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BC Mortgage - Buying a home |
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BC Mortgage Broker
Direct Line: (604) 506-0397 Fax: (604) 628-3798 Toll free (Canada) : 1-800-504-5886 email: johnso@bcmortgage.ca
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Areas served:
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Get your Home Buyer's Kit Click here to request this download |
The key players in your purchase
Is it a good investment?
Ask any homeowner, a house is solid investment that is difficult to match. Why?-
Capital Gains Are Tax Free -- Any capital gains that accrue and are realized on the sale of a principal residence are tax free -- your money, 100%!!
To match even a small appreciation of 6%, the return on a fixed-income investment such as a GIC would have to be as much as 12%. -
Gain Leverage -- You do not need the full purchase price to own a home.
Selecting a home type
Don't be pressured into buying a home that is not right for you. There are a lot of choices out there and a lot of pressures to buy. Here are the Pros and Cons of the various options as well as a comparison of resale homes vs. new homes purchased directly from the builder. Whether you live in the Greater Vancouver area or the outlying areas of BC, you have a wide variety of options. Be sure to discuss your choice of homes with your realtor and mortgage broker.Condo Apartment
Pros:- Lowest purchase price, lowest taxes
- Virtually maintenance free -- no snow shoveling or lawn mowing.
- Convenient for singles, childless couples and empty nesters.
- Given the high price of detached homes, condominiums are often a good choice in the Vancouver area
- Lower resale value, hardest to re-sell and can be difficult to finance with low down payment.
- Can have large maintenance fees that can substantially increase carrying costs.
- No private yard so you can't enjoy backyard activities such as barbecuing, gardening, etc.
- Share common walls with neighbours -- if they're noisy you're out of luck.
Condo/Freehold Townhouse
Pros- Lower purchase price and taxes than semi or detached and less maintenance.
- Better resale value than condo apartment.
- May have a backyard.
- Lower re-sale value than semi or detached and harder to re-sell
- Don't own the land -- the most valuable asset (unless freehold Townhouse).
- Share common walls and close to neighbors
Semi-Detached
Pros- Most privacy at least cost -- great for first-time buyer.
- You own the land -- the appreciating asset -- bricks and mortar depreciate.
- Good resale value and easy re-sell.
- Easy to finance at best rates.
- Usually has larger yard than townhouse, more backyard activities possible.
- Share a common wall with neighbors.
- Higher price per square foot of living space than a townhouse in a similar location.
Detached
Pros- Best resale value and you own the land, the main appreciating asset.
- Most privacy, least noise from neighbours because there are no common walls.
- Most desirable type of home with greatest perceived value.
- Lower priced detached homes tend to sell quickly because of the combination of prestige and affordability.
- Highest purchase price and property taxes.
Re-Sale Home vs. New from Builder
As a first-time buyer, another major decision you may have to make is whether to purchase a re-sale home or a new home directly from a builder. Both options have their advantages and disadvantages. Here's how they compare.Re-Sale Home
Pros- Lower prices because of some wear and tear (which varies greatly -- check closely!)
- You get the benefit of upgrades (finished basement, pool, etc.) at a depreciated price.
- Established neighbourhood, current neighbours, etc., are known entities although they can change.
- Home has been used by others.
- No warranty for repairs required by law, although it can be made a condition of purchase.
- If existing decor is not to your liking, it can be expensive and time consuming to change.
New Home from Builder
Pros- You are the first occupant and the house is yours to decorate as you wish.
- Purchase price includes colours, design features, etc. that you select, usually with negotiable upgrades.
- Protection from construction deficiencies is usually required by Provincial Law.
- There is often an extended period of time without lawns or paved driveways, and with dust from unsodded areas and construction traffic.
- There can be problems with permits or trade strikes that prevent timely completion and occupancy.
- Defects in construction may not be addressed promptly.
- Some closing costs apply to new homes that do not exist with resales.
The key players in your purchase
Purchasing a home requires more than just the buyer and seller. You' ll
also require the services of a variety of home-related professionals and
I can help you find many of the right ones.
Here are the key players in your purchase and the roles they play:
Realtor
Finding a home to purchase is a big job and a realtor can make it a lot easier by doing a good deal of the looking for you. Please call your mortgage broker, if you require a referral to a realtor in the Greater Vancouver area.The role of the realtor is to screen available properties, identify those that most closely meet your requirements and arrange to view them with you. Ideally, your realtor is more than a sales agent. He or she should serve as a resource person who can provide valuable advice and help you make an informed purchase decision.
The realtor:
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Is a certified real estate agent who keeps tabs on the latest properties by tracking the and other sources.
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May also be acting as agent for the seller when the property is an MLS listing. However, if you have already engaged the realtor as your agent, then he or she will act specifically and contractually in your best interest. This is known as agency.
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Negotiates terms and conditions of your purchase with the seller's agent or with the seller directly (if a private seller or their own listing).
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Realtor's commission is paid by seller out of proceeds of the sale. Usually it is split between the buyer's agent and seller's agent, if both agents are involved.
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Arranges to get information for you, or for certain conditions to be fulfilled, as agreed with you -- i.e., (for mortgage purposes), and a home inspection report.
Lawyer
Your lawyer makes sure that the property you purchase is legally yours and comes with no strings attached. Consult your mortgage broker or realtor for a name of a reputable lawyer in the Vancouver (BC) area.When you buy property you are not just buying the land and building, you are also buying the legal rights of ownership so you need to be certain that no other party has a claim to them. Your lawyer will confirm that there are no legal obstacles to your purchase and help it proceed smoothly.
The lawyer:
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Conducts a title search to ensure that the seller is the true owner of the property, makes sure that the current or proposed occupancy usage conforms to local by-laws.
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Obtains all necessary documentation including:
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Compliance Letter acknowledging that no outstanding liens (legal claims) or work orders are in effect
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Tax Department release verifying that property taxes are up to date
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Handles the transfer of ownership from seller to buyer and the registration of the mortgage on title.
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Ensures arrangements are in place for funds to be available for closing.
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Coordinates with lenders the setup of legal documents for any mortgage security.
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Ensures that all mortgage terms and conditions are met, and that title is clear in order to make undertakings to lender(s). May obtain title insurance on your behalf if there is any issue surrounding title that may cause a claim or work order of some kind in the future.
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Arranges with you the signing of legal documents and submission of remaining funds not provided by the Mortgage Lender(s).
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Coordinates closing of the purchase transaction with the lawyer(s) for the seller of the property.
Mortgage Lender
The financial backer in your real estate venture.In today's mortgage market it pays to shop around because there are many lenders and different financing options available. Save yourself the time and trouble. Sit back and let me find a lender who will give you the best rate for the best product to suit your needs. As the party providing the funding, the lender will want to be sure that you are a worthy credit risk and that the mortgage you are requesting corresponds to the value of the property you intend to purchase.
The mortgage lender:
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Sets out the legally stipulated lending criteria that you need to meet to qualify for a loan.
There are many options for borrowers in the Greater Vancouver area as well as most parts of British Columbia. Lenders are eager to expand their portfolio in the area.
Appraiser
Appraisers assess property value for the lender.When you purchase a property it's important for the lender to be satisfied that the price reflects the property' s true market value. An appraiser is an officially accredited valuator who is hired to conduct an inspection of the property for the lender to assess and certify its value.
The appraiser:
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Provides the lender an accredited opinion about the market value of the property (to be) purchased, which can be compared to the purchase amount.
Be sure to talk to your mortgage broker before engaging the services of an appraiser. Lenders usually have a list of accredited appraisers in the area. If you are purchasing in the outlying areas of British Columbia (BC), allow some time for an appraiser to get to the property. Appraisals in Vancouver are not problem and they can be usually be completed in 24 hrs.
Home Inspector
The Home Inspector acts as your extra pair of eyes, able to see things about a property that may not be visible to you.If you are buying a resale home, it's always advisable to have it checked by a Home Inspector as a condition of purchase. This individual (not requiring provincial licensing in most cases) will inspect the property for major deficiencies, which may not always be apparent. The results are presented in a written Home Inspection Report.
The Home Inspector:
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Identifies the soundness of the structure and any improvements that have been made.
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Notes any specific deficiencies and their impact on the value of the property.
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Estimates the cost to correct any identified deficiencies.
With the hot real estate market in Vancouver and BC, you need to ensure that you have a home inspector who can inspect a home on short notice. Consult your mortgage broker or realtor for a name of a reputable home inspector.
Builder's Representative
Your information resource when you buy a newly constructed home.Should you decide to purchase a newly constructed home from a Builder, then you will probably deal with a builder's representative who arranges the sale of new homes to the buying public.
The builder's representative:
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Provides information to buyers on house models, lots, costs of purchasing, municipal procedures and requirements, New Home Warranty programs, and all other related features of the property.
Note: Although Builder's Representatives are governed by regular consumer law, their duty is to the builder and they are in fact the Seller's Agent.
Purchase Price Checklist
Buying a home costs more than the offer you make. There are numerous other expenses that will add to the amount that you'll need to spend. This purchase price checklist outlines all the costs you can expect. Please note that they can vary by province and are subject to change.- Purchase Price
- Lawyer's Fees
- Land Transfer Tax
- Registration Fees
- High Ratio Insurance
- Compliance Letter
- Tax Certificate
- Provincial "New Home Warranty Program" premiums -- New Homes Only!
- Mortgage Appraisal and Application Fees
- Home Inspection
- Land Survey
- Title Insurance
- Connection Charges
- Property Tax and Prepaid Utilities Adjustments
- Interest Adjustment (IA)
Purchase Price
The starting point in your calculation. if you're like mostPrices in the Vancouver area are quite high so you'll need to discuss with your mortgage broker the amount you are qualified to purchase.
Lawyer's Fees
Although fees vary depending on your location, it can cost you up to $2,500 depending upon whether you are re-mortgaging your existing home or buying new. You can expect that lawyers in the Vancouver area will be charging more for their services than those in the outlying areas of BC.Land Transfer Tax
A tax payable to the Provincial Government by the purchaser upon the transfer of title from a seller. This amount is usually not expected by most homeowners. It can be sizeable. The amount varies from province to province and is generally a percentage of your purchase price. I can assist you with this.Registration Fees
Fees paid to the provincial government for recording a title transfer, mortgage registration or other instrument such as an Assignment or Lien with the local authorities.High Ratio Insurance
Must be purchased if you are buying a home for less than 25% down. A sliding fee scale applies, depending on the percentage of the purchase price required in a first mortgage (some minor exceptions). For example, as of 2005 Canada Mortgage and Housing Corporation (CMHC) and its competitor GE Capital charge a 1.75% one-time fee -- which can be added to the mortgage -- for any mortgage over 85% -- 90% of the purchase price. See also Mortgage Insurance for a definition.Compliance Letter
Obtained by your lawyer and required in many municipalities throughout Canada before a property transfer can take place. This is an acknowledgement from the building department that the property either has, or is clear of outstanding work-orders. Work-orders are specific clean-up or fix-up requirements that the owner is legally required to do, and which must be completed before ownership can be transferred.Tax Certificate
Obtained by your lawyer at the time of sale to confirm that local taxes have been paid up to date. If they are not up to date, the seller is required to pay them from the proceeds of the sale. If there are insufficient proceeds, then you may be legally required to pay the outstanding taxes. If, on the other hand, taxes have been prepaid, you may have to compensate the seller for them.Provincial "New Home Warranty Program" premiums -- New
Homes Only!
A third party (provincial) warranty program between a builder and a
buyer. With the exception of Ontario and Quebec, membership in such a
program is voluntary for the builder. Through these programs, your home
is guaranteed against defects for at least one year. All homes with a
high-ratio insured mortgage (greater than 75% loan to value) must be
enrolled in such a program.
Mortgage Appraisal and Application Fees
Application fees apply on high ratio mortgages only while appraisal
fees are common to most mortgages. Generally $150 -- $235 each would
apply. In the Vancouver area, appraisal fees are generally priced
at $241 for a standard home. Consult your mortgage
broker for more information.
Home Inspection
A report commissioned by a property owner or purchaser, usually to verify the condition of a property prior to the "firming up" of a purchase agreement. The scope and detail may vary, but most reports outline any particular problems and associated repair costs. Unfortunately, no licensing is required, and this service is not specifically regulated other than by general consumer protection legislation. The best safeguard against inadequate work is to ask for the resume of the Inspector, or select a name firm, such as Carson Dunlop, who stand by their work.
The farr
Land Survey
The legal written and/or mapped description of the location and
dimensions of your land. The survey should also show the dimensions and
placement on the lot of any structure, including additions such as
pools, sheds and fences. An up-to-date survey is often required by a
lender as part of the mortgage transaction.
Title Insurance
New to Canadian consumers over the last few years is the introduction of
title insurance into the home buying process. Title insurance can be
purchased by home buyers to protect against potential deficiencies in a
number of areas, such as the land survey. There are numerous benefits to
this product, and you should consult your lawyer or myself today.
Connection Charges
Some local utility companies (hydro, gas, oil) charge a fee on closing
to connect new buyers up to their service. More common, however, is an
extra charge on the first billing.
Property Tax and Prepaid Utilities Adjustments
If the previous owner prepaid property taxes or other utilities, they
will be credited the prepaid portion on closing.
If they paid all their taxes by April, expect a large adjustment cost on
closing!
Interest Adjustment (IA)
If you arrange to make your mortgage payments monthly on the first day
of the month, and your transaction closes after the first day of the
month, your lender will charge you interest on closing
to the next interest date, called the Interest Adjustment Date (IAD),
when your payment cycle will commence. This can be a sizeable amount,
but it is the correct interest you should pay. For example, close on
June 15th, pay 15 days interest on closing and start payments on August
1st. Consult your mortgage broker for more information on Interest
Ajustment.
"My job is done when you know your options"
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