OFFER

Homebuyers’

road map

Navigatingwith a REALTOR

®

reaLTors® are experienced in everything you

need to know and do when

buying a home.

your reaLTor® can help you:

• Navigatethehomebuyingprocessandpaperworkfromstarttofinish,ensuringeverythingflowssmoothlywithoutanysurprises.

• Findtherighthome,intheneighbourhoodyouwant,atapriceyoucanafford.

• Compareyourpropertywithsimilarpropertiesthathavesoldoverthepastyear.

• Getafeelfortheneighbourhoodincludingschools,parksandotheramenities.

• Findoutifyouareeligibleforgovernmenthomeownershipincentiveprograms.

• Assessmortgageproductsanddifferenttypesoflenderstoseewhatfitsyourneeds.

• Negotiatepurchasepriceandcontractterms,suchasdateofpossession,requiredrepairs,includedfurnishingsorequipment.

• Directyouthroughcomplexcontracts.

• Findqualifiedindustryprofessionals,suchasrealestatelawyers,homeappraisersandhomeinspectors.

• Planforclosingcostsandotherrelatedexpenses.

Homebuyers’ road map 2 Thefollowinginformationisforinformationpurposesonlyandisnotlegaladviceorasubstituteforlegalcounsel.

What do lenders require? mortgagelendersusetwocalculationstohelpdetermineyoureligibilityforamortgage–yourGrossDebtservice(GDs)ratioandyourTotalDebtservice(TDs)ratio.

yourGDsratioisthepercentageofyourgrossmonthlyincomeusedformortgagepayments,taxesandheatingcostsor-ifyouarebuyingacondominium-halfofthemonthlymaintenancefees.Asageneralruleofthumb,yourGDsratioshouldnotbemorethan32%ofyourgrossmonthlyincome.

yourTDsratioisthepercentageofgrossmonthlyincomerequiredtocovermonthlyhousingcosts,plusallyourotherdebtpayments,suchascarloansorleases,creditcardpayments,linesofcreditpaymentsandanyotherdebt.Generally,yourTDsratioshouldnotbemorethan40%ofyourgrossmonthlyincome.Have you been pre-approved?Gettingpre-approvedforamortgagebeforelookingatpropertiesgivesyouamorerealisticexpectationofwhatyoucanafford.

However,keepinmindthatthepre-approvedamountscanoverestimatewhatyoucanactuallyaffordtopay.

Pre-approvaldoesnotguaranteeyouwillbeapprovedonceyouactuallyapplyifmarketconditions,interestrates,oryourpersonalcircumstanceschange.do you know your credit rating?orderacopyofyourcreditreporttomakesureitdoesnotcontainanyerrorsbecauselenderswillcheckitbeforeapprovingyouforamortgage.Acreditreportisasummaryofyourfinancialhistoryandshowswhetherornotyouhavehadanyproblemsinthepastpayingoffdebts.

TheFinancialConsumerAgencyofCanada(FCAC),afederalgovernmentagency,hastipsonhowtoorderyourcreditreportforfreeandhowtoimproveyourcreditrating.VisitFCAC’swebsiteat:www.itpaystoknow.gc.ca.

OFFER

Assess your present household budget and your

annual income to determine if you are eligible for a

mortgage and how much you can comfortably afford.

Also check out the Mortgage Affordability Calculator

at www.REALTOR.ca.

1. assess Financial readiness

Homebuyers’ road map 3

What type of mortgage is best for you?• Fixedratemortgages:yourinterestrateislockedinforaspecifiedperiodcalledaterm.yourpaymentsstaythesameforthemortgage’stermsoyouwillnotpaymoreifinterestratesincreaseovertime.

• Variableratemortgages:rateofinterestyoupaymaychangeifratesgoupordown.

• Conventionalmortgages:requireadownpaymentofmorethan20%oftheproperty’svalue.youarenotrequiredtogetmortgagedefaultinsurancewithaconventionalmortgage.

• Closedmortgages:Themortgagecannotbepaidoffearlywithoutpayingaprepaymentcharge.

• openmortgages:Amortgagethatcanbepaidoffatanytimeduringtheterm,withouthavingtopayacharge.Theinterestrateforanopenmortgagemaybehigherthanforaclosedmortgagewiththesameterm.

What mortgage features are best for you?• Portablemortgages:Ifyousellyourexistinghome,youcantransferyourmortgagetoyournewhomewhilekeepingyourexistinginterestrate.youmaybeabletoavoidprepaymentchargesbyportingyourmortgage.

• Prepaymentprivileges:youcanmakelump-sumprepaymentsorincreaseyourmonthlypaymentswithouthavingtopayacharge.Thiscanhelpyoupayoffyourmortgagequickerandsaveoninterestcharges.

How often can you make your payments?• byswitchingfrommonthlypaymentstoacceleratedweeklyorbiweeklypayments,youcanpayoffyourmortgagefaster.exploreyouroptionsformortgagepaymentsandseehowmuchinterestyoucouldsavebyusingFCAC’smortgageCalculatorToolat:www.itpaystoknow.gc.ca.

2. Consider mortgage options

Homebuyers’ road map 4

OFFER

A mortgage is a loan, generally used to buy a

property. How much you pay depends on how much you borrow (the principal), the

loan’s interest rate, and how long you take to pay it back

(the amortization period).

Do not be afraid to negotiate interest rates and mortgage terms with different lenders.

They are offering you a product and talking to more

than one lender helps you make an informed decision.

What types of mortgage charges might you have to pay?youmayhavetopaychargesifyouprepaylargeportionsofyourmortgageearlyorifyoubreakyourmortgageduetounforeseenlifechanges,suchasmaritalbreakdown,deathofaspouseorrelocatingforajob.

Itisyourrighttoknowhowlenderscalculateprepaymentcharges.readyourmortgagecontractcarefullyandmakesureyouunderstandhowchargeswillbecalculatedbeforeyousign.How much do you need for your down payment?Adownpaymentistheportionoftheproperty’spricenotfinancedbythemortgage.youwillneedadownpaymentofatleast5%ofthepurchasepriceofthehome.Forexample,tobuyahomefor$200,000,youwillneedatleast$10,000asyourdownpayment.Ifyourdownpaymentislessthan20%,youwillneedmortgagedefaultinsurance.

Homebuyers’ road map 5

are you planning to purchase a property with less than a 20% down payment? Ifyes,yourequiremortgagedefaultinsurancewhichgenerallyadds0.5%to3%tothecostofthemortgagedependingonthetotalamountborrowed.

mortgagedefaultinsuranceenablesyoutopurchaseahomewithaminimumdownpaymentof5%(10%formulti-unitdwellings)withinterestratescomparabletothoseofaconventionalmortgage.

majorprovidersofmortgagedefaultinsuranceincludeCanadamortgageandHousingCorporation(CmHC),GenworthFinancialCanada,andCanadaGuarantymortgageInsuranceCompany.

3. mortgage default Insurance

Homebuyers’ road map 6

OFFER

When you buy a home with less than a 20% down

payment, the mortgage needs to be insured

against default. This type of insurance protects the mortgage lender in case

you are not able to make your mortgage payments.

It does not protect you.

• First-TimeHomebuyers’TaxCredit–a$5,000non-refundableincometaxcreditonaqualifyinghome.Thecreditprovidesupto$750intaxrelieftoassistfirst-timebuyerswithpurchasecosts.Formoreinformation,checktheCanadarevenueAgency’s(CrA)website:www.cra-arc.gc.ca.

• Homebuyers’Plan–aone-timewithdrawalupto$25,000fromaregisteredretirementsavingsPlan(rrsP)byfirst-timebuyerstohelppurchaseorbuildahome.Generally,youhavetorepayallwithdrawalsfromyourrrsPwithin15years.Formoredetails,visitCrA’swebsiteat:www.cra-arc.gc.ca.

• CmHCGreenHomeprogram–whenyouuseCmHC-insuredfinancingtobuyorbuildanenergy-efficienthomeormakeenergy-savingrenovations,youmayqualifyforapremiumrefundof10%onyourmortgagedefaultinsuranceandapremiumrefundforalongeramortizationperiod(ifapplicable).CheckoutCmHC’swebsiteformoreinformation:www.cmhc.ca.

Governmentprogramscanchangeovertime.Forthemostup-to-dateinformation,refertoserviceCanada’swebsite:www.servicecanada.gc.ca.

4. research Government programs

Homebuyers’ road map 7

OFFER

The federal government

has assistance programs

to help homebuyers.

Research government

program requirements to

see if you are eligible.

Where do you want to live?• urban,suburbanorcountry?

• Willyouneedtocommute?Doyouneedaccesstopublictransit?Howmuchwillcommutingcost?

• Arethereschoolsnearby?Howwillyourchildrengetthere?

What type of home do you prefer?• single-familydetachedhomesstandaloneontheirownlot.

• single-familysemi-detachedhomesarejoinedononesidetoanotherhome.

• Duplexescontaintwosingle-familyhomes,oneabovetheother.

• rowhouses(townhouses)areseveralsingle-familyunits,locatednexttooneanotherandjoinedbycommonwalls.

• othertypesofhomesincludestackedtownhouses,linkorcarriagehomes,condominiumsandco-opapartments.

What are the types of ownership?Freehold

youownthelandandhouseandareresponsibleforeverythinginsideandoutsideofthehome.

Condominium ownership

youownyourunitandshareownershipofcommonspaces.Thecondominiumassociationisresponsibleforupkeepofthebuildingandcommoninteriorelements,suchashalls,elevators,parkinggaragesandthegrounds.youpayamonthlyfeetothecondominiumassociationtocovermaintenancecosts.Thefeevariesbutcanoftenincludeutilities,TVservicesandtaxes.youmayalsohavetobuyorrentyourparkingspace.

Condosoftenhavestrictrulesregardingnoise,useofcommonareasandrenovationstounits.beawareofyourcondo’srulesbeforeputtinginanoffer.

5. Finding a Home

Homebuyers’ road map 8

OFFER

Finding your perfect home can be a long process. Your REALTOR® will help identify

the right type of home for you and continually research new listings in

neighbourhoods that meet your needs.

Check out www.howrealtorshelp.ca

to see how your REALTOR® can make the home buying

process easier for you!

Co-operatives

similartocondosbutinsteadofowningyourunit,youownsharesintheentirebuildingorcomplexwiththeotherresidents.Co-opresidentspayformaintenanceandrepairsthroughmonthlyfeesandaresubjecttotherulesandregulationsoftheco-opboard.

beawarethatifyoudecidetosellorrentyourshares,theco-opboardhastherighttorejectyourprospectivebuyerortenant.readtheco-op’srulesbeforemakinganoffer.

Check out www.REALTOR.ca to see

personalized listings for a variety of different

housing and homeownership types.

Homebuyers’ road map 9

What is an offer?Anofferisaformal,legalagreementtopurchaseahomeandislegallybindingonceacceptedbytheseller.offerstopurchaseahomecanbemadeconditionalonfactorssuchasfinancingorahomeinspection.Ifanyoftheconditionsarenotmet,youcanchangeorcanceltheoffer,evenifthesellerhasalreadyacceptedit.do you have your money ready?youwillneedtopresentadepositalongwithyouroffer.Theamountvariesbasedonthehome’spurchasepriceandthemarket.do you have up-to-date identification?ThefederalProceeds of Crime (Money Laundering) and Terrorist Financing Act(PCmLTFA)requiresreALTors®toidentifyclientsinvolvedinthebuyingandsellingofrealestate.reALTors®needtorecordyourname,address,dateofbirthandoccupationfortheirfileswhicharekeptforatleastfiveyears.Theyneedtoseevalidgovernment-issuedID.

TheFinancialTransactionsandreportsAnalysisCentreofCanada(FINTrAC)providesmoreinformationabouttheActonitswebsite:www.fintrac-canafe.gc.ca.

Homebuyers’ road map 10

6. making an offerOFFER

After seeing many different homes, you

have finally found one worthy of an offer! What

are the next steps?

How much land transfer tax will you have to pay? Thelandtransfertaxisaone-timetaxleviedbyyourprovincewhenyoupurchaseaproperty.Thetaxisbasedonapercentageofthepurchasepriceoftheproperty,andvariesfromprovincetoprovince.somemunicipalitiesalsochargealandtransfertax(forexample,Toronto).Have you budgeted for the associated legal costs?Legalcostscoveryourlawyer’sfeesor,inQuebec,yournotary’sfees.Thesemayinclude:

• reviewingthetermsoftheoffer• Conductingatitlesearchontheproperty• registeringanewtitle• obtainingrelevantdocuments,suchassurveysandevidenceofliensontheproperty

• Checkingthestatementofadjustmentsfortaxes,utilityandfuelbills,andothercoststhathavebeenpre-paidbytheselleratthedateofclosing

do you need a home inspection?Ahomeinspectorassessesaproperty’sconditionandcantellyouifsomethingisnotworkingproperly,needstobechanged,orisunsafe.Theymaybeabletoidentifywheretherehavebeenproblemsinthepast,suchasaleakingbasementortermitedamage.What other costs can you expect?• Interestadjustmentsbetweendateofclosingandfirstmortgagepayment

• GsT/HsTonanewhomeorahomethat’sbeenextensivelyrenovated

• servicechargesfromutilitycompaniesforhook-upsonelectricity,gas,internetandtelephoneservices

• Appraisalfees• movingcosts• storagecostsifyoumustleaveyourcurrentresidencebeforeyouareabletomoveintoyournewhome

• Furnitureandappliances• realestatecommissions

Homebuyers’ road map 11

7. Closing and related CostsOFFER

Closing costs are the legal, administrative

and disbursement fees associated with buying

a home. Understanding these fees will help you

budget more accurately. Remember these are additional costs over

and above the price of the home.

Now that you have arrived at your destination, it’s time to enjoy your new home!

OFFER

Homebuyers’

road mapwww.crea.cawww.itpaystoknow.gc.ca

ThetrademarksreALTor®,reALTors®,andthereALTor®logoarecontrolledbyTheCanadianrealestateAssociation(CreA)andidentifyrealestateprofessionalswhoaremembersofCreA.