Becoming a Homeowner is a Great Move!
Are you currently renting and thinking about joining the ranks of homeowners? You should know that in addition to providing numerous financial benefits, buying a home will help improve your quality of life. Not only do homeowners enjoy more freedom, they also have a strong feeling of pride, as well as peace of mind. It's definitely a worthwhile investment!
A Well-Adapted Home
First and foremost, being a homeowner means living in a house that suits your tastes and fits your lifestyle.
Is your family growing – do you want a backyard and basement playroom for your children? The purchase of a home can help you benefit from these extra spaces and is also a good long-term investment. Condominiums and plexes offer other benefits: less maintenance in the first case and additional income in the latter.
Paying for a home is a bit like making long-term savings. Instead of paying rent to a landlord, your monthly mortgage payments are used to finance your assets and build capital that you will recover once you finish paying.
A Profitable Investment
Across Canada, the value of real estate investments has increased significantly over the past ten years. In Québec, the median price of a single-family home grew from $110,000 to $209,500 between 2002 and 2010. This translates into an average appreciation of 8% per year.
Taking Advantage of Fixed Payments
Tired of rent increases? Unlike tenants who must deal with these fluctuations, as a homeowner, you can enjoy fixed payments for many years and, depending on the type of mortgage you choose, protect yourself against possible interest rate increases.
A New Lifestyle
Unleash your creativity and decorate your house as you wish, without worrying about the restrictions that are imposed on tenants. Any amount invested in decoration or renovation will be for your benefit. Moreover, nobody can make you leave your home, or enter uninvited for inspection or maintenance.
Take the Time to Analyze Your Needs
You’re dreaming of a big house on the waterfront, but does it really fit your lifestyle? Consider this carefully because it's important to distinguish your dream home from the one that actually meets your needs. Before you begin your search, take the time to consider your needs thoroughly.
Every family has its own needs and priorities. How many rooms and bathrooms will you need? Is a dining room a necessity? And what about the garage? Will it turn into yet another storage space?
Consider your style. If you’re not enthusiastic about do-it-yourself projects, avoid homes that require major renovations. And even if a spacious yard seems attractive, are you willing to spend the time caring for it? If you prefer city life you’ll have access to theatres, services and restaurants, but it’ll be noisier and won’t have as many green spaces. In other words, determine your priorities!
What’s Your Budget?
Don’t make the mistake of buying a home that is out of your price range. To find the home that’s right for you, adapt your needs to your budget. Once you’ve become an owner, your investment will start to increase in value and will eventually help you access a home that is closer to your ideal. In the beginning, it’s important to put savings aside for small purchases and unexpected expenses. Ensure you have enough money for maintenance costs such as insurance and repairs, as these can amount to 2% or 3% of the price of your home per year.
The environment is also an important factor. Is there a daycare or school nearby? Can your children take public transportation or will you need to drive them around? Consider the distance between home and work too.
Single-Family Home, Condo or Plex?
The single-family home is by far the most popular type of property. There are many advantages to a single-family home: you can arrange and decorate it the way you like, and you have maximum privacy since no one else shares your space. However, maintaining the exterior of the house can require lots of time and money.
Condos, which are gaining in popularity, are ideal for those people who don’t want to invest time in lawn maintenance. However, it's important to choose a building whose owners have a similar profile to yours, since you will need to agree on issues such as renovation work and building maintenance. Also take into consideration the condominium fees that you, and all of the other owners in the building, will need to cover.
A plex is a revenue property with two, three, four or five dwellings (duplex, triplex, quadruplex, quintuplex). The financial benefits are indisputable – you collect rent to help you pay your mortgage. Furthermore, a portion of the interest is tax deductible since part of the mortgage loan enabled you to acquire investment income, and any amount invested in maintaining your tenants' dwellings is tax deductible. However, a plex won’t give you the same privacy as a single-family home.
Choosing a Condo
There are two types of condos: divided and undivided. In a divided condo, the buyer is the sole owner of his apartment. He has the right to sell it or bequeath it as he pleases. However, property in the common areas, such as the land, the hallways, the elevators, etc., are shared with the other condo owners. In rarer cases, the condo can be undivided. This means that buyers have a common mortgage, rights and obligations.
A co-ownership syndicate (Board of Directors) is elected by the co-owners to handle the building’s management. To fully enjoy community life in your condo complex, choose a building whose occupants have a similar income and professional status as yours, as well as other common interests. This will ensure greater harmony.
The condo’s location is another important factor. Choose a well located unit. An interesting view, a peaceful environment and good lighting, along with the proximity of services and transportation, will enhance your unit’s resale value.
The unit’s surface area and quality of construction are also key factors. While some luxury buildings are designed with a private or semi-private entrance for each unit, condos do not always offer the privacy of a single-family home. Make sure the condo has adequate soundproofing.
What services are provided within the building? Is there indoor parking, a pool, a sauna, tennis courts, workout facilities? For instance, indoor parking can increase the value of a condo, but access to a pool is of little value if you don’t swim. Remember that condo fees cover the maintenance costs of all equipment and services whether you use them or not.
When you sign a promise to purchase for a condo, be sure to make it conditional on the review of the declaration of co-ownership and an inspection. Have this document examined by a lawyer or notary and carefully read all of the condominium’s rules and regulations (house pets, parking). Also find out the amount of money kept in the reserve fund, particularly in the case of older buildings.
Buying a Country Home
The market for country homes has boomed over the past few years. More and more households are choosing this kind of property, either for retirement or the desire to live in a more tranquil setting that is closer to nature.
Purchasing a country home requires as much planning as the purchase of property in a more urban setting. Before buying, it’s just as important to consider the surroundings, available services and quality of construction, as it is to evaluate your needs and the consequences this purchase will have on your budget.
Step One: Define Your Needs
In order to assess your needs, first think about your preferences and lifestyle. How often will you use your cottage? Do you prefer water sports or downhill skiing? Are you the host with the most, or do you prefer peace and quiet? Are you a do-it-yourselfer at heart? How far are you willing to travel between your main residence and your country home? Will you escape to your country getaway every weekend all year, or will you rent it out for a season or two?
Step Two: Find the Perfect Location
The value of a home is greatly measured by its environment and its accessibility. In general, buyers look for a comfortable home where they can enjoy the great outdoors and their favourite activities during all seasons. By finding accessible surroundings that match your lifestyle, you can fully enjoy your investment.
Make Sure You Budget!
Remember that a country home entails significant fixed costs such as insurance, taxes, heating, phone bill, electricity, water, as well as the investment of time and money for travel and upkeep. Caring for the lawn, flowers or garden, as well as renovations as years go by can represent substantial expenses. Make sure that the amounts required for your country home are compatible with your budget.
Feel Like Investing? Think Real Estate!
Buying a house is like long-term savings. As an owner, you make mortgage payments every month that finance your assets and allow you to build capital that you can recover at a later date when you sell your property.
Across Canada, the value of real estate has increased significantly over the last decade. In Québec, the median price of single-family homes has more than doubled over the past 10 years, increasing from $110,000 in 2002 to slightly more than $224,000 in 2012. This represents an average appreciation of more than 7 per cent per year. And this growth is far from over if we look at the trends for the factors mentioned below.
What Drives the Residential Real Estate Market?
Whether you’re already a homeowner or about to become one, owning property is one of the most important investments you’ll make in your lifetime. Therefore, you should be aware of the four main factors that influence the shape of the real estate market, which are population growth, interest rates, income and socio-demographic trends.
It stands to reason that everyone needs somewhere to live and that’s why the strength of the residential real estate market is directly linked to demographic growth. Whether it’s as a result of immigration, migration or natural population growth, the higher the population increase, the higher the demand for housing and thus, the stronger the market.
Interest rates also play an important role in the real estate market. When rates are lower, generally the market is stronger as lower rates mean less cost to finance a property. This, in turn, encourages consumers to become owners, or to buy larger or more luxurious properties or renovate.
When property values are increasing, it’s generally a true reflection of a household’s ability to pay. Therefore, the market’s strength is closely connected to job creation and a household’s disposable income.
And finally, there are certain socio-demographic trends which have an impact on the real estate market. For example, when households get smaller, meaning more and more people have chosen to live alone as has been the case over the past decades, more properties find buyers.
In conclusion, remember the law of economics: price is always a reflection of supply and demand. So, all other things being equal, high demand means higher prices.
There are many tools available to help you evaluate your financial situation and make your dream of becoming a homeowner a reality.
Borrowing Capacity and Preauthorized Mortgages
When you start looking for a property, it's in your best interest to determine your borrowing capacity. That way, you know what type of property to lean towards during your search. One approach is to get a preauthorized mortgage before even finding your property. Thanks to a preauthorized mortgage, you already know how much money you can borrow, your interest rate and the amount of each payment. You will be able to find a property that matches your means.
Mortgage Loan Insurance
You dream of buying property but you don’t have enough for a down payment? Not a problem! Mortgage loan insurance can help make your dream a reality. In general, lenders require you to get mortgage loan insurance when you have put down less than 20% of the property’s sale price.
Mortgage loan insurance is applicable to various new or existing properties. Also, bear in mind that a modest down payment means a higher mortgage payment and in the end, a greater total cost. In Canada, mortgage loan insurance is available through Canada Mortgage and Housing Corporation (CMHC) and Genworth Financial Canada.
The Home Buyer’s Plan
The Home Buyer’s Plan is a government program that allows buyers to withdraw money from their RRSP, without paying tax on withdrawal, in order to purchase a home. Funds withdrawn must be paid back into the RRSP within a fixed time limit.
Considering Start-Up Costs
Did you know that when you buy a property, you must have money set aside to cover start-up costs? Your down payment and mortgage payments are not the only costs involved, so it’s wise to have some additional savings set aside that can be used for your additional expenses.
These expenses should not be taken lightly and some mortgage lenders will even check that you have these funds available before granting you a loan. Mortgage loans are calculated based on the value of your home and, therefore, cannot be used to pay these additional costs.
Here is a list of common start-up costs:
- Property inspection and evaluation
- File processing fee for mortgage insurer as well as any taxes on the premium
- Notary fees
- Adjustment costs determined by the notary (electricity, heating, municipal and school taxes, equipment rental contract, etc.)
- Property transfer tax (welcome tax)
- Moving expenses
- Service and utilities hook-up fees (phone, electricity, etc.)
- Decorating (paint, curtains, etc.)
Real Estate Brokers: First-Rate Partners
Buying a home is a very complex process. In addition to considering commercial, financial and legal aspects, it also requires solid negotiation skills. Why not hand this task over to a professional? A real estate broker who is a member of a real estate board can successfully navigate you through the entire process.
Real estate brokers have followed extensive training and hold a certificate from the Organisme d'autoréglementation du courtage immobilier du Québec (OACIQ). Skilled negotiators, they have access to many tools and expert references: from building inspectors and notaries, to financial institutions and mortgage brokers, real estate brokers serve as a one-stop resource! Their presence also provides you with legal protection, as stated in the Real Estate Brokerage Act.
A Solid Team Effort
When looking to buy a home, a real estate broker can target those properties that best suit your needs and budget thanks to privileged access to the Centris® system. They can accompany you during visits in order to objectively analyze the different characteristics of each property. They are also there to represent you when it comes time to negotiate, a phase during which the help of an accomplished professional is very much appreciated. In short, a broker will guide you through all of the steps involved in purchasing your home, right up to your visit with the notary!
Protection You Can Count On!
Doing business with a real estate broker means that you are protected by the law. The Real Estate Brokerage Act and various other organizations regulate the real estate broker profession so that consumers can expect fair and competent services. So, you know that you’ll be served by a highly qualified and well-trained professional.
Real Estate Brokerage Act
The main goal of the Real Estate Brokerage Act is to protect the public. To enforce this, the Act sets out specific rules relating to the brokerage contract for the sale of a house. They are similar to several of the regulations found in the Consumer Protection Act.
Organisme d'autoréglementation du courtage immobilier du Québec
Created by the Real Estate Brokerage Act, the Organisme d'autoréglementation du courtage immobilier du Québec (OACIQ) is mandated to protect the public by regulating the professional activities of all real estate brokers. It is responsible for administering the exam that leads to the practice certificate and it ensures that its members carry out their activities in compliance with current laws and regulations. For more information, visit www.acaiq.com.
Fonds d’indemnisation du courtage immobilier
Each broker contributes to the Fonds d'indemnisation du courtage immobilier. The Fonds d'indemnisation du courtage immobilier has the authority to compensate a consumer in the event that a problem arises during a transaction whether it relates to fraud, a dishonest transaction or the misappropriation of funds or other property. For more information, go to www.indemnisation.org.
Professional Liability Insurance
Real estate brokers must hold professional liability insurance, which ensures that consumers have additional financial protection in cases of fault, error, negligence or omission. This insurance covers civil claims and civil proceedings.
The Centris® System and www.centris.ca®: A World of Difference!
Did you know that the Centris® system, reserved exclusively for brokers who are members of a real estate board, contains five times more information than the public website www.centris.ca®?
The Centris® system, a computerized database that is unparalleled in the industry, contains extensive information that is not available on the www.centris.ca® public website. For example, it can provide the sale history of a given property so that brokers can follow its market evolution over the course of many years.
The Centris® system is brokers’ main tool. It encourages co-operation between competing members by providing regulations, policies and conventions that are accepted by all real estate board members. The Centris® system is also the most complete and up-to-date database for real estate transactions. It holds data such as the property’s year of construction, the asking price, the sale price, the property’s value in terms of specific criteria, etc. And only real estate brokers who belong to a real estate board have access to this information.
As soon as a property is listed in the Centris® system, it can be seen by all brokers who are members of a real estate board, which represents approximately 14,000 professionals. If this property interests a buyer, his or her broker can contact the listing broker to schedule a visit and eventually, conclude the transaction.
If you’re a buyer, your broker can use this system to find properties that match your exact search criteria. They can search by price, neighbourhood or specific features such as a fireplace, the number of bedrooms and bathrooms, a pool, etc. Your broker can also provide you with information about properties that were recently sold to help you make the best decision.
The Centris® system is a one-of-a-kind, powerful marketing tool that follows very specific regulations. It shouldn’t be confused with the www.centris.ca® public site, which is primarily an advertising tool.
Thanks to the Centris® system, brokers who are members of a real estate board are able to expertly manage your real estate transaction.
Professionals Involved in Your Transaction
In the course of buying a property, aside from your broker, you will get to know a number of professionals working in the real estate industry. Since real estate brokers are central to any real estate transaction, they can help coordinate your transaction by being the link with the other people involved in the purchase of your property. Here's an overview of the services offered by each participant.
Land surveyors are the only ones authorized by law to delineate public and private property in Québec. Owners may call on their services to determine the boundaries of their lot using markers or to prepare a certificate of location.
The Ordre des arpenteurs-géomètres du Québec brings together all members of this profession.
Mortgage brokers help their customers find the best mortgage loans. They find loans whose conditions best meet your needs: prepayments, financing an old house, self-employed worker loan, etc.
Mortgage brokers must hold a certificate by the Organisme d'autoréglementation du courtage immobilier du Québec. They are listed under "Mortgage Loans" in the Yellow Pages directory. You can also visit the Website of the Canadian Association of Accredited Mortgage Professionals.
Chartered appraisers provide an objective estimate of a property’s value. Their appraisals are used for insurance, mortgage, estate settlement and asset sharing purposes. They also serve as expert witnesses in court and their report can be used as supporting documentation in the appraisal of a property.
To obtain the title of a chartered appraiser and the right to use the "É.A." designation, appraisers must be members of the Ordre des évaluateurs agréés du Québec.
Before buying a property, it is strongly recommended that a building expert inspect it first.
Since the building inspector profession is not under governmental regulation, it's important that you use an inspector who belongs to one of the following professional associations: technologists, engineers, chartered appraisers and architects. Inspectors who belong to one of these associations offer the public an increased level of protection, as they are overseen by their professional association. The Québec Association of Building Inspectors ensures that its members in Québec comply with professional standards.
A notary is an essential component of any real estate transaction. They are, along with lawyers, the only ones legally entitled to draft a mortgage deed. They also write up the deed of sale and perform a title search to ensure that the purchased property is free from obligations.
Notaries are members of the Chambre des notaires du Québec.