Monthly Archives: August 2016

Some Tips on Buying a New Home

r1Home buying is an important personal decision and a big financial investment. You want to find the home that’s right for you and the builder who provides the best value and service. Here are some tips to help make the buying process enjoyable and successful.

Do Your Research
Know what you want, what’s available and how the buying process works before you start thinking seriously about signing a contract. Browse through newspapers and magazines. Consult with family, friends and co-workers. Attend a seminar for first-time home buyers. Check the Internet. Visit model homes and talk with builders and their sales agents.

Pre-arrange your mortgage
If you are like most of us, you will borrow funds to finance your home purchase. Talk to your lender about mortgages early in the process. Knowing in advance how much you can spend comfortably and getting pre-approval for a mortgage means you can proceed from “just looking” to a signed contract with confidence.

Check the builder’s qualifications
There are many reputable builders who provide exceptional service and build great homes – both lowrise and highrise. As you talk with builders or their salespeople, ask questions: How long has the company been in business? Is it a member of the local home builders association? Will the builder give you references of previous new home projects? What after-sales service is offered? Does the builder offer an independent third-party warranty and, if so, what does it cover? “Personal fit” is also important: Does the builder or salesperson listen to you, understand your needs, and offer useful advice?

Check the home carefully
Whether a builder has a model home, a sales office or sells directly from plans, you’ll have an opportunity to look closely at the quality of the home and what’s included. The builder’s specifications list will detail the construction materials and finishing products. Ask to see a description and samples of the standard features included in the base price of the house, along with the description and cost of options the builder offers. When viewing a model home, don’t hesitate to try out windows, open drawers, look into every nook and cranny, and inspect the home’s mechanical system.

Understand the total cost of buying
Get detailed prices and estimates on everything involved in buying a home. Your builder and lender can advise you on the costs of securing a mortgage, taxes and so on. Ask your lawyer to give you a detailed breakdown of closing costs. Call movers for estimates. Determine if you need to buy new appliance, window coverings or furnishings.

Consult with a lawyer
Before you hire a lawyer, it’s a good idea to ask for a detailed estimate of fees for service.

Be realistic
Quality, solidity, good products, service – these are the things that add up to real value for the long term. Your objective is to find the home that provides the best overall value within your budget. A professional builder will work with you to find the right balance of features that will work well for you.

Some Benefits of Home Ownership

When weighing the options involved in purchasing a home, there are emotional and financial factors to consider. Most people can easily articulate their emotions such as a desire to be free of a landlord, to decorate and renovate as they wish, to set down roots in and enjoy the pride of homeownership. Financial considerations can be more complex and less obvious.

One of the main benefits of homeownership is tax-free capital gains. If a buyer purchases a home for $200,000 and sells it for $325,000, they can enjoy $125,000 in capital gains without tax. In today’s economy, tax-free is a rare and wonderful concept!

Real estate also offers the benefit of being a leveraged investment. This means that a mortgage allows a buyer to enjoy a home and take as long as 30 years to pay for it even as the value of the property increases during the intervening years. Consider the previous example with a mortgage:

• Home price: $200,000
• Down payment: $40,000
• Mortgage amount: $160,000
• Interest rate: 3.9% *
• Amortization: 25-years
• Bi-weekly payments (26 per year): $384.12 each

In this example, the buyers would spend $249,678 on the principal and interest over 25 years. Adding in the down payment, the total expenditure is $289,678. Canadian real estate generally appreciates over the long term so, if the value of the home is $325,000 after the mortgage is paid, the appreciation is $35,322. That is a nice, tax-free nest egg for retirement! In the unlikely event that the property did not increase in value at all, the owners still have a property worth $200,000.

*Note: interest rates will fluctuate but for this example, it was 3.9% for the mortgage duration

How does renting compare to purchasing? First and foremost, renting does not build equity. At the end of 25 years of renting, a person would have zero property assets. As well, the types of properties available to rent vary greatly.

Using the previous example, a $200,000 property in a medium-sized city could purchase a nice one or two-bedroom condominium. The owners would spend $832.26 per month on mortgage payments (384.12 x 26 payments/12 months) plus approximately $140 for strata fees for a total of $972.26 per month. Renting the same condominium, if something comparable was even available, would cost approximately $1,150 per month. At current low interest rates, owners are enjoying accommodation for less and, at the same time, building equity.

Clearly, purchasing a property offers many emotional and financial benefits. The challenge, of course, is choosing the time, place and property where the investment will grow.

Location is an important factor in price appreciation. Location refers to both the community and the neighbourhood within a community. While not everyone has the luxury of choosing where they will live due to job and family ties, when options are available, it pays to research. Some Canadian communities are thriving while others have suffered due to the loss of major employers, demographic shifts or environmental changes. There are costs and benefits to both. Prices in thriving communities generally increase steadily over time but are more expensive markets to enter. Struggling communities typically have lower priced properties but the trade-off may be longer commutes to work/social activities and less price appreciation.

The old phrase ‘location, location’ says so much. A property with a great view of a lake or parkland will always be in demand. Properties in close proximity to train tracks, busy roadways, industrial areas, landfills, etc. are a fact of life too. The latter generally offer great value in terms of home and yard size compared to view properties. The choice usually comes down to family size and personal requirements.

Remember that not every property is created equal. Buyers will ask for as much as the market will bear—and that may not accurately reflect the true value! Prior to purchasing a property, a home inspection by a qualified professional is essential. Inspections can reveal potentially expensive problems such as mould/moisture, roof and foundation damage, etc. In some cases, problems are worth fixing for a price adjustment.

The style of a home can also affect its price and long-term value. A very unusual design may attract fewer buyers when it comes time to sell. The same is true when the style of the home is not suited to the neighbourhood such as a log house in a city. A very old home may or may not last another 25 years depending on the construction and upkeep. The quality of a condominium complex is directly related to the care taken by owners and the decisions by strata representatives.

A well-built, attractive home that is maintained over the years is most likely to appreciate in value. A REALTOR® can provide market-specific expertise to help buyers make decisions that satisfy both emotional and financial needs far into the future.

More Information About Researching Real Estate Online

‘Let your fingers do the walking’ has taken on a whole new meaning when it comes to researching real estate in the 21st century. The Internet is becoming an increasing important source of information and a time saving tool for homebuyers. It empowers them to gather information about housing issues and current market conditions as well as allowing them to preview numerous listings at the click of a mouse and survey current mortgage rates.

Home shoppers benefit in particular by being able to research homes before meeting with a real estate agent. Typical questions such as: Are there good schools nearby? How far is it to downtown or to work? Is the home construction suitable to its geographical area? Researching areas of concern can provide a sense of control over what is for many people the largest purchase of their lives. Also by weeding out homes that don’t meet basic criteria, they can save themselves and the agent a great deal of time. The Internet makes research faster and more convenient than ever.

The following are some ways to maximize the research potential of the Internet when you search for a home.

In general…

Among the many purposes of the Internet from entertainment to education, it is a dynamic advertising and marketing tool. Remember that the truthfulness and quality of the information you find on the Internet can vary. Always consider the source. It’s wise to check out more than one source in order to cross check information.
Some websites require personal details before a consumer can proceed and view certain information. If you are not comfortable with this don’t feel obligated to divulge any personal information.

Conducting research…

The Canadian Home Builders Association website (http://www.chbabc.org/) serves those in the home building industry however it also provides valuable information to consumers regarding home design. In addition, the website lists topics in their technical library from masonry to finishes to energy efficiency which the public can access in person at their Burnaby, British Columbia location.

The Internet is an excellent way to find out about a new neighbourhood. There are three common online avenues to information about communities: type in e.g. www.nameofthecity.org (or .com), search for the town city hall or chamber of commerce.

Many online listings include an address with a postal code. If you aren’t familiar with the address you can use the postal code to get an idea of the home location. In your browser type www.yahoo.ca and click on maps. When you enter the postal code, Yahoo will provide you with a detailed map of the location.

If you are interested in finding out about local services such as landscapers, architects, recreation facilities, etc., visit www.yellowpages.ca or www.superpages.com and type in your criteria. Along with the telephone number and addresses, some businesses will even include a website link and a map.

To find a property appraiser in your area check out the Appraisal Institute of Canada’s website. An appraisal can provide an accurate assessment of market value when a home is bought or sold, a new home is being constructed, when a mortgage is required etc.

With a dizzying array of mortgage products on the market, online research can provide details about obtaining a mortgage as well as current rates. Many lenders include online mortgage calculators, worksheets to help you figure out how much you can afford, details of promotions as well as online applications.

If you’re in the market for a new home you’ve likely already visited or plan to visit online listings on www.mls.ca. These listings generally provide details on the square footage, number of bedrooms and bathrooms, age, location, and other aspects of the home along with a photo. You will also find the name of the listing agent.

Technology is not replacing customer service; an online listing doesn’t mean an online sale without a human element. In fact, Internet shoppers are more likely to use real estate agents than non-Internet shoppers. Eighty-seven percent of web home shoppers use a real estate agent or broker, while 76 percent of traditional buyers work with an agent, according to an American study conducted by the National Real Estate Board in 2000. The Internet is a channel for delivering property information; as a consumer you need not sacrifice any of the services you’d expect from a profession real estate agent.

Sales agents help potential buyers determine their specific home requirements, provide qualified information about the local market, prepare an offer, provide information on home inspection and more.

Important Things That Must Consider When Buying The First Home

I think it was Will Rogers who said “A fellow that owns his own home is always just coming out of the hardware store…” Most homeowners would agree but, often in the excitement of house-hunting, we tend to overlook some of the sobering realities. Before you start, be sure you’re comfortable with the obvious and less obvious costs of home-ownership.

The Price Range
First determine how much house you can afford. Take a ballpark figure by multiplying your income before tax by 2.5. This formula is used by lenders to establish the price range for various income levels. Using this formula, and income of $50 thousand ($50 x 2.5) would put you in the $125 thousand price range. Then estimate how much you can afford for a monthly mortgage payment. A lender’s rule of thumb here is usually about one-third of gross monthly income. Keep in mind that the one-third guideline includes not only the mortgage payment but also property tax and any other secondary financing or condominium management fees, if applicable.

Test this guideline by reviewing your current spending. Do you, for instance, have a commitment to a car or personal loan ? How much do you spend on rent, clothing, transportation, entertainment and travel? Would the guideline mortgage payment still be comfortable considering these expenses?

Looking Ahead
Consider the cost of living in the home. How much will it cost to heat monthly? What about the monthly cost of insurance, electricity, water, maintenance – painting, repairs etc.? If you are considering buying a condominium, what effect will the monthly management fees have on your ability to carry a mortgage?

It can be difficult to forecast the cost of living in a home as compared to living in an apartment. Here is another rule of thumb that may help you to estimate the difference between the two. Take the value of the home you are considering and multiply it by 3 per cent. Then divide that figure by 12. In our example of the $125,000 home, the monthly cost using this formula would be roughly $312 in addition to mortgage and taxes.

The Down Payment
The size of your down payment is a major part of your mortgage consideration. Most lenders will require a minimum down payment of at least 10 per cent of the purchase price of the home. For instance, our example of a home in the $125,000 thousand range would require a $12,500 down payment. You would then need a mortgage of $112,500.

Cash Costs
When you have made an offer, had it accepted and begin to finalize the purchase, there are other costs to be paid in full. There are legal costs, registration costs, possibly house inspection costs and probably a land transfer tax. Your real estate agent will give you an estimate of these costs. Be sure to discuss with your agent the question of what lenders call “interest adjustment date”, depending on the date of your closing and the date of mortgage payment upon closing. Be prepared to pay for any heating oil left when you take over and to re-imbrues the seller for property taxes paid in advance. Don’t forget about moving charges, your mover will give you an estimate before you move. You will have to pay the movers upon delivery of the furniture.

Be Prepared
The way Will Rogers saw it, home-ownership is all work and no play. But, the pleasures of having a place of your own usually outweigh the work involved. Be sure you get maximum enjoyment from the experience by buying within your means.