For those who are curious of the up and coming zoning plans:
CITY OF VANCOUVER
CITY OF BURNABY
CITY OF RICHMOND
CITY OF NORTH VANCOUVER
CITY OF WEST VANCOUVER
Valuable statistics and reports for the analytical eyes:
A great resource to refer to if you want to learn more about schools in your area:
Availability – Access is everything. Units for sale are based on availability of inventory at the time you’ve gained access to the sales floor at the presentation centre. Provided that you are at the presentation centre, you are positioned quite favourably in terms of different units and floorplans you can choose from. The earlier you are in the queue, the more inventory you can select from. Unlike a detached home where buyers compete for one home, in the presales world, you essentially have a set of floorplans to choose from with the floor levels being the unique factor. Here, you have a greater chance of getting what you want.
Avoid Multiple Offer Situation – All the prices offered to you is fixed. You are not bidding for a specific unit like in a multiple offer situation for detached homes. You ask for availability, and in that exact moment, you will be given a purchase price for that specific available unit. The quoted price IS the price you can take it home for. Skip nuances of offers and counter-offers, and go straight for the purchase.
Flexibility in Finances – Presale developments usually have a scheduled deposit structure. For example, some developers may require a $10,000 deposit on writing, balance of 10% of the purchase price at the end of seven (7) days, additional 5% after six (6) months, and another 5% after another six (6) months. In this scenario, you will only need to pay 20% within one (1) year to own a strata unit. This means, the rest of the 80% will be covered by your mortgage financing just before completion, which leaves you with more cash-flow between now and the completion date of your contract. If you wish to have less of your funds tide up in an investment, pre-construction real estate may fit your needs (of course, always seek the advice of your financial advisor when it comes to structuring your investment portfolio).
Tax Savings and Rebates – See I’m a First Time Home Buyer (FTHB), any grants and rebates I should be aware of? (FAQ) for an extensive list of tax savings programs you may be qualified for.
No. However, the federal Home Buyers’ Program allows home buyers to requalify after four years.
The Wait – The marketing and sales of a pre-construction development are both commonly done 2-3 years before scheduled completion. Your plans may change during the course of time. The market may change as well. Before jumping in, take a moment to assess your risk tolerance when making such an investment. Is Vancouver currently a buyer’s or seller’s market? Is the market volatile in detached, attached condominiums, and/or attached townhomes? Which area of the city is being affect most by factors like government policies, interest rates, and unemployment rates?
Always talk to your financial adviser before making major real estate decisions and build that relationship with your realtor so that you can have a conversation what is happening in the market.
Discrepancies – Ask, ask, and ask. At the sales centre, always ask what will and will not be included at the time of possession of your home. Don’t be afraid to ask, as you would not be if you were to buy a detached home in a multiple offer situation (items to be included and excluded are usually listed in the Chattels and Fixtures section of your Contract of Purchase and Sale). It is not uncommon for certain appliances, shelving, and design features that are displayed in the showroom to be not included in your purchase.
It is imperative you have a realtor who will represent you in your best interests. He/she will ask the tougher questions, point out glaring issues from the Disclosure Statement, and guide you in making sound real estate decisions. A good real estate agent is always going to be one who will freely bring you to different presale developments and help you determine which real estate decision is best for you.
The day has arrived!! You have signed the documents, packed your boxes, received your money and turned over your keys.
Your home is sold!
While it is the normal practice for the buyer’s lawyer or notary to prepare the documents necessary to transfer the legal ownership, it is recommended that you, as the seller, engage legal counsel to act solely on your behalf. Among other things, he or she will protect your interests by:
The Contract of Purchase and Sale, which you signed, will state the completion day for the transaction. On that day, legal ownership will transfer from you to the new owner in exchange for the purchase price of the home.
If it is possible, as some suggest, for people to quickly become very wealthy by dealing in real estate, then, unfortunately, people on the opposite side of the same transaction may, just as quickly, lose some of what they have invested. Those who may stand to lose are sellers who agree to be a party to buyers’ financing arrangements in which the sellers assume risks.
Essentially, there is nothing wrong with most innovative or creative financing if all parties are fully aware of the potential risks and fully understand the possible consequences of such risks. However, the fact is that many owners (sellers) are not aware of the potential disasters which may occur.
It is strongly recommended that you secure competent advice from a real estate licensee or legal counsel before finalizing any real estate contract. This recommendation is much more urgent when the offer you are considering includes terms which could jeopardize you financially.
Be wary of offers which require any of the following:
An offer to purchase will contain information about how the buyer intends to finance his or her purchase.
If you currently have a mortgage loan on your home, you may be faced with one of two situations:
The Buyer Wants to Pay Cash and Has no Mortgage
This situation will require you to pay out your existing mortgage and there may be an interest penalty for doing this. Remember that having to pay an interest penalty effectively reduces the price you will be receiving for your home.
The Buyer Offers to Assume, or Take Over, Your Remaining Mortgage Loan
In this situation, before agreeing to allow the buyer to assume your mortgage loan, you should ensure that your mortgage lender will release you from any future obligation to repay the monies owing (if the buyer defaults).
Contact the financial institution which holds your mortgage to obtain information about your position in each of the above situations. It is a good idea to do this well in advance of signing a Listing Agreement so you will be able to give your licensee accurate information.
Financing by the Seller
If you have no existing mortgage, an offer to pay all cash is ideal and, of course, would be your preference.
But the buyer’s offer might state that part of the purchase price is to be paid in cash and part is to be paid in payments over a specified period of time at a specified interest rate. In effect, the buyer would be asking you to become the lender.
If you are considering an offer containing a request for “seller financing” (sometimes referred to as a seller take-back mortgage), you should first seek legal advice in order that you fully understand the implications of this type of financing arrangement.
The purpose of a subject clause contained in an offer to purchase is to set out a specific condition that must be fulfilled before the sale can go through.
One common subject clause you might encounter is one in which the buyers make the sale conditional upon their finding the exact amount and type of financing which will enable them to purchase your home.
Another common clause is one in which the buyers make the purchase conditional upon a satisfactory home inspection.
Remember that, if you accept an offer which contains a subject clause, you are effectively taking your home off the market for the period in which the buyers are attempting to meet the condition they have set. Therefore, you should ensure that an agreed upon time for the condition to be met is specified in the offer to purchase.
If one of the conditions contained in a subject clause cannot be met after every reasonable effort has been made to do so, the contract ends and there is no legal obligation to complete the purchase or sale.
As a seller, you may wish to accept an offer containing a subject clause (e.g. subject to the buyers selling their own home) yet still leave yourself free to consider other offers, just in case the buyers are unable to remove the condition. You can do this by having the buyer agree to inserting a time clause in the contract. A time clause will permit you to require the buyer to remove all subject conditions within a short, specified time period if you receive another offer that you would like to accept. If the buyer does not remove the conditions within that time, the conditional contract comes to an end and you are free to accept the second offer.
When selling a strata property, a common clause you might encounter is one in which the buyer makes the counter-offer conditional upon his or her review and approval of all pertinent strata documentation, such as registered bylaws, current rules, strata meeting minutes, financial statements, strata plan, Form B, engineer’s reports, etc.
Accept an Offer Exactly as it Stands
If you decide that you would like to accept an offer, be sure you know the precise meaning of each term in the written offer before you sign the document.
Once you, the seller, sign a Contract of Purchase and Sale agreeing to its terms, and your acceptance has been conveyed to the buyer, it becomes a legally binding contract.
Legally binding means both you and the buyer will be bound by the terms of the contract and must perform your respective obligations as stated. Your performance can be enforced in a court of law.
If you are uncertain about any of the clauses contained in the offer, you may wish to consult a lawyer before signing the contract; however, keep the expiry date of the offer in mind if you decide to postpone acceptance!
Make a Counter-Offer
If you change anything at all in the original offer, you are considered to have rejected that offer and to be making a new offer from you to the buyer. This new offer is usually referred to as a “counter-offer.”
The risk in making a counter-offer is that if the buyer has changed his or her mind and rejects the counter-offer, you do not have the option to return to the original offer and accept it.
But, the buyer may decide to make another counter-offer back to you and the process of counter-offers could continue until an agreement is reached.
If, after making a written counter-offer, you decide you don’t want to sell the home, it may be possible to revoke the counteroffer. Many legal problems can result from the revocation of a counter-offer, so you should seek professional advice about the correct procedure to follow.
Reject the Offer
You are under no obligation to accept any offer or to make a counter-offer. If, however, you reject an offer that exactly meets all the terms you agreed to in the Listing Contract, which you signed with your listing brokerage, you could be legally obligated to pay the commission.
Ignore the Offer
You are under no obligation to acknowledge receipt of any offer. If, however, you ignore an offer that exactly meets all the terms you agreed to in the Listing Contract, which you signed with your listing brokerage, you could be legally obligated to pay the commission.
All offers to purchase your home will contain a number of important details which you must consider.
The offer should include:
Once an interested buyer has been found, a written offer to purchase your home will be prepared. This offer is usually recorded on a standard form entitled Contract of Purchase and Sale.
Your licensee will explain to you the process of receiving and reviewing offers. Do not be surprised if you are presented with offers which differ dramatically from your listed asking price; your licensee is under an obligation to bring all written offers to you for your consideration. If several offers are brought to you at once, you are under no obligation to accept any one offer over another.
Sellers must disclose known material latent defects about their property to a buyer. A material latent defect means a defect that cannot be discerned through a reasonable inspection of the property, including a defect that renders the real estate:
Material latent defects may also include:
Common examples of material latent defects could include the fact that the basement leaks when it rains, structural damage to the property, failure of the building’s envelope (water ingress), underground storage tanks located on the property, problems with the potability/quantity of drinking water and any un-remediated damage caused by the illegal use of the property, e.g. marijuana grow operation.
New installations or renovations of electrical or gas systems completed without appropriate permits and inspections may also be considered examples of material latent defects. For information on what type of work in a home requires gas and electric permits, please contact the BC Safety Authority at 1-866-566-7233 or visit www.safetyauthority.ca.
Failure to disclose material latent defects could result in future problems, including legal issues if the new owner discovers problems that you were aware of and did not disclose.
When you employ a licensee, you are responsible for providing him or her with accurate information concerning your home; for example, its age, the current financing arrangements, the condition of the roof and hot water heater, the property taxes, etc. The licensee will also need your assistance and/or authorization to gather information about such things as the ownership details, the outstanding balance owing on the mortgage, the home’s assessed value, and the current zoning of the property.
For strata titled properties, licensees will want your assistance to gather and provide information, including minutes of all strata meetings in the last two years, current financial statements, registered bylaws, current rules, building inspection or engineer’s reports, Information Certificate (Form B prescribed under the Strata Property Act), as well as information pertaining to the nature of how parking stalls and storage lockers are designated, whether a special assessment is being proposed, and any other documentation relevant to the strata property.
In general, licensees work on a commission basis and receive payment only after the successful completion of a sale. As the seller, you will be asked to agree to pay this commission as a fee for the licensee’s services. The commission is usually stated as a percentage of the total sale price or as a fixed dollar amount. Note that GST is applicable to commissions. The commission rate is neither fixed by law nor by any real estate board; it is negotiable between you and the licensee you engage to help you. The seller’s brokerage traditionally shares this commission/fee with the brokerage working for the buyer.
When providing real estate services, the nature of the relationship that is created between the buyer or seller and the real estate brokerage, including its related licensees, is important. The relationship may be either a sole agency, limited dual agency, or no agency relationship.
Where a licensee acts only for the buyer or the seller, a sole agency relationship is generally created. The buyer or seller who engages a licensee to act as a sole agent is known as the “client”. There are different types of sole agency relationships. The historical model of real estate agency, referred to in this material as ‘brokerage agency’, is one where the brokerage is the agent of the client, and all licensees engaged by that brokerage automatically assume the same agency obligations as the brokerage in relation to that client. When the brokerage only represents one client in a particular transaction this is referred to as ‘sole’ agency. Another type of sole agency, ‘designated agency’, occurs when the brokerage and the client agree that the brokerage will designate one or more licensees engaged by that brokerage to provide real estate services as sole agent to or on behalf of the client. In designated agency, the brokerage has contractual duties to the client but it is the designated agents who act as sole agent on behalf of the client.
As an agent, a licensee has certain duties to their clients. In addition to the general obligation that all licensees have to act honestly and with reasonable care and skill in performing all assigned duties, an agent has:
In designated agency, the brokerage and the client agree that these duties – other than the duty shared with the designated agents to keep the confidences of the client, and the holding of money on behalf of the client – are the responsibility of the designated agents.
Limited Dual Agency
When a brokerage acts for both the buyer and the seller, with their agreement, the nature of the relationship created by contract is one of limited dual agency. In brokerage agency, limited dual agency can occur when the same licensee engaged by the brokerage represents the buyer and seller, or where different licensees engaged by the same brokerage represent the buyer and the seller. Before a brokerage may represent both the buyer and the seller, the buyer and seller must consent to such a relationship. Before providing their consent, the buyer and seller should be fully informed regarding the limits that will be placed on the agent’s (brokerage’s) duties and obligations to the buyer and seller.
Designated agency allows two clients who have engaged the same brokerage to have independent representation by their respective designated agents, eliminating the occurrence of ‘in-house’ limited dual agency where the interests of those clients are in conflict, e.g. they wish to negotiate in relation to the same property.
Where a limited dual agency relationship has been agreed to, it is not possible for the agent (brokerage or its designated agent) to fulfill all of its duties to both parties. As a result, the duties are limited by contract and the sole agent, whether the brokerage or its designated agents as the case may be, become limited dual agents, with their duties being limited as follows:
A brokerage or its designated agent may also agree with a buyer or seller that they will not act as an agent on their behalf in a transaction. In other words, there will be no agency representation. In such a case, the buyer or the seller will be the “customer”, not the client of the brokerage or its designated agent. This may occur when a licensee already has an agency relationship with a seller, for example, and a buyer becomes interested in the seller’s property. In this situation, the licensee is not permitted to recommend or suggest a price, negotiate on the customer’s behalf, inform the customer of their client’s bottom line price point or disclose any confidential information about their client unless otherwise authorized by the client. However, the licensee can provide a customer with other services, such as:
Wise real estate decisions are made when you have a clear understanding of your personal financial circumstances. When assessing your situation, it is important to know there is a broad range of cost-saving programs available to help you.
*Updated: August 2016
|Home Buyers’ Plan: Registered Retirement Savings for down payments|
|Canada Revenue Agency’s Home Buyers’ Plan lets qualifying home buyers use up to $25,000 of their Registered Retirement Savings Plan (RRSP) to buy a home. Couples can use up to $50,000. The home must be the principal residence, the home buyers must not have owned a home within the past five years and the loan must be repaid within 15 years.
Home buyers who have already used the plan and have fully repaid their RRSP may be eligible to use the plan a second time.
Disabled home buyers upgrading to a more accessible home also qualify as do relatives helping disabled home buyers.
|Canada Revenue Agency
Home Buyers’ Plan
|First-Time Home Buyers’ Tax Credit|
|Eligible individuals who bought a qualifying home in 2015 can claim the home buyers’ amount of $5,000 on line 369 of Schedule 1 when filing their 2015 income tax and benefit returns. For 2015, the maximum home buyers’ tax credit is $750, which is calculated by muliplying the home buyers’ amount of $5,000 by the federal non-refundable tax credit rate of 15% (equal to the lowest personal income tax rate for the year.)
|Canada Revenue Agency
|GST Rebate on new homes|
|New home buyers can apply for a rebate of the 5% GST if the purchase price is $350,000 or less. The rebate is equal to 36% of the GST to a maximum rebate of $6,300. There is a proportional GST rebate for new homes costing between $350,000 and $450,000. There is no rebate for homes priced at $450,000 and above.||Canada Revenue Agency
GST- New housing rebate
|BC Property Transfer Tax (PTT)|
|Home buyers in BC pay a provincial Property Transfer Tax (PPT) when they buy a home. The tax is charged at a rate of 1% on the first $200,000 of the purchase price and 2% on the remainder, up to a maximuim of $475,000.
First-time home buyers may be exempt from paying the PTT. There is a proportional exemption for homes priced between $475,000 and $500,000. At $500,000 and above the rebate is nil.
Qualified buyers of new homes may be exempt from paying the PTT on a newly built home or newly subdivided unit priced up to $750,000, saving buyers up to $13,000; and a partial exepmption on newly built homes priced $750,000 to $800,000. Learn more
|BC Ministry of Finance
Property Transfer Tax
|BC property tax deferment programs|
Qualifying low income home owners aged 55+ may be eligible to defer property taxes.Financial hardship
Qualifying home owners may be eligible to defer property taxes.Families with children
Qualifying home owners who financially support children under age 18 may be eligible to defer property taxes.
|BC Ministry of Finance
Property tax deferment programs
and enter ‘Property tax deferment’ in the search box or contact your municipal tax office.
|BC Home Owner Grant|
|Reduces property taxes for home owners with an assessed value of up to $1,200,000. The basic grant gives home owners:
• a maximum reduction of $570 in property taxes on principal residences in the Capital, Greater Vancouver, and Fraser Valley regional districts
Home Owner Grant
Or contact your local municipal tax office.
|Home Adaptations for Independence (HAFI)|
|A program jointly funded by federal and provincial governments provides up to $20,000 to help eligible low-income seniors and disabled home owners and landlords finance modifications to their homes to make them accessible and safer.||For information:
|BC Seniors’ Home Renovation Tax Credit|
|Assists eligible seniors 65+ with the cost of certain permanent home renovations to a principal residence to improve accessibility or help a senior be more mobile at home. The maximum amount of the refundable credit is $1,000 per tax year and is calculated as 10% of the qualifying renovation expense (maximum $10,000).||For information:
Canada Revenue Agency
|Rain barrel subsidy programs|
|Many Metro Vancouver municipalities offer rain barrels for sale, often at a discount for their residents:
Burnaby – $70
Coquitlam – $72
Richmond – $30
West Vancouver – $55Other municipalities may have similar offers.
|Local government water conservation incentives|
|Your municipality may provide grants and incentives to residents to help save water.
Clothes washers: replace your old clothes washer with a new, high efficiency ENERGY STAR clothes washer and receive a $100 or $200 rebate from Richmond.
Visit your municipality’s website and enter ‘toilet rebate’ to see if there is a program.
|Local government water meter programs|
|Your municipality may provide a program for voluntary water metering so that you pay only for the amount of water you use. Burnaby (scroll down), Delta, Richmond and West Vancouver have programs and other municipalities may soon follow.||For information:
Visit your municipality’s website and enter ‘water meter’ to see if there is a program.
|Water saving kits|
|Many Metro Vancouver municipalities offer water saving kits and other tools for reducing home water consumption including Burnaby, Coquitlam, and Delta.||For information:
|Leaders in Energy Management Program|
|Partners BC Hydro with BC’s largest commercial, government and institutional customers (who spend $200,000 or more/year on hydro). Customers gain access to energy management programs, tools and incentives.||For information:
|Business Energy Saving Incentives|
|Provides financial incentives to organizations that replace inefficient technologies with energy efficient technologies.||For information:
|FortisBC new home energy rebate offer|
|FortisBC and BC Hydro customers can receive rebates when building ENERGY STAR new homes or installing high-efficiency natural gas fireplaces.||For information:
|FortisBC rebate program for homes|
|Rebates for home owners include:
• $300 rebate for buying an EnerChoice fireplace
• up to $1,800 off an ENERGY STAR water heater
• $1,000 rebate for switching to natural gas (from oil or propane) and installing an ENERGY STAR heating systemTotal value of available rebates: $5,300 per household.
|FortisBC rebate program for businesses|
|For commercial buildings, provides:
• up to $45,000 for the purchase of an energy efficient boiler
• up to $15,000 for the purchase of a high-efficiency water heater
• funding towards a new construction energy study
|Energy Conservaton and Assistance Program|
|BC Hydro and FortisBC offer free energy assessments and energy saving products to income-qualifying households. Qualified contractors will install upgrades ranging in value from $300 to $5,000 depending on the need of the home.||For information:
|Energy savings kits|
|BC Hydro and FortisBC offer low-income customers a free energy saving kit containing products to help save energy and money.||For information:
|Home Energy Rebate Offer|
|BC Hydro and FortisBC offer home owners rebates for upgrades and improvements, including insulation, draftproofing, space and water heating systems and ventilation to reduce the average customer’s energy bill by 30%.||For information:
|Smart Thermostat Pilot Program|
|The City of Vancouver and Vancity are offering a $125 rebate for a home owner purchasing 1 of 3 smart thermostats that automatically controls the climate in your home. This pilot program runs to December 2016.||For information:
City of Vancouver
|Financial institutions – energy-related savings|
|RBC’s Energy Saver Mortgage
Home owners who have a home energy audit within 90 days of receiving a RBC Energy Saver Mortgage may qualify for a rebate of $300 to their RBC account.RBC’s Energy Saver Loan
Offers a 1% interest rate discount or a $100 rebate on a home energy audit with a qualifying purchase through a fixed rate loan over $5,000.BMO Eco Smart Mortgage
Offers home buyers a special rate on qualifying green properties.Vancity Home Energy Loan
Offers home owners up to $50,000 at prime + 1% for up to 15 years for energy efficient renovations.
CMHC Mortgage Loan Insurance Premium Refund
|For information visit your financial institution or
RBC- mortgage 1-800-769-2511
It’s easy to count your available cash, but remember that all of these cash savings cannot be used as your down-payment. There are last-minute costs, such as taxes, legal fees, appraisal fees, moving expenses, and home insurance to pay before you are finally in your new home. The time to budget for those “end” expenses is now. You must be prepared to pay most, and perhaps all, of the following closing costs.
Property Transfer Tax (PTT) – The British Columbia Provincial Government imposes a property transfer tax, which must be paid before any home can be legally transferred to a new owner. Some buyers may be exempt from this tax.
Home buyers in BC pay a provincial Property Transfer Tax (PTT) when they buy a home.
The PTT is charged on the fair market value of a property at a rate of:
Qualifying first-time home buyers may be exempt from paying the PTT if the purchase price of their home is priced up to $475,000. There is a proportional exemption for homes priced between $475,000 and $500,000. At $500,000 and above the rebate is nil.
Qualifying buyers of new homes may be exempt if the purchase price of their home is priced up to $750,000. There is a proportional exemption for homes priced between $750,000 and $800,000. At $800,000 and above there’s no rebate.
Goods & Services Tax (GST) – If you purchase a newly constructed home, you may be subject to GST on the purchase price. There may be some rebates available depending on the value of the home.
The GST on a new home is 5% of the price. A GST rebate equivalent to 36% of the GST paid is available for new homes priced up to $350,000 and a partial rebate on new homes priced up to $450,000.
Buyers also pay the GST on fees for services from appraisers, home inspectors, lawyers, Notary Publics and REALTORS®.
Provincial Sales Tax (PST) – The PST is generally not payable on services except for legal and notary fees. Both the GST and PST are paid on legal and notary fees.
Property Tax – If the current owners have already paid the full year’s property taxes to the municipality, you will have to reimburse them for your share of the year’s taxes. See also Why do I have to pay property taxes on the house I’m buying.
Appraisal Fee – When the lending institution requires an appraisal of the home before approving your loan, it may be your responsibility to pay the appraiser’s fee. The fee ranges from $300 to $450 plus GST.
Survey Fee – The lending institution may also require that a survey certificate be presented to them. The purpose of the survey is to formally establish the boundaries of the property and to ensure that all buildings are within those boundaries.
Note: Lending institutions may ask for either a building location survey, which establishes where a building is located on a property, or a monumental survey, which establishes the actual boundaries of a property. If the current owner cannot provide a recent survey certificate, it will be your responsibility to pay the surveyor’s fee.
Mortgage Application Fee – Lending institutions may charge a mortgage application fee. This application fee may vary between lending institutions.
Don’t forget about last minute costs
Mortgage Default Insurance – This type of insurance is required on most mortgage loans in excess of 75% of the appraised home value. Its purpose is to ensure that the lender will not lose any money if you cannot make your mortgage payments and the value of your home is not sufficient to repay your mortgage debt. The insurance premium is paid to the lender and, in most cases, is added to the loan amount and paid for over the term of the loan.
As of February 15, 2016, the federal government requires a 10 per cent down payment requirement on homes valued at $500,000 – $1 million, that need mortgage insurance. Homes valued at $1 million+ require a minimum down payment of 20 per cent. Mortgage insurance is not available for homes in this price range. Learn more
Rent and security deposits – If there is a secondary suite or a laneway home rental and the tenancy continues, the buyer receives the security deposit from the seller with accrued interest because the buyer is responsible for reimbursement when the tenant leaves.
Land survey fees – Lenders may requie a survey of the property. The fee ranges and is typically $500 plus GST.
Life & Disability Mortgage Insurance – At your option, you may purchase insurance which will ensure that your outstanding mortgage balance is paid if you die or become disabled.
Fire & Liability Insurance – The mortgage lender will insist that you purchase an insurance policy which guarantees that, in the event of fire, the lender will receive the balance owing on the mortgage loan before you receive any insurance proceeds.
Legal Fees – The transfer of home ownership from the seller to the buyer must be recorded in the Land Title and Survey Authority Office in order to protect the new owner’s interests.
You will probably want to engage a lawyer or notary public to act on your behalf during the completion of your purchase. The lawyer or notary public will charge a fee for this service, plus disbursements, including the Land Title Registration fee. If you are financing your purchase with a new mortgage loan, there will be a further fee and disbursements to prepare and register the mortgage documents.
Likely fees include:
For more information about land titles, visit the Land Title and Survey Authority of BC at www.ltsa.ca.
Other last-minute costs you shouldn’t forget to set some money aside for:
Based on Your Income:
A general guideline is to allow no more than 30% of your gross monthly income (before deductions) to make your monthly housing payments. This test of your ability to repay a mortgage loan is generally referred to as the Gross Debt Service Ratio.
Complete the following calculation to determine the approximate amount you may be able to afford for the mortgage payment, the property taxes and, where applicable, 50% of the strata maintenance fees. Some lenders will require that this total maximum monthly payment also covers heating costs.
Based on your Other Financial Obligations:
If you have other monthly financial obligations, such as car or credit card payments, the lending institution will also apply the Total Debt Service Ratio test to determine the maximum mortgage loan for which you can qualify.
$ ____ Your monthly housing payment
$ ____ Your calculated monthly debt payments (car, credit card, etc.)
$ ____ Total monthly payment
A general guideline should be that the total of your monthly housing payment added to your other monthly debt payments should not exceed 40% of your monthly gross income.
The Gross Debt Service Ratio and the Total Debt Service Ratio tests protect both you and the lender by ensuring that you do not take on more debt that you can reasonably afford to repay.
Many lending institutions will prequalify you for a specific size and type of mortgage loan before you begin searching for your new home. Taking the time to apply for a pre-approved mortgage will give you the security of knowing how much you can afford to spend.
Before concluding the loan agreement, most lending institutions will require an appraisal of your selected home. The appraised value is a professional opinion of the value of the home and may differ from the purchase price you are willing to pay. The appraised value may affect the approved value of the loan.
Most mortgage loan contracts only permit the regular payments to continue for a specified term which is shorter than the amortization period. The term can be as short as six months or it can be five years or more.
At the end of the term, you are required to repay the full unpaid balance. If you don’t have the cash required to pay the balance, it may be necessary to refinance the loan.
Deciding on the length of term you want will depend partly on whether you think interest rates will go up or down. Keep in mind that the longer the term you choose, the longer your monthly payment remains stable.
CAUTION: The lender is not obligated to renew your mortgage loan at the end of the term.
Typically, the size of a mortgage loan payment is calculated as if the loan payments were going to be paid over 20 or 25 years. This is called the amortization period. Each payment will repay the interest due up to the payment date along with some of the principal owed. The longer the amortization period you choose, the lower the regular payment will be. Keep in mind that the faster you repay any money borrowed by choosing a shorter amortization period, the more you reduce the total cost of borrowing.
There are two basic types of mortgage loans:
Obtaining a loan to finance the purchase of your new home will probably require you to sign a document called a mortgage. This document will set out the terms and conditions for the loan and its repayment. If you fail to meet your debt obligations, the lender may have the right to claim your home to pay off what you still owe.
Almost everyone who purchases a home borrows some of the money needed to pay for it. The easiest way to determine how much money you will be able to borrow as a mortgage loan is to consult with one or more lending institutions. These lenders will apply standard tests, based on your family’s current income and debts, in order to decide the amount of money they will lend to you. They will ask for information about your finances and make a thorough credit check, in order to be sure you are able to repay a loan.
Lending institutions will usually require you to make a down-payment of at least 5% to 10% of the purchase price of the home. Lending institution policies may vary from time to time. However, as a general rule, you should make your cash down-payment as large as possible. Your deposit for the real estate transaction may form part of your down-payment.
Before you start looking for a new home, it is important that you become aware of how much you can afford to pay. This knowledge will allow you to spend your valuable time looking productively at homes which are within your predetermined price range. You can calculate a relatively accurate figure for yourself if you assemble the following information:
$ _____ The cash you have saved to be used for this home purchase is called the down-payment.
$ _____ Plus: The amount of borrowed money you are able to arrange.
$ _____ Less: Closing costs and other “last minute” costs associate with the real estate purchase.
$ _____ Equals: Maximum Price
While there are a variety of housing ownership interests, the most common include the following:
Freehold – A freehold interest (also known as a fee simple) is the more precise term for what we ordinarily refer to as “ownership” of a home. The owner of the freehold interest has full use and control of the land and the buildings on it, subject to any rights of the Crown, local land-use bylaws, and any other restrictions in place at the time of purchase.
Strata Title – The strata title form of ownership is designed to provide exclusive use and ownership of a specific housing unit (the strata lot) which is contained in a larger property (the strata project), plus shared use and ownership of the common areas such as halls, grounds, garages, elevators, etc. This type of ownership is used for duplexes, apartment blocks, townhouse complexes, warehouses, and many other types of buildings. In additiion, some single family home developments may be part of a bare-land strata development. Because ownership of the common space is shared, the owners also share financial responsibility for its maintenance.
Leasehold – In some cases, you might purchase the right to use a residential property for a long, but limited, period of time. The owner of this right of use has a type of ownership called a leasehold interest. This type of ownership is used most often for townhouses or apartments built on city-owned land. It is also used occasionally for single detached homes on farm land, on First Nation reserves, and for apartments where the owner of the freehold interest of an entire apartment block sells leasehold interests in individual apartment units to other “owners.” Leasehold interests are frequently set for periods of 99 years, but regardless of the length of the original term, you will only be able to purchase the remaining portion. Of course, the shorter the remaining portion, the less you, or the person who eventually purchases from you, will be willing to pay for the leasehold interest.
Cooperative – In the cooperative form of ownership, each owner owns a share in a company or cooperative association which, in turn, owns a property containing a number of housing units. Each shareholder is assigned one particular unit in which to reside.
To meet the many kinds of needs that people have, a number of different housing styles and types of ownership have developed over the years. Your individual requirements and your income level will govern the housing type which is most suitable for you at the present time.
Single Family, Detached Home – A detached home is one which has no common walls with any other residential structure, resting on its own land with front, rear, and side yards. It may be any size from a small, one-storey bungalow to a huge mansion.
Semi-Detached Home – A semi-detached home is two single family dwellings joined together by a common middle wall. It is sometimes called a “side-by-side” duplex.
Duplex – A duplex is two separate dwellings which are attached either side-by-side (a semi-detached home) or one unit above the other. It is important to note that this type of structure may be a strata titled property and therefore subject to the Strata Property Act.
Townhouse – In British Columbia, the term “townhouse” is usually used to describe one of a group of dwellings (most often two-storey) joined together by common walls, each with its own entrance from the outside.
Apartment – An apartment is one of several dwellings (most often single storey dwellings built one above the other) joined together by common walls, each having its entrance from a common hall. The overall building containing the apartments may be from three to 33 or more storeys.
Mobile or Manufactured Home – A manufactured home is a factory-built residential structure designed to be moved from one place to another, although wheels are not necessary. It is often placed on a rented space (called a “pad”) in a manufactured home park.
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An inspector checks the safety of your potential new home. Home Inspectors focus especially on the structure, construction, and mechanical systems of the house and will make you aware of only repairs that are needed.
The Inspector does not evaluate whether or not you’re getting good value for your money. Generally, an inspector checks (and gives prices for repairs on): the electrical system, plumbing and waste disposal, the water heater, insulation and Ventilation, the HVAC system, water source and quality, the potential presence of pests, the foundation, doors, windows, ceilings, walls, floors, and roof. Be sure to hire a home inspector that is qualified and experienced.
It’s a good idea to have an inspection before you sign a written offer since, once the deal is closed, you’ve bought the house “as is.” Or, you may want to include an inspection clause in the offer when negotiating for a home. An inspection clause gives you an “out” on buying the house if serious problems are found or gives you the ability to renegotiate the purchase price if repairs are needed. An inspection clause can also specify that the seller must fix the problem(s) before you purchase the house.