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October 24th, 2014 
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1st Time Buyers - Condo or House in Toronto

When the day finally arrives that you find yourself leaping into “Toronto” home ownership, whether it be a condo or house, you’re going to want to be prepared for the days ahead of your “buying journey".

Even if you’re not a “detailed-oriented” personality type, you should still take the time to organize your priorities and understand the real estate purchasing process from start to finish.

You’ll find some Frequently Asked Questions that will help you begin the exciting search in finding your first “Toronto Pad”. 

1. How to pick an agent and do I really need one?

For many first-time home buyers starting the search for properties begins by browsing online or driving around neighbourhoods they’d prefer to live in. Having a conversation with either friends or family will usually result in some personal recommendations of an Agent they have used in the past and been pleased with; dropping into Public Open Houses and talking with the Realtor or searching Real Estate websites are some suggestions in finding someone you’d like to work with.

Arrange to meet with them and choose a Realtor that is experienced with the area and type of property you have in mind. Having a Realtor as your advocate, will save you both time and money.

Scouring through public websites such as Realtor.ca to find properties yourself can often be frustrating as listings are not always current and you’re communicating with the Seller’s Agent. Other sites for FSBO’s (For Sale By Owner) has you talking with the Seller. (did they happen to mention that leaky roof?)

When you have your own Realtor, he or she will be able to provide you with an unbiased market value for the house or condo you’re considering as well as pointing out specifics with either the property or neighbourhood that might require further looking into. They can also screen listings to avoid wasting your time, negotiate your interest in the offer presentation, ensure that all clauses in the Agreement protect you (especially if drafted by the Seller’s Agent); advise you of the best strategy in the event of Multiple Offers; provide you with recent Market activity and capitalize on their experience with similar market conditions and properties. They will also have recommendations for Building Home Inspectors and Mortgage Brokers. When working with a Registered Realtor, part of their RECO Insurance also covers protecting your deposit. (your deposit accompanies and forms part of the Agreement of Purchase and Sale, not to be confused with a downpayment) Otherwise when dealing with a private Seller, your deposit monies could either be held up or worse if dealing with fraud. Having a Buyer’s Representation Agreement with your Realtor allows them to be compensated through the Seller (no cost to you) with all the legal benefits of having your Realtor working on your behalf.

 2. What type of property should I consider - House or Condo?

Most Buyers start off with a preconceived idea of where they’d like to see themselves living. Toronto being a “City of Neighbourhoods” offers everything from small and intimate enclaves to the downtown vibrant hub of activity. Often certain types of properties will be more commonly found in some locations than others and might vary in price. (the price of a downtown house vs. condo)

After determining the price range that you are able and want to spend (through a pre-approval with a Bank or Mortgage Broker) you should examine your present lifestyle and where you possibly see yourself in the next five years. Do you want to walk everywhere local and have shops and food markets handy? Is a larger yard important to you or is having parking a priority? Are schools a factor? Do you see yourself cutting the grass and shoveling snow or does a Condo lifestyle appeal to you? Does your pet impact your choice of where you want to live? What is more important size or neighbourhood?

Once you have your price range established your Realtor would then be able to offer some suggestions regarding types and styles that match your criteria. If you can’t get into one of the hot & pricier hoods around Toronto, ask your Realtor if there are any up-and-coming surrounding communities worth considering. 

3.  What type of Mortgage is the best choice for me?

When you arrange for your pre-approval with either the Bank or Mortgage Broker (*before you even begin looking at properties) part of your conversation can also be looking at the different Mortgage Products that are offered and what will best suite your own personal situation and lifestyle. The number one question is usually “What should I choose…Fixed or Variable?”

The answer to this question will often be personal as to the extent of your tolerance with possible rate increases and payments. Can you sleep at night if the rates went up or would you rather know what your payments would be for the next 5 years? Often 1st time Buyers will choose a fixed term and take advantage of other pre-payment privileges. Some lenders also offer great packages that enable Buyers to blend renovation costs in with their purchase, allowing them to consider properties needing work, when they don’t already have the up-front money required. An experienced Mortgage planner can demonstrate different scenarios to you as well as keeping you informed of possible rate hikes. 

$ Saving Tips for Your Mortgage

Increase your payment frequency from monthly to bi-weekly or weekly and save $$ in reducing your amortization and interest paid throughout the term of your mortgage.

Shorten your amortization from 25 years to 20 years and pay off your mortgage earlier and saving $$ in interest.

Use your pre-payment privileges allowed with your mortgage each year and you'll shorten the length and save $$ in interest.

4.  What do I need a Real Estate Lawyer for?

In addition to the Real Estate team of professionals that are assisting with your purchase (Realtor, Mortgage Specialist, Home Inspector) your Lawyer also has a full list of tasks to be completed prior to your closing date.

  • Collect information from client
  • Obtain copy of Agreement of Purchase & Sale (Survey) and determine title issues which require resolution prior to closing such as mortgages, deceased title holders, tax arrears, encumbrances etc.
  • Obtain mortgage and property tax information
  • Deal with special clauses in the Agreement of Purchase and Sale
  • Encroachments shown on survey
  • Utilities & Tax liens
  • Executions
  • Reviewing documents
  • Arranging closing Disbursements
  • Exchanging documents with Seller’s Solicitor
  • Meet with clients to sign paperwork prior to closing
  • Deal with releasing documents for registration on closing

*If you are purchasing a Condo your lawyer will also review the Status Certificate (should be part of the condition of your Purchase) and if purchasing Pre-Construction will review the Builder’s Purchase Agreement during your 10 days rescission period as well as going over the hidden extra charges that Builders love to hide from you. 

5.  Should I have a Home Inspection done and what if there are problems?

Having a Home Inspection done by a professional Home Inspector can assist you in making an informed buying decision and understanding of the home's components, how they work as well as what needs repairing and the cost and time frame needed.  A perfect home does not exist, but knowing ahead of time what needs to be addressed will help with your future home budget. If you have an offer that is conditional upon having a satisfactory Home Inspection done, you will want to ensure that your clause in the Agreement of Purchase and Sale protects you if you decide against going forward with the purchase after the inspection has been done. Some properties on the market will have a pre-inspection report available. It is still advised that you have your own home inspection done which will allow you to walk through the property and discuss with your inspector all the components and learn how the home works. It’s a great learning opportunity, especially with your first home. Sometimes what you thought was a huge problem, can be easily addressed and remedied. 

6.  Are there Government Grants for 1st Time Buyers? 

First-Time Home Buyers Tax Credit Program

This credit (FTHBC) provides a 15% credit on a maximum of $5,000 of home purchase costs (e.g. legal fees. Land transfer taxes, etc.) to a maximum tax relief of $750. 

*To qualify an individual will be considered a 1st Time Buyer is neither the individual nor spouse or common-law partner owned or lived in another home in the calendar year of the home purchase or in any of the 4 preceding calendar years. 

Land Transfer Tax Rebates

(Provincial and Toronto) 

1st Time Buyers of new and re-sale homes are eligible to receive rebates on both provincial and Toronto land transfer taxes. The maximum provincial LTT rebate is $2,000 and the maximum Toronto LTT is $3,725. 

*To be eligible as a first-time buyer for these rebates:

  • Be at least 18 years old
  • Must occupy the home as their principle resident, no later than 9 months after date of conveyance or disposition
  • Buyer or spouse cannot have owned a home or had ownership interest in a home, anywhere in the world (while he or she was buyer’s spouse). 

First-Time Home Buyers Plan 

Federal Government Plan that allows qualified 1st time Buyers to withdraw up to $25,000 as an individual or $50,000 as a couple from their RRSP’s to use as their downpayment when purchasing their principal resident. Buyers will have 15 years to yearly re-pay the amount back. The RRSP contributions must remain in the RRSP for at least 90 days before being able to withdraw them under the Home Buyers Plan. * Visit http://www.cra-arc.gc.ca/ for qualifying criteria as a first-time Buyer under this plan. 

7.  What other costs will I have over and above my purchase price?

Closing costs are the list of charges that your lawyer presents to you on closing date. They often tend to surprise many people since they are additional costs over and above the price of the home.

According to CMHC and GE Capital, a purchaser should set aside at least 1.5% - 2.5% of the purchase price for closing costs.

Your lawyer can help you with explaining these in more detail. When you meet with your lawyer you may want to have this list of items to see which ones apply to your situation.

  • Appraisal Fee-from your lending institution to determine the market value of your purchase
  • Home Inspection Fee – an optional service for inspecting your potential purchase ranging from $300-$600
  • Fire Insurance – If you are getting a mortgage, the Lenders require a certificate of fire insurance be in place from the time you take possession
  • Land Survey fee or Title Insurance – some mortgage lenders will require one or both of these. Costs for a survey will depend on the size of property, number of buildings and complexity of the survey. Title insurance Fee ranges from $350.00 for properties up to $500,000 and $1 per thousand over $500,000
  • Legal Costs and Disbursements – Lawyers fee for their services including title deed drafting, co-ordination of title transfer, preparing mortgage documents and conducting searches to protect the Buyer
  • Land Transfer Tax – Government tax related to processing the transaction (when purchasing within Toronto both Municipal and Provincial tax applies)*1st time buyer rebates applicable
  • New Home Warranty Enrollment Fee – for most new construction this is a mandatory warranty program to protect the Buyer against a variety of potential issues and costs
  • Mortgage Application and processing Fee for High Ratio Mortgages (a high ratio mortgage is more than 80% of the purchase price) will require an insurance fee available through CMHC /GE Capitol
  • Harmonized Sales Tax of 13% (HST) on the High Ratio Fee and any other Services
  • GST/HST rebate on purchase of new construction (http://www.cra-arc.gc.ca/)

April Esteves is an “Accredited Buyer’s Sales Representative” designated by REBAC of the National Association of Realtors with Royal LePage R. E. Svcs. Ltd. Brokerage at Toronto’s Bloor West Village Branch.

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