out today and we can walk you through the steps in the process.