- A mortgage broker's fee
- An appraisal fee
- Surveying costs (if the seller couldn't come up with a current survey)
- A high-ratio mortgage insurance premium
- An interest adjustment. (Mortgages are normally calculated from the first of each month. If your closing date is the same as the beginning of your mortgage, there will be no adjustment. However, if your closing date is July and you move in on June 15, those last 15 days are the interest adjustment period. Your lender will expect you to cover the cost of the interest during that time.)
- Reimbursement to seller for the unused portion of any prepaid property taxes or utility bills
- A land transfer tax (a sales tax on property) in certain provinces
- Legal fees, and, if applicable, REALTOR® fees
Finding the perfect home doesn't happen in one day. It takes careful planning and lots of work. Fortunately, there are a number of things you can do to simplify the process.
1. Things to Consider Before Starting Your Search
What Features Do You Need?
Do you need an extra bathroom, a garage, a fenced backyard, or lower utility bills? Do you want a fireplace, a short drive to work, or maybe minimal yard work? Once your list is complete, decide what’s most important to you.
What’s the Ideal Location?
Where you live obviously affects your lifestyle; it’s also one of the most significant influences on the value of your home. Your choice of location may be somewhat limited by the price you can afford. Even so, make sure to consider such things as distance to work, schools, shopping and entertainment.
What Kind of Home?
What type of property do you want? A single-family detached home is attractive to many people because it typically provides more living space and land. On the other hand, a condominium may be a more appropriate choice for you, with an emphasis on maintenance-free living. Determine what type of home best suits your desired lifestyle and budget.
What’s Your Budget?
How much do you want to spend? Just as importantly, how much do you have to spend? Note there are numerous additional expenses (detailed below) that you’ll pay to complete the purchase of a home.
2. Choosing a REALTOR
A REALTOR® can help you answer all of these questions and help you navigate through what can be a complicated business transaction. Start by finding REALTORS® in your city by using CREA’s handy search tool. Then, talk to some of them and compare their services. It’s important that you’re comfortable and confident with the agent you choose.
3. Searching For a Home
A REALTOR® will use various tools to try and find properties that meet your specifications. The most important is a local Board’s MLS® (Multiple Listing Service®) System. Your REALTOR® can quickly search through numerous properties available for sale in specific areas to find suitable listings; that is, houses that best match your needs, choice of neighbourhoods and price range. You can also view listings in Board MLS® Systems that are advertised on the national REALTOR.ca web site.
4. Seeing Houses
When you select a property and decide to visit a house, there are many things to consider. Does it have all the features you want? Is the neighbourhood what you expected? Try to picture your favorite furnishings in a room. Remember all of the technical considerations, including:
- What type of heating system does it use? Heating costs can vary drastically by type.
- Have the roof and foundation been well maintained?
- What condition are the windows in?
- What about the plumbing?
- What type of wiring does the house have? What about power outlets? Different appliances use different types.
There are numerous other things to consider as well. If you don't have time or don't feel comfortable doing it, home inspection services are available for a reasonable fee. Having a qualified home inspector look at the house is always a good idea. The older the home, the greater the need for professional inspection.
5. Making an Offer
Once you find a house you want to make your home, your REALTOR® can help you develop an offer. In the offer, you should specify how much you're willing to pay. State when the offer expires and suggest a closing date for the transaction. You can also propose some conditions on the offer. Some common types of conditions are:
- Selling your current home (the seller may continue to look for a buyer, but will give you the right of first refusal);
- The seller providing a current survey, or a "real property report," showing that there are no encroachments on the property;
- The seller having title to the property (your lawyer will check this out when she conducts a title search to see if there are any liens on the property, easements, rights of way or height restrictions);
- If there’s a septic system, the seller having a health inspection certificate, stating that the system meets local standards;
- An inspection by a qualified engineer, should you have any doubts about the home's safety and construction;
- Any inclusions of appliances and other items - basically, what stays and what goes and
- Getting a suitable mortgage (include the amount, interest rates and any other figures you feel important)
You will need to present a deposit along with your offer. An appropriate deposit will show your good faith to the seller. Note that the seller's agent, if they are represented by one, is bound by law to bring all offers to the seller's attention.
6. If Your Offer is Accepted
After your offer is accepted and all conditions met, the offer becomes binding on both sides. If you later refuse to honour the agreement, you may lose your deposit or might be sued for damages. Before signing, make sure you understand and agree with all terms of the offer.
Before the property can formally change hands, there are still a few things to do. Be prepared to furnish proof to your lender that you’ve insured your new house. On or before closing day, both side’s lawyers will arrange to transfer title of the property from the seller to you. The mortgage money will be transferred to your lawyer's trust account, and then to the seller, and your lawyer will bill you all additional expenses such as land transfer taxes or outstanding legal fees.
At this time, be sure to check with your lawyer that everything is as stated in the offer-to-purchase.
Once you're satisfied and the keys to the front door are in your hands, there's nothing else to say, except welcome home!
No matter what type of home or property you're buying, plan on some extra expenses.
(The comments contained on this page are for informational purposes only and do not constitute legal advice.)
Property tax: what it is and what it pays for
Property taxes are one of those ongoing costs of owning a home that you don’t really hear too much about when you get your mortgage. They figure into your GDS and TDS ratios at the time of your mortgage approval, but they tend to increase over time while your mortgage, generally speaking, does the opposite. Let’s take a look at these taxes in greater detail – you’re going to pay them, so you may as well know what you’re paying for and how it’s calculated.
In Canada, municipalities are not allowed to run a deficit. That means that by law, they’re not allowed to borrow money in order to fund their daily services and operations. Because of this, they need a stable income stream, and that income comes from the property tax paid by local residents. Unlike provincial and federal income streams, such as sales tax, property tax is a more reliable source of money because it does not fluctuate when the economy falters.
Property taxes are the main revenue stream for municipalities across the country. They fund local services, maintenance, and amenities for residents, including but not limited to garbage collection, parks, water and sewer services, libraries, recreation and community centres, police and fire protection, emergency services, road construction and maintenance, and general administration. On a provincial level, taxes help to pay for healthcare, education, and social services, among other things. Taxes do not vary from resident to resident dependent on how much they utilize these services; everyone within a community contributes to funding them with the idea that everyone benefits when these services are well-run and well-maintained. If you are looking to buy property in an area with a low property tax, you may be rejoicing because thousands of dollars stay in your pocket each year, but it’s probably a good idea to look a little deeper into the community to ascertain whether or not that particular municipality is skimping on services because it’s poorly funded.
Each year, municipalities set budgets and establish the amount of money necessary to pay for local services. Municipalities then set tax rates to make sure they get the funds needed to provide those services, and these tax rates are adjusted every year to meet the new budget. In most cases, tax rates are applied to the assessed value of your land as well as any buildings or structures on the property. Taxes can be applied in various ways, however, and not all taxes are applied to the value of your entire property.
Your property tax is typically calculated by taking the tax rate – otherwise known as the 'mill rate', multiplying it by the assessed value of your property, and then divide it by 1000. You’ll most often see the tax rate expressed as dollars of tax per $1,000 of assessed value of a property. For example, the current residential tax rate in Edmonton is 8.0, and the average home price is $435,366.
Municipalities often set different tax rates for residential properties and businesses or non-residential properties, and residential properties are usually taxed at a lower rate than non-residential properties. Property tax payments are made throughout the year but the frequency depends on the municipality.
Property assessments are important because apart from the tax rate, the assessed value of your property is what determines how much you pay in property tax each year. An assessor bases the value of the property on a variety of factors, including location, type, size, use, and comparable sales in your area. While there are parameters for assessing the value of your home, there isn’t a magic formula where x feature = y dollar amount. Sometimes assessors will come to a property as part of the assessment but in most municipalities, it’s not feasible for assessors to visit each and every home to provide in-person inspections. Instead, they usually rely on files with details about the land and structures on the land, and combine that with real estate and construction data in the surrounding area. Things like building permits for large-scale renovations or any other construction can also trigger an in-person assessment the following year.
Each province has a different body responsible for assessing the value, classification, and exemptions to find the monetary value of your property.
Challenging your property assessment
The frequency of property assessments vary across the country. In Manitoba, for example, assessments are done very two years, while in Ontario, properties are assessed every four years. You can't appeal your property tax amount, but you are able to appeal your property assessment and ask for a re-evaluation if you think that your property has been unfairly or incorrectly assessed. For most assessments, this requires some sort of additional or corrected information on the property, or additional market information on other similar properties in your area. There may or may not be a fee associated with the appeals process.
If you’re hoping to sell your home or access its equity, then you want a high property value, but since your property assessment is directly related to the amount you pay in property taxes, there’s a downside to your property value greatly increasing each time it’s assessed. Then again, if your property’s assessment value increases, it does not necessarily mean that your taxes will increase. Municipalities can also adjust municipal tax rates to address the average impact of reassessment. As well, municipal budgetary decisions may result in changes to municipal tax rates.
Property tax relief programs
There are various tax relief programs available in a number in municipalities designed to help alleviate the property tax burden on those residents with limited income. In Ontario, for example, if you or your spouse is a low-income senior or low-income person with a disability, and you experience a tax increase due to reassessment on your residential property, you may be eligible for a municipal tax relief program.
In British Columbia, a home owner grant is available, which reduces the property taxes that you’re liable for. You may be eligible for the grant if you’re younger than 65, a senior, a veteran, a person with disabilities or living with a spouse or relative with disabilities, or a spouse or relative of a deceased owner.
In Yukon, if the property being taxed is your permanent residence and you lived there for a set period of time, you can apply to the Yukon Government for a Home Owners Grant equal to 50 per cent of your taxes up to a maximum of $450.00 (75 per cent if you are over 65 years of age and up to a maximum of $500.00).
There are also relief programs that operate on more local levels.
Tax deferment programs exist in various locations throughout the country that allow you to put off paying your property taxes for a period of time. Again, there is always interest paid on the amount owing, although the interest rates of tax deferral programs can be lower than the one that’s applied when you simply don’t pay your property tax. It’s also worth noting that in some locations, the rate of appreciation in property value will cover the interest costs of the property tax deferment. But some municipalities require means testing in order to take advantage of these tax deferral programs, and not everyone will qualify.
What happens if I can’t pay my taxes?
If you don’t pay your property tax, then you will incur interest charges until you do pay. After a certain period of time has passed without you paying your property tax, a lien can be placed on your property and it can’t be sold or even refinanced until that lien is removed. If the municipality so chooses, they can also sell that lien to an investor, who then becomes responsible for collecting the debt. Ultimately, your home can be sold to pay the municipality, although it’s a long process that goes through various agencies.
If you think you’ll have difficulty coming up with the money to pay your property tax, it’s in your best interest to investigate what tax deferment programs are available in your area before you get too far in arrears.
(by Kimberley Green3 Oct 29, 2016)
CENTURY 21 Dome Realty Inc.