Durham Region Real Estate Blog

As Realtors® we often forget how intimitating it can be to buy or sell a home. We do transactions and discuss the industry daily and forget that not everyone lives and breathes real estate. So this blog is hopefully a refresher course for those who need it and a few helpful tips for those new to the exciting world of home ownership.

It’s all over the papers that the market is cooling (and it is, but the sky is not falling….but that’s another blog!) and with a cooling  market it is that much more important to create a plan before jumping into the market.

Our neighbours to the south have experienced a housing burst but thankfully, we have not. More conservative regulations helped to prevent people from getting in over their heads. Yet another reason to be glad to be a Canadian!

But the market is different now than it was so anyone buying a house needs to be extra careful they have all their ducks in a row. Here are six things to remember to ensure you end up with the house of your dreams.

1. Build your team – You need a knowledgeable real estate agent, lawyer and mortgage broker. (Hopefully this is where you decide to call me! But really, just make sure you choose someone you can trust to help you make the decision that is right for you at this time in your life.)

2. Get a pre-approval – Having a great mortgage broker on your side can give you great peace of mind. They will lock in your mortgage rate for up to 120 days. Keep in mink that pre-approvals are almost always subject to certain conditions that you will need to meet before financing is confirmed. To protect and ensure that you can afford to buy the house of your dreams, it is a good idea to have a condition for financing on any offers to purchase a house.

3. Set a budget and stick to it – It’s hard not to let emotions take over during the home buying process. Your pre-approval amount is what the bank is willing to lend you and may not necessarily be an amount you can comfortably afford to pay, after taking into consideration your lifestyle needs. Do you have an active social life? Do you enjoy eating out? Are you planning on having kids? Are you saving for your RRSPs? When a bank provides an approval, they are based on CMHC guidelines, not the costs associated with your lifestyle.

For example, your financial institution will examine your gross debt servicing. Your monthly housing costs should not exceed 32% of your gross monthly household income. Housing costs include monthly mortgage payments, taxes, heating expenses and half of monthly condominium fees (if you are buying a condo). Your mortgage lender will also examine your total debt servicing ratio. This is your entire monthly debt load and it should not exceed 40% of your gross monthly income. This includes housing costs such as property taxes, heating costs and condo fees and other debts such as car payments, personal loans and credit card payments.

4. Factor in closing costs -  Far too often people are surprised when they get the final statement of adjustments from their lawyers and are left scrambling to come up with thousands of dollars to cover the shortfall. On top of the purchase price, there are also land transfer tax and legal fees. For example you must pay the Provincial Land Transfer Tax (first time buyers are eligible for a rebate), lawyer fees, maybe land taxes and an oil tank fill up. If you are buying in a new development, you may also be responsible for development charges, such as education levies and fees for enrolment in Tarion Warranty Corporation and installation of hydro meters. My advice? When negotiating the purchase of a new home, you should put a cap on all these extra charges. For example, if you capped all your developments charges and levies at $3,000, this is the maximum the builder could charge you at closing time, regardless of what the actual fees should be.

5. Title Insuance – Title insurance and identity theft coverage offer peace o fmind and protection. Although real estate title fraud is far less frequent than other forms of identity theft, it is a violation that can have devastating and long lasting effect on its victims.

And finally, once you are happy and settled in your new home, the journey is not over, it is just beginning. The goal is to pay off your mortgage as soon as comfortably possible. Try this:

6.  Bump up frequency of your payments – To save substantially on your interest costs and pay off your mortgage faster, set your payments to rapid weekly or bi-weekly mortgage payments options instead of monthly. The total outlay is only slightly greater than if you coose to pay monthly, but the impact on the bottom line is amazing. For instance, if you started with a 25 year amortization, by making rapid bi-weekly payments you would pay off your mortgage in 21. 4 years instead of 25. This saves tens of thousands of dollars in interest costs!

Regardless of where we are in the economic cycle or how robust the real estate market is, we all need a home, Finding the right home to suit your budget, your lifestyle and your aspirations is always a challenge. But with the right team, the right tools, a little patience and a little luck, you may be moving into the house of your dreams sooner than you ever imagined!

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