TIPS FOR BUYERS
Take the Time to Analyze Your Needs
Are you dreaming of a large house by a lake? However, does it really fit your lifestyle? Sometimes we need to know the difference between the house of our dreams and the one that really suits us. Before you begin your search, take some time to think.
Each family has its own needs and priorities. How many rooms and bathrooms do you need? Is a dining room really necessary? And what about the garage? Will it turn into yet another storage space?
Keep in mind 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, set 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. Make sure 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 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.
Your real estate broker has the expertise to help you make the best choice.
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, hallways, 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 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 accessibility. In general, buyers look for a comfortable home where they can enjoy the great outdoors and their favourite activities in all seasons. By finding accessible surroundings that match your lifestyle, you can fully enjoy your investment.
Step Three: Do the Math!
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.
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.
The Home Buyer’s Plan (HBP)
The Home Buyer’s Plan is a government program that allows buyers to withdraw money from their Registered Retirement Savings Plan (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.
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.
Think About Start-Up Costs
Your down payment and mortgage payments are not the only costs involved when you buy a property. You must also have money set aside to cover start-up costs.
Many 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 cannot be used to pay additional start-up 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
Adjustment costs determined by the notary (electricity, heating, municipal and school taxes, equipment rental contract, etc.)
Property transfer tax (welcome tax)*
Service and utilities hook-up fees (phone, electricity, etc.)
Decorating (paint, curtains, etc.)
In addition, anticipate your future needs (renovations and extensions, purchase and installation of a swimming pool, etc.) and the means to finance these projects.
* Check with your municipality to see if you qualify for an exemption.
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, amortization terms, 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 (OACIQ). You can also visit the Mortgage Professionals Canada website.
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 regulated by their professional association. Members are also required to hold professional liability insurance as a condition of membership. 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.