Buying A Home - Overview

So you've decided you want to buy a new home. It's a popular dream. For most people, with the right planning, it can become a reality. But there is a lot to know before you begin moving. I'll take you through the planning process step-by-step, to determine exactly the kind of home that's perfect for you.

What does your future lifestyle hold? How many bedrooms will you one day require? Your preschoolers will be teens some day. Are you planning to stay in your home that long? Perhaps your teens are ready to move out on their own. What will you do with all the extra space? When you?re thinking about accommodating your family's needs, think of things like parking. How many cars will require space? You'll also want to consider proximity to - and the reputation of - schools in the area. How is your work situation? These days people tend to change jobs frequently, and sometimes the best way to get a promotion is to move to another company. If you might be transferred, will you be able to sell your home quickly? Keeping work in mind, how long do you want to spend commuting? Do you drive or depend on public transportation? As you can see, you will want to give some thought to how long you are going to stay in your home. It may be difficult to answer these questions before you've even found your home, but if it's your first home, give some thought to the resale value when it's time to upgrade. On the other hand, if you're planning to stay in your home for a long time, consider your future needs and purchase a home that will accommodate them.

 

Location, Style & Cost
The first question you are bound to ask yourself is "How much home can I afford?" That depends on a number of factors:

Your selected location. Are you set on a specific area? Downtown? The suburbs? A rural setting?
Your preferred type of home. Detached? Semi? Duplex? High-rise? Link? Townhouse? New or resale?
Your income. After all, it?s not just a mortgage you have to take into account. There are property taxes, utilities, and in some cases condo or strata fees. As a general rule of thumb, your monthly home-carrying cost should not be more than 30-35% of your income.
Market conditions. Is it a buyer's, seller's or balanced market?
There are also additional costs to keep in mind. It is a good idea to work out exactly what you want and what you can afford before you begin the search. Be specific! After all, you don?t want to suddenly come to the realization that your dream house has come with a nightmare of bills and expenses. Stick to looking at houses in your price range. The more you've thought about it, the better your RE/MAX agent can meet your needs.
Why is location important?
Of course, the first step in deciding on a new home is your lifestyle at present and how your lifestyle will change over the next few years. Are you an active person? If so, a location with a nearby recreational facility would be ideal. Are you a nature lover? Then perhaps an area with parks and walking trails would suit you. Think about yourself and your family and decide what you enjoy doing and what type of lifestyle you would enjoy in your new home.

Your ideal home may not be ideal anymore if it is downwind from a garbage dump, or if your home is right next to a freeway overpass. Think about the view. Will you like what you see every time you look out the window? Selecting where you want to live is as important as selecting what type of dwelling you would like to live in.

Consider how far your selected neighbor hood is from where you work, how far you?re willing to commute and your lifestyle. You'll also think about schools if you have, or are planning to have, children. And what about medical facilities, places of worship public transportation and recreation?

If you're contemplating the move to an unfamiliar neighborhood, take the time to go exploring. Walk around, drive around, and get a feel for the distance to the nearest convenience store, the commute. Make some notes. Take the neighborhoods tour at different times of day and contact the local municipal office to find out what future developments are planned.

You'll also want to check zoning by-laws and fire codes, especially if you plan to rent the basement or conduct a business in your new home. In-law suites, student housing, basement apartments and duplexes all have very specific code requirements.

Types and styles of homes

High-rise Condominium : A multi-storey residential building
Townhouse : Several single-family units joined by common walls
Semi-detached : Two single family homes attached by one common wall
Duplex : Two units, one above the other, detached from neighboring homes
Single-Family Detached : One unit on its own lot, designed to house one family

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Typical Costs Involved In Buying A Home

What can I afford?
There are two types of costs in buying a home - the initial amount you will need for your purchase and the ongoing costs of paying back your mortgage along with monthly operating costs. The largest one-time cost is the down payment, which usually represents 5-10% of the total price of the property

Typical one-time expenses:

Mortgage application and appraisal fee
Property inspection (optional) due at time of inspection
Legal fees, due at time of closing
Property survey (sometimes provided by seller), due at the time of closing
Land transfer, deed tax or property purchase tax, due at the time of closing (in Quebec, within 3 months of signing)
Mortgage interest adjustments (if applicable) due at time of closing
Home and property insurance, at closing and ongoing
Moving expenses, due on the date of move
PST on high ratio mortgages
Realty Tax Holdback
Typical Monthly Expenses

Mortgage payments
Maintenance (this could be condominium fees, or allocated maintenance fees)
Property and content insurance
Property taxes
Utilities

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Ontario Land Transfer Tax :
The Purchaser is required to pay this tax at the time of closing. Use this helpful land transfer tax calculator to calculate your tax. Typical costs range from $1,000 to $6,000. To arrive at your estimated Ontario Land Transfer Tax total, use the guide below:

0.5% on the first $55,000 of the purchase price
1% on the portion between $55,000 and $250,000
1.5% on any amount over $250,000 and $400,000
2% on the balance of the purchase price over $400,000

Example: A home that costs $350,000.00
• 1st 55,000 = $275.00 +
• 2nd 195,000 = $1950 +
• 3rd remaining 100,000 = $1500
• Total: ($275 + $1950 + $1500) = $3,725.00 Land Transfer Tax

 

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High Ratio Mortgage Loan Insurance :
Those with a down payment of 27% or more need not worry about this insurance. However, if you are borrowing more than 73% of what the home costs, you will have to pay High Ratio Mortgage Loan Insurance. It is provided by GE Mortgage or CMHC. The total Insurance is added to the amount being mortgaged. Use the chart below to estimate your High Ratio Loan Insurance costs:

Loan to Value Premium :

75.1 – 80 % 1.25 %
80.1 – 85 % 2.00 %
85.1 – 90 % 2.50 %
90.1 – 95 % 3.75 %

If we continue with our example of a home asking $350,000.00, with $20,000 deposit and $35,000 down-payment to the mortgagee – Here's how the cost breakdown looks:
$350,000 total price
$20,000 deposit
$35,000 down payment to bank
Mortgage: $295,000
Mortgage ratio: 84.28 %

Other Costs (Sample):
$1,200 Lawyer
$500.00 Home Inspection
$3,725.00 Land Transfer Tax
$750.00 Movers
Total Other Costs of $5,775.00

Continuing With Our Example: High Ratio Loan Insurance: Since our Mortgage Ratio is 84.28 % - You can expect to pay 2% extra for High Ratio Mortgage Insurance. In this case, that would be $5,900.00. This amount would be added to the mortgage amount and would be amortized over the life of the mortgage. So now, your mortgage to the bank is $300,900.00

If you acquired a mortgage 5 year fixed, at 5%, amortized over 25 years, you would expect to pay $1,750.05 per month. So Let's Take All These Findings and Put Them Together: $350,000 home – you put $55,000 down on it - you arrange a mortgage of $300,900. Your closing costs will be $6,425 and your monthly payment to the bank will be $1750.05.

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RRSP Information:

RRSP Home Buyer's Plan

The First-time Home Buyer's Plan (HBP) is a Federal Government initiative providing Canadian citizens the opportunity to withdraw up to $20,000 from personal registered retirement savings plans (RRSPs) for buying or building a home in Canada.

To qualify, applicants must not have directly, or indirectly, owned a residence within the past five years. Under the HBP, qualifying withdrawals will not be included in annual income, and RRSP issuers will not withhold income tax from these withdrawn amounts.

If you are jointly buying or building a home together with your spouse or other qualifying individual, each of you can withdraw up to $20,000. To withdraw these funds from your RRSPs, you must first have entered into a written agreement to buy or to build. You will also need to confirm that you will occupy the subject property as your personal residence. (Once you take occupancy there is no minimum period of time you are required to live there.)

Your commitment to the HBP is to repay the amount withdrawn within a 15 year time period. In each year, you will need to make the minimum contributions to your RRSPs equal to 1/15 of the withdrawn funds until the total amount is repaid. You will receive a HBP Statement of Accounts on your annual Notice of Assessment showing you the total HBP withdrawal, the amount you have repaid to date, your HBP balance, and the amount you should repay the following year. Your repayment starts the second year following your withdrawal, and you may repay any amount in excess of the minimum to reduce payments in later years.

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Inventory Of Homes:

Mississauga:
Freehold Homes Total: 1765 (77 towns, 1246 detached, 383 semis)
Condo Style Homes Total: 1719 (1089 apartments, 609 towns)
Total Homes For Sale: 3484

Milton:
Freehold Homes Total: 290 (34 towns, 201 detached, 33 semis)
Condo Style Homes Total: 15 (4 apartments, 11 towns)
Total Homes For Sale: 305

Oakville:
Freehold Homes Total: 926 (108 towns, 780 detached, 20 semis)
Condo Style Homes Total: 192 (97 apartments, 91 towns)
Total Homes For Sale: 1118

(Last Updated On May 8th, 2006)

Compare this to what is currently available

So, what is your plan with this opportunity and what is your next step in the real estate process?

Overall average prices.

So, if you are thinking of selling and buying a homes this year, should you buy or sell first?  I've had many clients purchase before they sell.  I just want you to have all the information so you can make the best decision for yourself and your family.  You may read more about buying or selling first here

Read about what happened in real estate last month.

I wish you much success, good health and happiness today and always! 

Mark