How to Choose a Realtor
Here are several points to consider when looking for a professional/reliable Realtor:
Obtain recommendations from friends and business associates;
Check the reputation of the brokerage firm;
Go to several open houses and build a rapport with the agents, then choose the one you think is best for your needs;
Look for an agent who is familiar with the area you want to live in;
Review ads in your local newspaper;
Note the "For Sale" signs and jot down the key information as you drive through prospective neighbourhoods;
Make sure the Realtor you choose is someone you feel comfortable with - someone who listens to your needs and is genuinely interested in helping you find the right home;
Verify the Realtor's track record, e.g. how long has he/she been in business; what do previous customers think about his/her performance;
Verify the Realtor's knowledge about the housing market and financing options;
Ask the Realtor bluntly what he/she will do for you;
Ask for references from buyers for whom the Realtor previously worked.
Tips On Buying Your First Home
Make a list of all the features you want in your new home such as number of bedrooms, bathrooms, proximity to schools, shopping and workplace.
Be sure you can afford your home. Your monthly housing costs should not be more than 32% of your gross monthly income and your entire monthly debt load (which includes other debts such as car loans and credit card payments) should not be more than 40% of your gross monthly income.
Calculate your other monthly living expenses such as food, clothing, transportation, personals and childcare to ensure you can afford your mortgage payments.
Call a REALTOR in your preferred area. They are trained professionals with knowledge about local conditions and the housing market in general. Through the Multiple Listings Service they have access to virtually every property listed for sale in the province. Your REALTOR can narrow down your search and provide you with information on properties for sale and those that have recently sold. This will allow you to make informed decisions about pricing. Licensed by the province and members of local real estate boards, REALTORS must adhere to high standards of ethical behavior.
Obtain a pre-approved mortgage form the lender of your choice. This will help you determine the price range you should be looking in. With a pre-approved mortgage, your lender will guarantee the interest rate for up to 60 days.
You may wish to have an independent appraisal done of a property before you offer a price. It can keep you from paying more than the market value.
Ask your REALTOR for a copy of the Property Condition Disclosure Statement. This document is completed by the sellers and ensures the buyer gets complete information about the property they are about to purchase, and alerts buyers when they need to do more research on a property.
If buying a new or existing condo, look beyond style and amenities and investigate whether the construction is of good quality. You can ask for a copy of the minutes to Strata Council Meetings to determine what kind of problems the condominium has had in the past, and the expenses.
To assess potential water leakage problems, visit a condominium project immediately after a rainfall and check to see if flat areas such as roof deck and walkways have large pools of standing water on them. All building surfaces except specially designed ponds should drain freely and be immediately clear of water after a rainfall.
It is always a good idea to have the home inspected from a professional home inspector. An inspector's written report should include how well-built the home is and whether any repairs are necessary and the estimated costs.
Don't forget about other costs when you buy your own home such as legal fees (they will most likely be at least $500), property taxes and the GST (if purchasing a new home).
Homeownership for Young People
Looking Ahead
No one likes to think they will get old but we all seem to. Equally, no one likes to think that they will be living in their parents' basement until they're thirty-something! While saving for a mortgage may be the last thing on young minds preoccupied with sports, dating, or academics, it's never too early to plan for the future. A few small steps can become giant leaps towards financial security!
Every dollar counts!
If there are two key words every young adult and teenager should know they are "compound interest". A simple mathematical calculation demonstrates how savings can build. If the initial investment is $100 at a conservative interest rate of 5% per year, by the end of that year the investment will be $105. If the money remains invested through the next year, the investment will grow to $110.25 ($105 x 5% = $110.25). The following year it would be $110.25 x 5% = $115.76. So it is easy to see how quickly an investment can grow. It's a great habit to get into setting aside a certain amount from every paycheck. Regular "payments" to your investment not only result in greater savings, they can help even out the ups and downs of the marketplace. There is nothing worse than investing one large sum of money and immediately afterwards seeing the stock market or interest rates plummet. Also try to think of invested money as being out of reach and avoid dipping into those savings.
Remember, a poor credit rating can haunt you for years...
A credit history can go as far back as the first loan (even those co-signed by a parent) or the first credit card. A bad credit rating can make it hard to lease a car, get a mortgage, or any type of loan. Always pay at least your minimum monthly credit card payment and pay it on time. Of course, the best plan is to never carry a balance. The lure of credit, however, can be too hard for anyone to resist especially for a young adult on a limited budget. If you can establish good habits early, think of how much you will save by avoiding years of paying 18-20% credit card interest. (That's compound interest too, by the way.)
A poor credit rating can haunt you for years but a good rating can help you get a loan or mortgage in the future. Most lenders need to see that a borrower is financially responsible. Credit cards can be a great beginning. Most credit card companies will give accounts to students in their last year of university or most applicants over the age of 21.
Research the area where you would like to live.
No one can predict where the future will take him or her. Society is more mobile than ever. Educational pursuits or new jobs often force people to leave their hometowns and relocate in other cities or provinces. Wherever a person decides to put down roots, it's important to research the market. Talk to local real estate agents. Most will be happy to share their knowledge and experience. Some important questions to ask include How much will I expect to spend in order to purchase a house with a certain number of bedrooms or a certain square footage? What sort of features should I look for in a home? Is there a strong resale market in this area? Also check out the local real estate companies on the Internet to get an idea of local home prices and sizes.
Mortgage Calculators
The best place to start is a mortgage calculator on the Internet. You can simply type in "mortgage calculator" and several options come up. (Ensure that you are using a Canadian mortgage calculator since rules differ between countries. A good calculator can be found at (http://www.canadamortgage.com/.) A mortgage calculator is a quick, easy way to see what you can afford. If you enter an approximate home value and current interest rates, the calculator will show the required monthly payments and the value of the mortgage. By changing the amount of your down payment or the length of the mortgage payment period (amortization period) you can see how monthly payments change. Remember that this calculator only provides general information. When an individual applies for a mortgage the lender will take numerous factors into account including income, length of employment, and of course that omnipresent credit rating!
The tortoise and the hare...
Even if buying a home is years away it's a good idea to start planning today! The slow steady building of your investments pays off richly in the end. Save a specific percentage of your income on a regular basis starting from your very first part-time job. Also try to make payments to your credit card on time and don't carry a balance. Eventually we all get to the finish line but it's nice to get there in style!
Home Buyer's Checklist
LOCATION
Area ______________________________________________________________
Street Address ______________________________________________________
Realtor or Sales Person _______________________________________________
Phone ____________________________
COSTS
Asking Price $ _____________
Likely Price $ _____________
Property Taxes $ _____________
Utility / Garbage or Other Municipal Levies $ _____________
GST Applicable $ _____________
Property Transfer Tax $ _____________
Other Costs $ _____________
Down Payment $ _____________
Mortgage Terms $ _____________
Monthly Payments $ _____________
Principal & Interest $ _____________
Taxes $ _____________
Life Insurance on Mortgage $ ____________
Household Insurance $ _____________
Total $ _____________
SQUARE FOOTAGES
Home Type___________________
Age ______________
Total Square Feet _____________
Kitchen _____________________
Dining Room _________________
Living Room _________________
Family Room ________________
Great Room _________________
Den _______________________
Master Bedroom _____________
2nd Bedroom _______________
3rd Bedroom _______________
Other Room ________________
Number of Bathrooms ________
Master Ensuite _____________
Storage Space _____________
Fireplace: [ ] gas [ ] wood burning
Garage: [ ] attached [ ] detached
Carport __________________
Font Yard ________________
Back Yard _______________
Fence ___________________
Patio ___________________
Driveway ________________
Special Features _____________________________________________________
We suggest you make several copies of this list and complete one for each home you visit. When you make an offer to purchase be sure you include a "subject to satisfactory home inspection".
Do Your Homework - Home Inspections
Home inspections are often an important part of the pre-purchase routine when buying a house. You do not want to end with faults that you had not anticipated. Choosing a home inspector can be difficult process. It is important to consult with family and friends to find a reliable inspector that has good references. You should also contact several inspectors in your area and interview them in advance to ascertain their qualifications. Be sure to do your own independent investigation of the Inspectors' qualifications.
Questions to Ask
1. How long has the inspector been in business AS A HOME INSPECTION firm?
2. Is the inspector specifically experienced in RESIDENTIAL CONSTRUCTION?
3. What does the inspection include? Inspections should include visual inspections covering exterior, structure, garage, plumbing, heating, cooling, electrical, interior, insulation and ventilation. Extras include radon testing, a pest infestation survey or inspection of septic systems or wells. Be sure the inspector will provide a written report.
4. How much will it cost? Determine fees up front. Inspections cost from as little as $200 to as much as $1,000 depending on the size of the home and which inspection services are requested.
5. How long will the inspection take? The time depends on the size and age of the home, the average is 2 to 3 hours. Anything less isn't enough time to do a thorough inspection but many inspectors take a full day to thoroughly inspect your prospective purchase.
6. Does the inspector encourage the client to attend the inspection? This is a valuable educational opportunity, and an inspector's refusal means you should look for a better qualified inspector.
7. Bluntly ask what educational and/or training facility the inspector attended. Does the inspector participate in continuing education programs to keep his/her expertise up to date? Ask to see the inspector's papers. When hiring a company, make certain that your home will be inspected by a registered professional.
8. Does the company offer to do any repairs or improvements based on its inspection? This might cause a conflict of interest. We do not recommend that you deal with these firms.
9. Do they belong to an association that will investigate a consumer complaint?
10. Do they carry errors and omission insurance?
First Home, First Hints
Congratulations! You're about to move out of an apartment into your first home. What a great move, but you need to know a few things and buy a few things. Remember there will be no "building manager" to take care of things for you - you're it!
First things first. Let there be light, but where is the fuse box? Does it use fuses or just switches? (Hint: Label each switch with white tape and black letters so you can see them easier in the dark.) It's a good idea to turn the switches off and on a few times so you're used to how stiff they can be.
Water. Find the turn-off valve inside the house so minor floods don't become major. Make sure you know where the toilet turn-off valve is. Can you turn off the outside faucets in the winter? (Hint: you may have to leave one outside faucet dripping during the cold months so you don't burst the pipes during freezes.) Find the water meter and make sure it is functioning. If your garbage disposal stops working, find the red reset button on the unit under the sink. Before you turn it back on, check with your fingers to see if anything is blocking the blades, and then press the reset button. (Hint: Remove your fingers and the offending objects from the blades before turning the disposal on again...duh.)
Keeping warm. It's important to find the furnace. What kind of fuel does it use? If you have an oil furnace, ask how often you need to refill it and who refills it. Do you have a maintenance contract for repairs? If not, can you get one? If you're going to have to replace or clean the filters, where do you get them? (Hint: buy a couple of them, you never seem to need to replace them when the store is open.) Find the reset button and label it. Does the furnace have a fan for cooling the house in the summer? Where are the thermostats for controlling the temperature? No matter what the source of energy for your heating, find the main shut off valve.
Curl up by the fire. But make sure the fireplace flue is cleaned every one to three years, depending on how much you use it. Otherwise, the chimney may not draw well and "smoke gets in your eyes", which is not as romantic as the song. A clogged chimney can cause a fire, which is not cool.
Nothing like a long hot bath. Check the water heater to see if it has a pilot light. If it goes out, how do you re-light it? Find out how to set the temperature and decide what temperature you should set it to.
Your very own washer and dryer. Clean the lint tray on the dryer every load or two, or it will build up and slow down the drying process. Also, too much dry lint can cause a fire. If your washer drains directly into a utility sink, place a filter on the end of the hose to keep from clogging your sink.
How about a tall cold one? At least twice a year, clean the water tray under your frostless refrigerator, and vacuum the coils at the back now and then to keep it cooling effectively. (Hint: Check the seals around the doors of your refrigerator to make sure no cool air is escaping. If there is moisture on the rubber seal, you've got a faulty seal.)
How Much Will It Really Cost?
Once you have figured out the best price range for you, you will need to calculate all of the additional costs of the transaction to make sure that you are financially able.
UP-FRONT COSTS
* Mortgage Loan Insurance Premium - You may need mortgage loan isnurance if you have a high-ratio mortgage (less than 25% down payment). Your insurance may be added to your mortgage or you may be asked to pay it in full upon closing.
* Appraisal Fee - Your mortgage lender may require that your property be appraised at your expense. The cost for an appraisal is usually around $250-$350 and must be paid when you contract for those services.
* Deposit - This is part of your down payment for the porperty and must be paid when you make an Offer to purchase. The cost varies depending on the area or property, however it may be up to 5% of the purchase price. If you wish to make a down payment of 5% and you deposit 5%, then your down payment is considered to be made.
* Down Payment - At least 5% of the purchas price is required for a high-ratio mortgage and at least 25% for a conventional mortgage.
* Estoppel Certificate Fee - This applies if you are buying a condo or strata unit and usually costs up to $100.
* Home Inspection Fee - A home inspection is a reprot on the condition of the home and may cost over $200, however, it depends on factors such as large square footage, etc.
* Land Registration Fees (sometimes called Land Transfer Tax/Deed Registration Fee/Tariff/Property Purchases Tax) - A provincial or municipal charger. The cost is a percentage of the property's purchase price and may vary.
* Prepaid Property Taxes and/or Utility Bills - To reimburse the vendor for pre-paid costs such as property taxes, filling the oil tank, etc.
* Property Insurance - This insurance covers the cost of replacing the structure of your home and its contents. This must be in place on closing day.
* Survey or Certificate of Location Cost - Prior to finalizing the mortgage loan, the mortgage lender may ask for an up-to-date survey or certificate of the location. If the seller does not agree to get one, it will come out of your own expenses. It may cost aproximately $1000 to $2000.
* Water Quality Inspection - If your home has a well, you will want to have the quality of the water tested to ensure that your water supply is adequate and the water is potable. You can negotiate these costs with the vendor.
* Legal Fees and Disbursements - This must be paid upon the closing and cost a minimum of $500 plus GST/HST.
* Title Insurance - Your lawyer may suggest title insurance to cover loss casued by defects of title to the property
What Kind of Mortgage Will You Require? Conventional or High Ratio?
In these days of soaring prices, first time buyers especially find that they require high ratio mortgages. What exactly are the differences between the two types of mortgages?
A loan for up to 75% of the purchase price of a property is a conventional mortgage. The Bank Act prohibit Bank, Trust and Insurance Companies from lending in excess of 75% of the purchase price or the appraised value of a property without obtaining
Mortgage Loan (High Ratio) Insurance.
A high ratio mortage is, therefore, a mortage for 75.1% to 95% of the purchase price of a property.High ratio mortgages must be insured through CMHC (Canada Mortgage and Housing Corporation) or GE (Genworth Financial Canada). CMHC and GE provide default or high
ratio insurance to the lenders protecting them against the risk of lending to homebuyers who have less than 25% downpayment available. An insurance premium is paid by the borrower on
behalf of the lender. The insurance premium that is paid to CMHC or GE is to protect the lender in the event that the mortgage is not paid. This is not to be confused with life, disability, or job loss insurance.
The insurance premium is calculated as a percentage of the mortgage amount, depending on the loan to value of the property, and may be added to the mortgage amount.
Short Term Rates vs. Long Term Rates
The options for mortgages available can be very confusing for most mortgage shoppers. Terms for mortgages vary between variable and fixed rate, 6-month terms to 10 year terms. Taking a variable or floating rate mortgage can have savings. Typically the shorter the term or guarantee of the rate, the lower the rate will be. This does not always happen, depending on the market place and the economy, but history has shown that short-term rates tend to be lower than long-term rates. The up side of variable rate is the strong potential for interest rate savings. The down side is the fact that you are accepting the interest rate risk without a guarantee. If you are considering a variable rate mortgage you need to look at your own risk tolerance, and your cash flow available to deal with potential increased payment. Considering projections of rates and where we see interest rates heading can also be important in this decision. Make sure you talk to an expert when you are making this decision.
Cool Buyers in a Hot Market
In some regions across Canada, the real estate market has been steadily heating up. In these areas, real estate agents have more buyers than sellers, and multiple offer situations are becoming commonplace. It's called a seller's market, and it can be perilous for a buyer.
The most common hazard for a buyer in a sellers market is to be in a multiple offer situation and get caught in a bidding war. With each round of counter offers, the price gets higher and the buyer has to decide between the possibility of overpaying for the property or losing it to another buyer.
But there are other perils for the buyer in a seller's market, where the risk is not as clear cut. In order to make the offer more attractive to the seller, a buyer may be tempted to make an offer without any conditions. Conditions are included in an offer to ensure that the buyer is not bound to the Contract unless the buyer:
* Is approved for required financing.
* Is satisfied with the results of a property inspection.
* Has an opportunity to review and approve all minutes of the Strata Corporation and financial statements (if the property is a strata unit).
Additionally, if the buyer is already a homeowner, a condition may be required to ensure that the buyer is able to sell their own home prior to being bound to the offer for another house. Depending on the circumstances, there may be other conditions that are also required.
What happens if the buyer chooses to forgo the use of these conditions? A buyer should consider the consequence of not being able to perform the task. For example - what if the offer is not conditional upon -
* Financing: what will happen if the buyer is not able to arrange the financing?
* A property inspection: What if there are material defects that would likely only be discovered by a professional home inspector?
* Review of financial statements and minutes (if purchasing a strata property). What if these documents contain evidence that the property has some potentially serious problems?
* Sale of the buyer's property: what if the buyer needs the cash from their current home in order to buy another home?
A prudent buyer will ensure that any issues that need to be confirmed or investigated are enshrined as a condition in the Contract. Once the offer becomes firm (i.e. without any conditions) it is a legal promise by the buyer - secured by a "good faith" deposit - to complete the transaction.
What You'll Need to Get Pre-Qualified for a Mortgage
1) Ask your employer to prepare a letter on company letterhead outlining your name, base
salary or hourly rate, normal hours worked per week, position and length of service. A recent pay stub and a copy of your T4 from last year may also be required.
2) If commission sales, three years personal tax returns together with the Notice of Assessments from Revenue Canada.
3) If self-employed, three years personal tax returns together with the Notice of Assessments from Revenue Canada, three years business financial statements, and three years business tax returns (if applicable).
Note: New products have been launched to the marketplace where, with good credit, you can qualify for a mortgage based on your stated income. This type of mortgage was designed for the self-employed, including contractors, freelancers, consultants, commission sales
professionals, or small business owners. A mortgage broker is particularly helpfully for the self-employed.
4) Social Insurance Numbers.
5) At least 3 years history of residence and employment.
6) Know your banking information (name of financial institutions,
address, and type of accounts, account numbers).
7)Know your assets (what you own) and their value, i.e. cash amounts,
stocks, bonds, RRSPs, car.
8 Know your liabilities (what you owe), i.e. car loan, credit card balances, child or spousal support payments.
9) Please be upfront about any past credit problems you may have had.
10) Write down a list of questions you would like to have answered.
11) GET A MORTGAGE BROKER ON YOUR TEAM. In most cases, they don't cost you a thing and their knowledge is invaluable. I will gladly recommend several trustworthy professionals.
Downpayment Sources....Saved, Borrowed or Bequeathed?
Homeowners no longer need the minimum 5% downpayment from their own funds to purchase a home. You can now use borrowed funds for your 5% down, but keep in mind that there are higher credit criteria and your insurance premiums increase.
Effective March 1, 2004, homebuyers can get their downpayment from borrowed sources that
include:
1) Lender cash back incentives;
2) Personal loans, lines of credit or credit cards;
3) Unsubstantiated gifts.
DOWNPAYMENT FROM YOUR OWN RESOURCES:
You must supply verification satisfactory to the lender of accumulated savings from non-borrowed funds. This may be in the form of:
1)Copy of your bank statement or bankbook (including cover) showing a minimum three-month history. Any large deposits during this time period must be explained and documented.
2)Copy of RRSP statement, term deposits, CSBs, or other investments.
DOWNPAYMENT FROM A GIFT (NOT BORROWED):
All or part of the minimum equity requirement (5% for downpayment plus 1.5% for closing costs) may be provided by way of a financial gift, as long as all of the following conditions are met:
1) The donor is an immediate relative of the borrower (recipient); and
2) The Approved Lender has verified that the money is a genuine gift; and
3) The Approved Lender has verified that the funds are in the borrower’s (recipient’s) possession at least 15 days prior to closing.
The Approved Lender will verify the authenticity of the gift by obtaining a written confirmation, signed by the donor and the borrower (recipient), which will include the following points:
1) The money is a genuine gift from the donor and does not ever have to be repaid;
2) No part of the financial gift is being provided by any third party having any interest (direct or indirect) in the sale of the subject property.
0% DOWNPAYMENT MORTGAGES:
If you can afford mortgage payments but can’t seem to save for a downpayment, there are numerous no downpayment mortgage options, including the borrowed downpayment program.
No downpayment mortgages can be ideal for:
• professionals and other high income earners just starting out who
may have large student loans.
• also consider renters who often worry they won’t be able to find an
affordable home by the time they’ve saved enough for a downpayment.
Some Mortgage Brokers offers a unique mortgage that can get you the home you want and 3% cash back if you have good credit. The 3% cash back can be used for expenses related to the move such as legal fees, land transfer costs, moving expenses, furniture, appliances, or to pay off other more expensive debt such as credit cards.
To be sure, 0% downpayment mortgages are not for everyone. The objective is not to take on a higher debt load than can be comfortably handled. But for Canadians with good credit and steady incomes, these mortgages can definitely help to make the dream of home
ownership a reality.
Home Buyer's Plan (Using your RRSP as a Downpayment)
The HBP is a program that allows you to withdraw up to $20,000 per person (or $40,000 per couple) from your registered retirement savings plans (RRSPs) to buy or build a qualifying home. Withdrawals that meet all conditions do not have to be included in income and there is no withholding tax.
CONDITIONS FOR PARTICIPATING IN THE HBP:
1) You have entered into a written agreement to buy or build a qualifying home that you intend to occupy the home as your principal residence.
2) You or your spouse or common law partner have to be considered a first-time homebuyer i.e. have never owned or have not owned in the last 4 calendar years and 31 days before the withdrawal.
3) Your HBP balance on January 1 of the year of the withdrawal has to be zero i.e. nothing is outstanding from a previous purchase.
4) Neither you, nor your spouse or common-law partner can own the home more than 30 days before a withdrawal is made.
5) You must be a resident of Canada.
6) You must complete Form T1036.
7)You have to receive all withdrawals in the same year.
8) You have to buy or build the home before October 1 of the year after the year of the withdrawal.
9) When an RRSP contribution is made, you must wait 90 days before withdrawing funds under the HBP or you may be denied the right to use that contribution as an RRSP deduction for that year.
10) The home can be for yourself or it can be for a related disabled person if it is more accessible to that person than his or her current home, or it is better suited to that person’s needs. You can acquire the home for the disabled person, or you can provide the withdrawn funds to the disabled person to acquire the home.
REPAYMENT OF THE RRSP FUNDS:
Repayment of the funds back to your RRSP must be made within a period of no more than 15 years. Generally, in each year of your repayment period, you have to repay 1/15 of the total amount you withdrew until the full amount is repaid. Your repayment period starts the second year following the year in which you made your withdrawals. If the required amount is not repaid in a year, that year’s repayment amount will be added to your income and taxed
accordingly. Repayment can occur earlier if you wish.
Purchase Plus Improvements Financing! - Funding Immediate Improvements through your mortgage
This special program is designed for people who wish to purchase a home that may require some immediate upgrades... a new electrical service, a new roof, central air, a new furnace, new siding, eaves, soffits, fascia, doors, windows, a new kitchen, carpeting... or any other renovation that would increase the value of the home.
The way it works is like this: Let’s assume that you are a first time buyer and have 5% downpayment.
Before the mortgage financing is arranged, written quotes are obtained from licensed contractors for the repairs and or the improvements to be done to the home. When the application
for mortgage financing is made, the request is made for 95% of the purchase price PLUS 95% of the cost to complete the improvements.
Note: The lender will “hold-back” on closing the “improvement“ portion of the mortgage until the work has been completed, normally within 30 to 60 days of closing. Once the work has been completed, the lender will advance the balance of the funds and the contractor can be paid.
What does this mean? Let us give you an example...
Purchase price: $ 100,000 x 95% = $ 95,000
Cost of improvements: $ 10,000 x 95% = $ 9,500
Total mortgage: $ 110,000 x 95% = $ 104,500
Therefore, an application is made for a mortgage in the amount of $104,500, which represents 95% of the purchase price plus 95% of the improvements.
On closing this is what happens... The mortgage advanced to complete the purchase is $95,000 plus the original 5% from the purchaser’s downpayment ($5,000) sufficient funds to complete
the purchase of $100,000.
After closing the contractor completes the improvements (normally within 30 to 60 days after the closing) the lender advances the hold-back of $9,500, the purchaser pays the additional 5% of the cost of the improvements ($500) and the $10,000 owed to the contractor can be paid as per the original quote for the work.
Everyone’s a winner!
The purchaser is happy because they got $10,000 of improvements done to the home with a cash outlay of only $500 (the balance was financed with their mortgage).
The lender is happy because they now have a mortgage on an improved home.
Bi-weekly and weekly payments
Most mortgages have the option to allow payments to be made on a weekly or bi-weekly basis. This option may be desirable for two reasons. The first is it can save you money as you can expect to pay off your mortgage about 4 years sooner. This can save you dramatically over the life of your mortgage. The other reason why these options are so popular is that if your employer pays you on a weekly or bi-weekly basis, you can simplify your budgeting by making the payment line up with the way you paid.
Making Extra payments
Paying extra amounts on your mortgage can make a big interest saving over time. When we select a mortgage company, privilege payments options are something that we look for. A 20% privilege payment will allow you to pay off up to $20,000 per year on a $100 000 mortgage. It is important that the privilege payment also be flexible to allow you to pay smaller payments on the mortgage and as often as you wish. An extra $1000 periodically paid on a mortgage can help you become mortgage free faster.
Reducing the CMHC fees on your purchase
When you require a mortgage for more than 75% of the purchase price of a property, that mortgage must be insured by Canada Mortgage and Housing (CMHC) or GE Mortgage insurance. The premium charged by these company`s decreases as the down payment increases. When you finance your property at 95%, a premium of 2.75-2.90% is added to the mortgage depending on whether the downpayment is borrowed or not. By increasing the down payment to 10% of the purchase price the premium can be reduced to 2.0%. If you can put down 25%, you can avoid any additional insurance fee. Depending on your situation there are ways that you can structure this financing to avoid the CMHC or GE insurance premium.
Advantages of Bigger Down Payments
As mentioned above, when you put a 25% down payment on your purchase you can avoid the CMHC premium. More importantly the larger the down payment, the lower the amount of interest you will pay over the life of your mortgage. It is important to note that it may not be wise to stretch yourself to increase your down payment and end up borrowing on credit cards or a line of credit at a higher rate.
Costs and Considerations when Buying a Home
"Home is an invention on which no one has yet improved."
- Ann Douglas
In the excitement of beginning a search for a home, many people jump right in without considering all of the elements that make a home truly right for them. It is a complicated and personal process. An unsuitable choice can be costly in many ways - you could lose money, waste time and effort relocating, or even put your family's health in danger. The following are some things to consider when identifying your ideal home and planning a successful purchase.
Choosing a Neighbourhood
Remember that you can renovate a house but neighbourhoods take years to change and there's no guarantee they'll change for the better! On the other hand, if you really love a certain part of town but it's out of your price range you may want to consider buying a less-than-perfect home then doing renovations. They can be quite expensive so try to make improvements that will be reflected in the value when you sell. These renovations have been found to have the greatest payback: kitchen 70%, bathroom 68%, interior painting 65%, exterior painting 62%.
Tips on choosing a suitable neighbourhood:
* When you find a locale you like, walk around it. See what it's like from street level.
* Are the people friendly?
* Are there stores and recreation facilities nearby?
* Contact the local school board if you have children. Do local schools provide good education opportunities? If applicable are there private/religious schools?
Figure out what you can afford:
Consider how much you currently need to live on and how much you actually have leftover every month. People have a tendency to create budgets that look nothing like reality - when we should have $400 left over, for some reason we only have half that.
Consider these basic costs of buying a new home:
* Most homes require a down payment of several thousand dollars.
* Monthly mortgage payments can be 1/3 of the average person's annual net income.
* You may want to pay for a home inspection. Consider more than just the structure. Ask the inspector to check for asbestos, radon, animal infestation and lead.
* Moving costs can be from a couple hundred to several thousand dollars depending on the distance of your move and the quantity of belongings.
Financing
The sort of home you can afford depends on several things:
* How much you have saved
* How much you earn
* Past earnings
* Your credit rating
The past has a way of haunting new homebuyers. If you are concerned about your credit rating you can usually get a free copy of your rating report from your local credit bureau. Normally all that's required is a couple pieces of photo identification. Remember, a few late payments or disputed bills can besmirch your record. Try to pay everything on time and don't have more than two credit cards. A bad rating can spell trouble getting a mortgage or you end up paying more for your mortgage as a form of insurance to the lender.
Pre-Qualification
This refers to documents from a bank or other lender indicating that you have the financing to back up your offer on a house. Pre-qualification is free and most lenders are happy to sit down with prospective buyers and figure how much they can afford. Having an accurate idea of price range will save time in the bidding process. If there are several people making offers on your dream home, being pre-qualified can make your offer more attractive since financing is not in question. It is important to note, however, that lending institutions will base their final decision about a mortgage on ability of the buyer to service the debt as well as the property. Most lenders state that the two components go hand in hand - the buyer with the ability to repay a mortgage and the property as security in the event of default on payment.
By taking all these points into consideration, you can worry less about the process of buying and get busy finding your ideal home!
Costs and Value Benefits of Owning a Home
There is no doubt that one of the more pleasant and exciting times for most people is when they have decided to buy a home. This excitement exists whether or not you are buying for the first time or the fourteenth time.
There is no doubt that the experienced home buyer has a relatively good idea as to what it costs to buy a home today. However if it has been a long time since you last bought a home, you may have forgotten or not be aware of the associated costs involved
A lot of people think of the basic costs as legal fees, property tax adjustments, GST in some cases, the cost of movers, the set-up fees for utilities, new window coverings, etc. First timers should also consider home maintenance costs, like tools, a lawn mower, etc. Beyond the basic costs, are major cost factors like replacing flooring and roofs, or making additions. These costs may be necessary to give you everything you want from your new home.
On the opposite side, some buyers may gain a cost benefit from buying a new home. You could buy in a development that has a fitness centre, or a swimming pool. This means no more fitness club dues or transportation worries. Some developments offer more luxurious features like golf privileges or skiing benefits.
Just as the above features offer you a financial and non-financial benefit; there are non-financial costs to look at when buying your house.
A feature you must consider seriously when buying a home is its location. Look at location from many view points and perceptions. A suggested question would be:
where am I going to live relative to ............?
The relative to "what" includes work (my work, my spouses work), established leisure activities (golf membership, hiking trails, night school courses, children's ballet or music classes), children school or daycare, proximity to family, best friends or the old neighbourhood.
Now to create a more interesting but realistic scenario, take all of the above factors and try to determine the likely disruptions to a perfect schedule.
How often do you or your spouse have to work late or work unusual hours? Does this mean that the public transit you plan to take at commuter time, is only viable 50% of the time? Does this mean that little Mary or John may have to miss a lot of soccer practices, or other activities that they enjoy?
Is the commuting experience likely to leave you too tired (physically or emotionally), when you get home?
How important is the ease of transportation for you, to be able to leave work to pick-up your sick child at school or at daycare?
If grandma or grandpa is in weak health; is being close by a true comfort?
Will you need to make new friends because you will only see our old ones at holiday occasions?
In summary; when buying a home, consider the value of your purchase in relation to the emotional costs imbedded in that purchase. Does a house 25 miles away from where you spend most of your waking hours (at work and with friends) have a non-financial cost? Is being anywhere from 45 to 75 minutes away (depending upon traffic volumes) from a valued and trusted daycare for your child a reasonable cost for you to deal with?
When you buy a home you want to be happy and satisfied on all counts, of which money is only one
Getting the Best Service
If you are planning to purchase a home, you will be faced with many decisions. What comes first buying the next home or selling your present home? What is your price range? What will be the location, size and style of your next home?
Before getting the answers to these questions there is one major decision to be made: which Realtor shall you choose to help you get through the maze of forms and give you the direction needed to successfully complete your real estate transactions?
Buying a home is too important to leave up to a committee. Some buyers like to leave their name with three or four salespeople. Although it may seem to be to the buyer's advantage to have a number of people to work with, it is usually a very ineffective approach. The basic assumption is that a committee of agents can produce more results than working exclusively with one realtor. Like most committee assignments--everybody's responsibility is nobody's responsibility.
ONE REALTOR = COMMITMENT
You need the total commitment of one Realtor whom you feel comfortable with and who will get to know and understand you and have compassion and empathy for your particular situation. Buying and selling a home is a journey that must be carefully plotted and mapped from the start to completion. Tell this Realtor that you will work with them exclusively as long as you see the effort and work needed to get the job completed. In fact if you are a Buyer you should sign a Buyers Agency form with this agent to show your commitment, as well the agent should put in an escape clause for you the buyer if they do not perform or work actively for you. In this way you will have a dedicated Realtor who will make it his personal responsibility to handle all the details to get you to a successful completion of this real estate journey.
A REALTOR NEEDS CANDID FEEDBACK
A good agent will listen to your needs and search through properties that are available both their own office and the Multiple Listing Service, then sort out the inappropriate ones. They will likely show you a number of homes and get your feedback and then continue the process until you have found the right home. Be very candid with your feedback, point out your likes and dislikes of the properties. Your Realtor should have a copy of each of the listings you will be viewing with a space on each of the pages for your written notes. You will not remember the likes and dislikes you have of each home after you have finished your entire showing tour. Make your notes immediately after viewing each home. Also remember it is in your best interest to view only a maximum of 4 to 5 homes on any one showing tour. It is easy to become confused when viewing too many homes at one time.
A Realtor is paid on a straight commission basis. They do not receive a salary or have an expense account. They are paid only after they have sold something and it successfully closes. This is why working with more than one Realtor is not a good idea. None of the Realtors will know if it will be to their financial benefit to spend any of their time or effort trying to find you a property, when you could possibly buy through another Realtor. Believe it or not, you will be best served by dealing with one committed Realtor as opposed to shopping the field with a variety of Realtors and Brokerages. By giving your commitment to one Realtor, the Realtor will work with the enthusiasm and diligent efforts required to successfully complete your transaction.
Market Time and Price Reductions
"How long has it been on the market"? This is a question many buyers ask. The thought behind it is often one of two things. Either there's something wrong with the home or the price is too high. Both of these notions may need clarification. Let me deal with the first thought.
Consumers need to know that under the closest scrutiny one could argue that there is something "wrong" with every home. The real question here is:- does the price reflect what is being offered? In this case what is "wrong" with a home may be exactly what makes it right for some one who appreciates the opportunity and the reflected price.
Regarding the thought of overpricing, it must be considered that where a home is extremely unique, a long marketing time may be necessary in order to obtain market value while pursuing a buyer with the same unique interest. On the contrary, with atypical homes, a long period of time on the market may point toward inferior marketing but mostly toward an overpriced listing for that market regardless of what is "right or wrong" with the home. However, sometimes when homes are reduced and buyers ask "how long has it been listed" the proper response is "at that price only...weeks". By illustration and a bit of exaggeration to make the point, suppose a home is on the market for 2 years at $300,000 and the seller reduces it to $250,000. Then, while the buyer is asking "how long has it been listed", there are 5 offers being presented, followed by the hollow apology "Sorry it's sold".
It is obvious then that both notions for time on the market may be incorrect. While you can always make an offer, it's always best to ask yourself "does the price reflect what is being offered" to avoid disappointment.
Real Vs. Personal Property
The last thing you need on moving day is a battle over that wonderful antique mirror in the master bathroom! Yet most buyers take very little time to look at the "extras" in a home before they make an offer. As a result, they may discover that the beautiful fixtures or high-tech stove they thought came with the house have been loaded on the moving van heading to a new home.
Both buyers and sellers should make a detailed list of items to be included in the sale of the property and reach an agreement on disputed items before closing. The most difficult part of a sale, however, can be reaching an agreement on the definition of property. Everyone has a slightly different concept of what should or should not be included. Many items can fall into dispute particularly if they were specially ordered, custom-made, expensive or have some personal significance.
To avoid confusion, general rules of real vs. personal property have been established. Real property refers to all the items which are part of the property and cannot be removed without causing damage, anything which is immovable by law, or anything which is incidental or appurtenant to the land. Personal property is simply anything which belongs to, and leaves with, the homeowner such as tables or sofas.
Legally, the intention inherent in the manner in which an article, fixture, or piece of equipment is attached to the property is used to determine if the item is real or personal property. (You may be familiar with rule of thumb that anything screwed in can be removed but items which are nailed in place cannot.) Since the intention of the owner at the time of installation is almost impossible to determine, it is important that everything is in writing. The easiest way to avoid misunderstandings is for the seller to make a list of their personal property.
Once you have completed the checklist and decided which items will stay and which will go these should be noted in sale documents. Give a list of all personal property items which will remain in the home such as chandeliers, built-in bookshelf, or appliances to the closing agent. The Bill of Sale will then be signed at close of escrow by the seller to avoid confusion.
It's also a good idea for the buyer to make his or her own checklist. House hunters can save time by taking inventory of fixtures and all property which might fall into dispute on second viewing of a home or even at open houses.
Remember that both buyers and sellers can negotiate on property transfer. A seller may be happy to leave an ornate light fixture if the style is unsuitable for their new home. Buyers who have their heart set on item are free to try to work in into the asking price or condition or sale.
Researching Real Estate Online
'Let your fingers do the walking' has taken on a whole new meaning when it comes to researching real estate in the 21st century. The Internet is becoming an increasing important source of information and a time saving tool for homebuyers. It empowers them to gather information about housing issues and current market conditions as well as allowing them to preview numerous listings at the click of a mouse and survey current mortgage rates.
Home shoppers benefit in particular by being able to research homes before meeting with a real estate agent. Typical questions such as: Are there good schools nearby? How far is it to downtown or to work? Is the home construction suitable to its geographical area? Researching areas of concern can provide a sense of control over what is for many people the largest purchase of their lives. Also by weeding out homes that don't meet basic criteria, they can save themselves and the agent a great deal of time. The Internet makes research faster and more convenient than ever.
The following are some ways to maximize the research potential of the Internet when you search for a home.
In general…
Among the many purposes of the Internet from entertainment to education, it is a dynamic advertising and marketing tool. Remember that the truthfulness and quality of the information you find on the Internet can vary. Always consider the source. It's wise to check out more than one source in order to cross check information.
Some websites require personal details before a consumer can proceed and view certain information. If you are not comfortable with this don't feel obligated to divulge any personal information.
Conducting research…
The Canadian Home Builders Association website (http://www.chbabc.org/) serves those in the home building industry however it also provides valuable information to consumers regarding home design. In addition, the website lists topics in their technical library from masonry to finishes to energy efficiency which the public can access in person at their Burnaby, British Columbia location.
The Internet is an excellent way to find out about a new neighbourhood. There are three common online avenues to information about communities: type in e.g. www.nameofthecity.org (or .com), search for the town city hall or chamber of commerce.
Many online listings include an address with a postal code. If you aren't familiar with the address you can use the postal code to get an idea of the home location. In your browser type www.yahoo.ca and click on maps. When you enter the postal code, Yahoo will provide you with a detailed map of the location.
If you are interested in finding out about local services such as landscapers, architects, recreation facilities, etc., visit www.yellowpages.ca or www.superpages.com and type in your criteria. Along with the telephone number and addresses, some businesses will even include a website link and a map.
To find a property appraiser in your area check out the Appraisal Institute of Canada's website: http://www.aicanada.org/public.htm. An appraisal can provide an accurate assessment of market value when a home is bought or sold, a new home is being constructed, when a mortgage is required etc.
With a dizzying array of mortgage products on the market, online research can provide details about obtaining a mortgage as well as current rates. Many lenders include online mortgage calculators, worksheets to help you figure out how much you can afford, details of promotions as well as online applications.
If you're in the market for a new home you've likely already visited or plan to visit online listings on www.sutton.com or www.mls.ca. These listings generally provide details on the square footage, number of bedrooms and bathrooms, age, location, and other aspects of the home along with a photo. You will also find the name of the listing agent.
Technology is not replacing customer service; an online listing doesn't mean an online sale without a human element. In fact, Internet shoppers are more likely to use real estate agents than non-Internet shoppers. Eighty-seven percent of web home shoppers use a real estate agent or broker, while 76 percent of traditional buyers work with an agent, according to an American study conducted by the National Real Estate Board in 2000. The Internet is a channel for delivering property information; as a consumer you need not sacrifice any of the services you'd expect from a profession real estate agent.
Sales agents help potential buyers determine their specific home requirements, provide qualified information about the local market, prepare an offer, provide information on home inspection and more.
Happy (and knowledgeable) house hunting!
What Should You Buy?
YOUR CURRENT AND FUTURE NEEDS
Before looking for a home, you may have some needs that you must consider for now and the future. These may include:
* Size Requirements - How many bedrooms do you need? Do you need room for a home office? How many washrooms do you need? Do you need parking or a garage? For how many cars?
* Special Features - Would you like air conditioning? A fireplace or swimming pool?
* Lifestyles and Stages - Do you plan on having any children? Do you have teens that are plannign to move away shortly? Are you close to retirement?
CHOOSING A LOCATION THAT IS RIGHT FOR YOU
Even if the home you choose has everything you need, the location might not be the best for you. When deciding where you would like to buy, you should take the following things into consideration:
* Whether you would like to live in the city or a town
* Where you work and how easy it is to commute
* Where your children will attend school and how they will get there
* Whether you would like a safe walking area or would like a park nearby
* How close you would like to be to family and friends
* Would you like to be near stores or public transportation
DECIDING ON THE TYPE OF HOME TO BUY
There are many different types of homes to choose from. Think about your wants and needs before making any findal decisions. Remember to look beyond the walls. The environment surrounding your home can be almost as important, if not more important than the inside of it.
SINGLE-FAMILY DETACHED
The most popular style and the most solid investment. It sits on its own lot offering a greater degree of privacy.
SEMI-DETACHED
A single-family home that is attached to another one by a common wall. It can offer many of the advantages of a single-family detatched home, however it is usually cheaper and easier to maintain.
DUPLEX
Two units - one is above the other or side by side. Most of the time, the owner usually lives in one of the two units and rents the other.
ROW HOUSE OR TOWNHOUSE
One of several types of single-family homes joined by common walls. It offers less privacy than a single-family detached home, nonetheless, a separate outdoor space. These homes may also cost less and are easier to maintain.
LINK OR CARRIAGE HOME
Houses that are joined by garages or carports whcih provide access to the front as well as the back yard. Builders sometimes join basement walls that way the houses appear to be sinlg-family detached homes. These houses can be less expensive than single-family detached homes.
MANUFACTURED HOME
A factory-built single-family home that is transported to your location and placed on a surface-mounted foundation. This term has replaced the old term "mobile home."
MODULAR HOME
A factory-built home constructed in compliance with local building codes. This home is normally shipped to your location in two or more sections.
CONDOMINIUM
This refers to a form of legal ownership as opposed to a style of construction. They can be high-rise residential buildings, townhouse complexes, indiviudal houses as well as low-rise buildings.
What Professionals Should You Call On?
THE REAL ESTATE AGENT
Your Realtor's job is to:
*Help you find the perfect home for you
*Write an Offer of Purchase
*Negotiate on your behalf to help get you the best possible deal
*Provide you with impotant information about the neighbourhood, arrange the home inspection and essentially save you time, trouble as well as money
When the time comes to select a realtor, do not hesitate to ask questions, especially regarding potential service charges. Vendors usually pay a commission to the agent but some agents may charge buyers a fee for their work.
THE LENDER OR MORTGAGE BROKER
If you have not yet gone throught the mortgage pre-qualification process, you will need to find a good lender to assist you during the purchasing process as well as for as long as you have your mortgage.
Remember that many different institutions lend money for mortgages. These include: banks, trust companies, credit unions, pension funds, insurance companies as well as finance companies. It is always a good idea to shop around and speak with more than one lender because terms and options vary with institution.
Some people find it helpful to use a mortgage broker. Mortgage brokers do not work for any specific lending insutiton. Their role is to find the lender with the terms and rates that are best suited for you.
THE INSURANCE BROKER
An insurance broker can help you with your insurance needs, including property as well as mortgage life insurance. Lenders insist on property insurance because your property is their security for your loan. Property insurance covers the replacement cost of your home, so premiums may vary depending on the property's value.
Your lender may also suggest that you purchase mortgage life insurance. THis provides coverage for your family if you should die before your mortgage is paid off. This type of insurance is often available through your lender who then just adds the premium to your regular mortgage payments. You may want to compare rates between btoh an insurance broker and your lender.
THE APPRAISER
Having an independent appraisal done on a property before you make an offer is a good idea. An appraisal will tell you what the property is worth and will ensure you that you are not overpaying. Your lender can also ask for a recognized appraisal in order to complete the mortgage loan.
The appraisal should include an unbiased assessment of the property's physical and functional characteristics, an analysis of recent comparable sales and an assessment of current market conditions affecting the property.
Fees for an appraisal may vary but you should not pay more than $250-$350 in most areas for a typical single-family home.
Home Financing Checklist
Are You Purchasing a Home?
What information to bring about the Property you are Purchasing?
Purchase and Sale Agreement(s) include schedules and waivers
MLS listing with photo
Name, address and telephone number of your Solicitor/Notary
Confirmation of Down Payment equal to the down payment amount of $ ___________ from one or more of the following sources: Savings accounts and/or deposits, liquid or other assets, gift or Proceeds from the sale of another property
Other Documents/Information Required
Income Confirmation:
If your income is from Salaried or Hourly Employment Full Time or Regular Part Time - provide one of the following: a letter from your employer which includes your name, salary or hourly pay rate and name and title of person signing the letter., current pay stub, Copy of a current Bank Account Statements showing Direct Deposit of your Income
If your Income is not Salaried or Hourly (e.g. Self Employed, Contract, and/or you wish to include Bonuses, Overtime, Gratuities or Proft Sharing) provide: your last two years Notice of Assessments (NOA) from Canada Revenue Agency (formerly Revenue Canada)
If your Income source is something other then mentioned above please refer to your financial institution for more information on the type of confirmation required.
Do You Already Own Your Home?
What information to bring about your Current Property:
Recent Mortgage Statement (if any)
Current Homeowner Insurance Policy
Recent Property Tax Bill/Statement
Legal description of Property: Original Purchase Agreement, Property Tax Statement
Property Value: To help estimate your property value, refer to: Recent Property Tax Assessment and/or Neighbourhood Sales Comparables (MLS listings)
Some of the common questions that you may be asked to complete your mortgage application.
What current assets or savings do you have?
What current liabilities do you have? (Please ensure that you know the amount outstnding and monthly payment)
What specific Critical Illness/Life Insurance coverage do you presently have?
Specific questions about property: How much are (or estimate) annual property taxes and heating costs? If the property is a condominium, what fees are associated with the corporation? What is the total square footage of your home? What is the total square footage of the land?
MORTGAGE TERMINOLOGY
Key Words Defined
Agreement of Purchase and Sale: a legal agreemtn that offers a certain price for a home. The offer may be firm (no conditions attached), or conditional (certain conditions must be fulfilled before the deal can be closed).
Amortization Period: the amount of time over which the entire debt will be repaid assuming the same Interest rate. This is normally 25 years for a new mortgage.
Appraised Values: an estimate of the market value of the property
Closing Date: the date on which the sale of a property becomes final and the new owner takes possession.
CMHC or GEMICO Insurance Premium: mortage insurance insures the lender against loss in case of default by the borrower. Mortgage insurance is provided to the lender by CMHC or GEMICO and the premium is paid by the borrower.
Conventional/High-ratio mortgages: a conventional mortgage is one that does not exceed 80% of the purchase price or the appraised value of the property, whichever is less. Mortgages that exceed this limit must be insured against default, and are referred to as high-ratio mortgages.
Home Equity: The differences between the price of which a home could be sold (market value) and the total debts registered against it.
Interim Financing: short-term financing to help a buyer bridge the gap between the closing date on the purchase of a new home an the closing date on the sale of the current home.
Mortgagee and Mortgagor: the lender is the mortgagee and the borrower is the mortgagor.
Mortgage pre-payment: as defined in the mortgage agreement, this gives the mortgagor an opportunity to make special payments over the regular payment schedule
Mortgage Term: the number of years or months over which you pay a specific interest rate. Terms usually range from six months to ten years.
P.I.T: Principal, interest, and taxes. Together, these make up the regular payment on a mortgage if you elect to include property taxes in your mortgage payments.
Porting: is a feature of some mortgages that lets you keep the actual interest rate and remaining term you have on the outstanding balance of your current mortgage, if you move. Any additional money that you borrow will receive the current rate in effect at that time for those funds.
Pre-approved: a pre-approval gives you the confidence you need when making an offer to buy a home. It lets you know how much you could reasonably borrow and allows you to focus on properties in your price range. A pre-approval also gives you an idea of what your payments will be and guarantees an interest rate and term for a set amount of time.
Principal: the amount of money borrowed for a new mortgage or now owing on an existing one.
WHAT YOU SHOULD KNOW ABOUT YOUR CREDIT REPORT
Many Canadians have never looked at their own credit report. Knowing what is in your credit report is important. Obtaining a copy of your credit file on a regular basis helps you manage your financial situation. To obtain a copy call...
Equifax Canada Inc. 1 800 465 7166 Trans Union of Canada 1 800 663 9980
Once you have placed your request, the credit-reporting agency will mail your report to you. It is recommended you get your report from both agencies to ensure accuracy
Frequently Asked Questions:
What exactly is a credit file?
A credit file is created when you first borrow money or apply for credit. Companies that lend money or issue credit cards to you, including banks, finance companies, credit unions or retailers, send specific factual information related to the financial transactions they have with you to credit reporting agencies, on a regular basis. For example, it might include a listing of your credit cards or lines of credit as well as a history of whether or not you have paid on time. If you declared bankruptcy, that will also appear. If you did not pay a bill and your account was sent to a collection agency that will show as well. Your credit file is a report of your financial history and performacne with credit grantors.
Why is my credit file important?
When applying for credit or opening an account,l the credit grantor wants to ensure that if they lend you money, you will pay it back. When your credit file demonstrates that you pay your debts on time, you are more desirable as a potential csutomer. If you have had past late payment history, a credit grantor wants to know how you have been managing your debt since then. Your credit file also shows how much you already owe. Credit grantors want to evaluate your financial position and ensure you have the capacity to pay.
What information does a consumer credit report contain?
There are six different sections in a consumer credit report.
Personal Identification: Contains key identification information - name, address, birth date and Social Insurance Number (SIN)
Inquiries: lists all individuals or organizations that have requested a copy of your credit file in the past 3 years.
Public Record Information: contains information about secured loans, bankruptcies and/or judgements.
Third-Party Collection Agency: Contains information about involvement with a collection agency trying to settle a debt
Trade Information: Provides details of your credit transactions and show whether payments are being made as agreed. The credit grantor evaluates each of these trade items. Evaluations are based on industry standard ratings, which use a range from R0 to R9. R0 indicates you are too new to rate; R1 indicates that you pay within 30 days of billing or as agreed; R9 indicates a bad debt, collection or bankruptcy.
Consumer Statement: This is where you can add a brief comment about any information in your file. For e.g. if you have an R9 rating, you may want to explain that you suffered a setback due to illness, temporary unemployment or other extenuating circumstances.
What is a rating?
Every piece of credit history information in your credit file is assigned a rating by the credit grantor. These are R ratings. The R indicates that the item being described involves revolving credit. If you always pay on time, the item will be coded an R1. If an amount was written off because you never paid it back, it will be coded R9.
What the ratings mean:
R0 - Too new to rate, approved but not used.
R1 - Pays (or paid) within 30 days of payment due date or not over one payment past due.
R2 - Pays (or paid) in more than 30 days from payment due date, but not more than 60 days, or not more than two paymnets past due.
R3 - Pays (or paid) in more than 60 days from payment due date, but not more than 90 days, or not more than three payments past due.
R4 - Pays or (paid) in more than 90 days from payment due date, but not more than 120 days, or four payments past due.
R5 - account is at least 120 days overdue, but is not yet rated 9.
R7 - Making regular paymnets through a special arrangemtn to settle your debts.
R8 - Repossession (voluntary or involuntary return of merchandise)
R9 - Bad debt, placed for collection, moved without giving a new address.
Other rating indicators that might be found on a report are "I" for installment credit or "O" for open credit.
There are a few simple ways to keep a solid credit rating. Pay your bills and debts promptly and always meet payment due dates. Borrow only the amount you can afford to repay. Draw up a budget to control your spending. Review your credit file regularly to stay informed about the details of your credit file.
Additional Costs to Consider When Purchasing Your Home
Closing Costs - are the legal and administrative fees and disbursements associated with buying your home, that are in addition to the purchase price of the home. They range on average from 1.5% to 4% of a home's selling price. Understanding each one will help you budget more accurately and lead to a more comfortable home-buying experience.
Type of Fee Typical Fee Amount Purchase of Fee
Land Registration Fees
(sometimes called a Land Transfer Tax, Deed Registration Fee, Tariff or Property Purchase Tax)
0% to 4% of the purchase price Most provinces levy a one-time tax when you buy a home. The tax is based on a percentage of the purchase price of the property, and vareis from province to province. Check with your lawyer/notary to see what the current rates are.
Legal/Notary Fees $500 to $1000 To protect your interests you should be represented by a lawyer or notary during the purchase and mortgaging of the property, and you are responsible for paying the lawyer's or notary's fees and disbursements. Lawyer/Notary's fees can vary widely and depend on the complexity of the transaction.
Fire Insurances Variable based on the value of the home and its contents Your mortgage lender will require that you have property insurance effective at the time you legally take possession of your new home. Some insurance companies may require proof of a home inspection or may not insure certain type of dwellings. Make sure that you enlist your insurance agent early.
Home inspection (may not apply if you are purchasing a new home) $200 to $500 A clean bill of health from a qualified home inspector can provide a great deal of comfort when buying a resale home. The home inspector evaluates the structures and systems that make up your home and provide you with a written report. A home inspection is not mandatory but may provide peace of mind when purchasing a home.
Moving Costs Variable per hour Costs depend on the amount of work you can do yourself and the distance involved. Prices may be higher at the end of the month and in the Summer.
Utility Service Hook Ups (e.g. Hydro, Telephone, Internet, Cable) $100 to $500 Initial hook up charges may apply and are determined by the utility service provider. Contact your service provider for details.
Say Goodbye to your Mortgage Faster
Strategy #1 - Increase the Frequency of your Payments
If you're paying your mortgage on a monthly basis, you cna arrange to switch your payments to half of the monthyly paymnet amount on a biweekly basis. As a result, you'll actually make 26 payments a year. Most homeowners don't miss the extra amount they pay but always notice the interest savings that add up from this simple strategy.
Strategy #2 - Take Advantage of Lump-Sum Payments
Most banks offer the opportunity to make lump-sum payments on a mortgage. Annual bonuses or tax refunds provide great opporutnities to take advantage of this option. An annual lump-sum payment of just 2% is all it takes for many homeowners to pay off their mortgage years ahead of schedule.
Strategy #3 - Take a shorter amortization
In addition to strategies listed above, some home buyers choose to shorten their amortization period from the industry-standard 25 years to 10, 15, or 20 years instead. The result is slightly higher mortgage payments but significant interest savings over time.
