5 Points to Consider in Buying a Home
- Decide it’s time to buy a home.
- Establish your affordable price range, desired location(s) and desired/required features.
- Your sales representative…meeting your criteria will source out & inspect available homes, then show you suitable homes as they become available, therefore saving you from seeing a lot of houses that aren’t right for you and missing excellent properties which sell before they are advertised, or which do not have “Open Houses”.
- When you find a suitable home, you will prepare the offer with your REALTOR. This key document must cover all details which are important to you. You submit a deposit with the offer.
- Your sales representative will negotiate on your behalf with the sellers and their REALTOR. There may be several stages to the negotiations.
- Once the deal is made, your agent will arrange for an inspection (if required) assist with financing and forward all documents to your lawyer. Your agent will take care of any paperwork required to “firm” the deal (e.g. waivers of conditions, amendments, etc.).
- Your lawyer does all things necessary to prepare for the closing of the transaction.
- You prepare to move.
- You take possession on closing day.
Your main expenses are:
– purchase price (less the deposit)
– land transfer taxes payable to the Provincial & Municipal Governments,
– legal fees,
– moving costs,
– HST for new and renovated housing.
- A good agent will be available to you throughout the process, and will help you resolve any problems which arise before or after closing.
The long standing controversy on bringing Ontario a Value Added Tax ended permanently on June 18, 2009, when the Ontario Provincial Government announced the implementation of the Harmonized Sales Tax (HST). The effective date of this new tax was July 1st, 2010.
This tax is called a Harmonized Sales Tax because it effectively replaced the 5% Federal Goods and Services Tax (GST) and the 8% Provincial Sales Tax (PST) thereby creating a combined 13% harmonized sales tax.
The HST is quite similar to the current GST, and as such it does not apply to the purchase price of resale residential properties. The tax will apply to all real estate commissions, home inspection services and legal fees which were previously exempt from PST (8%).
The largest impact to the real estate industry will be in new construction, which will include all single family dwellings, semi-detached, condominiums and even mobile homes. The new tax will capture properties that have undergone substantial renovations, as well as vacant land. When purchasing a new home, be mindful of agreement clauses referencing taxes and specifically who is responsible for the payment of such taxes (provincial versus federal).
It is important that you discuss your specific transaction with your real estate lawyer to ensure that any nuances or particulars are fully captured or addressed from the HST perspective. Please keep in mind that the tax is still subject to interpretation as revisions may still be introduced prior to implementation.
PLANNING YOUR MOVE
Use this helpful check list as a reminder of the things you need to do before you move.
- Book the movers. You can choose to have the movers pack everything, or just the breakables, or you can pack yourself. It’s a good idea to obtain estimates from several different companies.
If you own your present home:
- Arrange to have your gas and electric meters read of the day you leave and forward the bill to your new address.
- Have the oil tank read before your sale closes.
- If your water heater is rented, arrange for the transfer of the rental agreement to the purchaser.
- Disconnect your telephone, cable, T.V. and water softener.
If you rent your present home:
- Give necessary written notice to your landlord and make arrangements for the return of any monies you have on deposit.
At your “new” home:
- Make arrangements for the gas and electric utilities, water softener, telephone and cable TV to be connected on the day the sale closes.
- Get “Change of Address” cards from the post office and send out well before moving day.
- Have the post office forward your mail to your new address.
- Cancel any contracted services and pre-authorized cheques.
- Inform gardening, dry cleaning, garbage pick-up, newspapers, magazines, diaper and other home services. Arrange for service at your new address.
- Obtain a letter of introduction from your current branch to help establish new accounts. Transfer trust or bank accounts and securities.
- Cancel or transfer social, athletic, civic, religious or business affiliations and memberships.
- Arrange for transfer of medical, dental, prescription and optical records.
- Change the address on your driver’s license(s) effective the day of the move.
- Collect all items out for cleaning, repair or storage. eg: fur coats, dry cleaning.
- Make special arrangements for the moving of perishables, such as plants.
- Make special arrangements for the moving of your pets.
- Dispose safely of all flammable liquids as it is illegal for movers to carry them.
- Establish status of alarm contract.
LAND TRANSFER TAX
Provincial & Municipal
The formula for calculating ONTARIO is:0.5% on the first $55,000
Plus 1% of the amount from $55,001 to $250,000
Plus 1.5% of the amount in excess of $250,001 to $400,000
Plus 2% of the amount in excess of $400,000
The formula for calculating TORONTO is:0.5% on the first $55,000
Plus 1% of the amount from $55,001 to $400,000
Plus 2% of the amount in excess of $400,000
NEW MORTGAGE RULES 2012
Jim Flaherty, Canada’s Finance Minister announced his latest changes on Mortgage rules and went into effect on Monday July 9th, 2012.
The key message is that the changes only impact mortgages greater than 80% loan to value ratio. Many mortgage brokers have remedies for many of the new rules and a good mortgage consultant can provide assistance.
Starting July 9th, lenders can now only issue home equity loans up to a maximum of 80% of a property’s value, down from 85%. Therefore lenders will no longer offer refinancing in high ratio ranges. This applies to debt consolidations, renovations etc.
The maximum amortization period on a high ratio mortgage drops to 25 years from 30 years.
In addition, the Federal Government is capping the maximum debt ratios for households GDS, (Gross Debt Service, which is all property-related expenses such as mortgage payments, taxes, heating, condo fees and so on), to 39% from 44% and limiting government insurance of mortgages on homes with a purchase price of less than $1-million.
5% down payment option is an option still available for qualified buyers less than $1-million. Clients must qualify at the 5 year posted mortgage rate.
Home Equity Lines of Credit are now capped at 65% loan to value ratio. (effective October, 2012), although it appears an additional 15 per cent is allowed (to 80 per cent) if that 15 per cent is amortized.
Buyers with a mortgage pre-qualification received prior to July 9th, 2012 are able to gain approval under the old rules as long as their transaction closes prior to Dec 31st, 2012.
Banks are required to qualify all variable terms of less than five years at the Bank of Canada five-year benchmark rate (typically RBC’s five-year posted rate). Today, many banks will qualify shorter terms at the actual rate if the deal is conventional (more than 20 per cent down payment).
All “Stated Income” borrowers (those borrowers with many deductions on their income) must provide reasonable income verification such as a Notice of Assessment.
Cash back will not be allowed to be used toward a down payment. Currently a few banks allow five per cent cash back to be used towards down payment (making it effectively a $0-down deal). Of all of the rules put forth, this one makes the most sense in today’s economy.
Who will be affected?
- Homebuyers hoping to get a “zero-down” mortgage using cash back.
- Homebuyers who were very close to their maximum qualifications before the rule changes.
- Purchasers in the $1-million price range with less than 20 per cent down payment.
- Self-employed purchasers who write off a lot of their income.
- Existing homeowners who have an amortization longer than 30 years, less than 20 per cent equity in their property and would like to shop around for a better mortgage rate.