Home Buying Guide in Canada
There is a lot you have to consider
When your new condo or house needs financing, there is a lot you need to be mindful of. To obtain a mortgage, you will need to be qualified ahead of time. You’ll also have to make some crucial financing choices, as well as select a lender down the road.
Here are the Steps to Buying a House or Condo:
This section is at the beginning for a reason – the initial steps to buying a house or condo in Toronto is to determine the amount of a loan a bank can potentially lend you. To get a mortgage pre-approval, the lender will assess your debts, income, and down payment. It is prudent to thoroughly optimize your pre-qualification before looking at properties, and the best way to do so is to receive a pre-approval for a mortgage. If you are pre-approved, it will be articulated as such in writing (your pre-approval will be valid for 3 or 4 months). You will be required to show proof of income and have good credit history. If you are pre-approved, you will receive a guaranteed interest rate.
A pre-approval doesn’t guarantee the issuance of a loan. Lenders need to feel confident that the money they are giving you to buy a home matches the value of a property. Financial institutions in the city of Toronto ask for home appraisals by independent parties prior to the issuance of mortgage funds.
Receiving a pre-approval will tell you how much money you can expect to receive from a lender. In having such a figure, you’ll have a price range to work with when searching for Toronto or GTA homes and your house hunting endeavors can be limited to homes within your reach. Pre-approvals also bypass the uncertainty and risk of financing after you discover the home of your dreams.
The intimidation of mortgages is understandable, particularly for new homeowners who are searching for the cheapest place to buy a house in Canada. After you receive mortgage pre-qualification, you’ll have some fundamental choices to make. These choices must be made before possession of a condo or house can be taken, and they involve interest rates, amortization, mortgage type, and mortgage terms. Keep reading to learn what these terms mean when buying a house. Feel free to use our convenient mortgage calculator for an estimate of what your monthly payments could potentially be.
Amortization and Mortgage Term
The amortization period and mortgage term determine the amount of funds available to you (and subsequently, the cost of the property you’ll be able to purchase). These two factors also establish how much you can expect to pay each month.
There are not very many people who can repay a whole mortgage principal within 5 years, let alone six months. To achieve this, you would have staggering monthly payments. To provide you with assistance, mortgage payments are calculated over a longer period – sometimes by as much as a quarter-century! You aren’t being lent money for one 25 year term – lenders are simply calculating a payment timetable to give you an idea of the length of time necessary to repay not just the principal, but the interest, too. Your mortgage will likely need to be renewed a number of times when the amortization is taking place. You can always adjust it based on your financial circumstances or market conditions. The longer an amortization period is, the lower single payments are – mind you, the longer the amortization is the more interest you will pay throughout the amortization period.
A mortgage term refers to the duration a lender will issue funds to you for – they can last from 6 months or as long as 5 and sometimes 10 years. At the end of the term, any outstanding amount is to be paid in full. Exceptions are made when new financing and terms are arranged.
It can be quite a challenge to choose a term for your mortgage when buying a house. You need to be somewhat knowledgeable about marketplace trends, in addition to knowing how much risk you are willing to take. If you select a six-month term, and there is a drastic increase in interest rates within that period, would it still be feasible for you to afford a house or condo?
Many mortgage payments are comprised of 2 aspects: interest and principal. This type of payment is called a blended mortgage. Every payment made minimizes the balance owing on a mortgage – a payment portion is credited towards the principal. As time progresses, your payments for portions that minimize the principal balance will go up. The quicker the outstanding balance can be paid down, the less overall interest you will need to pay. A number of approaches can be used to repay your mortgage quicker. Some of them include payment acceleration (for instance, making biweekly payments rather than by monthly payments; or making 26 payments a year rather than 24) and making mortgage principal payments/pay-downs in one lump-sum. Your lender will be happy to develop a suitable strategy that accommodates your unique situation.
When buying a house another important consideration is interest rates. Interest rates substantially influence the amount of money you pay in total for your property. This includes monthly payments, as well as payments made over your mortgage’s lifetime. Interest is defined as the price of borrowing funds. As the economy fluctuates, so too, do interest rates. An interest rate established at the start of a term can make a big impact on what your monthly mortgage payments will be. There are a couple of fundamental interest rate types used for mortgage products: variable-rate and fixed-rate:
Variable-rate mortgage – you have a couple of variable-rate mortgage types to choose from when buying a house. With the initial type, the portion of payments you make each month fluctuate with a financial institution’s prime interest rate. If there is an increase in rates, there will be increases in your payments, too. Likewise, if there is a decrease in rates, then your monthly payments will be lower. The other kind of variable-rate mortgage features an ongoing payment. However, the amount of money allocated to principal repayment (as opposed to the interest) of the mortgage is on par with the prime interest rate of the bank. If there are interest rate increases, payments made on the principal will be reduced while your interest payment amounts will go up.
Fixed-rate mortgage – basically, this entails being locked into one interest rate that will stay the same over your mortgage term. This approach fixes the portion of monthly repayments made towards the principal and interest in form of a fixed payment. Fixed-rate mortgages are ideal in economies where interest rates rise, since there is no risk of making larger interest rate payments on your part.
Conventional mortgages – Conventional mortgages are appropriately named since they’re the most popular kind of mortgage. A lender will issue you as much as 80% of the purchase price or appraised value of a home (choosing the lower of the 2 options). You would need to use your own funds for the remaining 20%, which will be the down payment on the mortgage.
High ratio mortgage – If you don’t have a down payment of at least 20% that is necessary to obtain a conventional mortgage, high ratio mortgages can get you as much as 95% of the property’s purchase price or appraised value. With that said, because you will be borrowing much more than 80% (which is standard), the government will insist on insurance for the mortgage against default. You will be responsible for paying the insurance cost. The amount will likely be a small percentage of the mortgage total, which will be added to its principal.
Home equity line of credit HELOC – In this scenario, instead of getting a conventional or high ratio mortgage, the lender will register a line of credit against the deed of your property. The maximum amount that most lenders will lend on a HELOC will be 65% of the value or the purchase price of the home (whichever is lower). Some property owners will opt for this option since it offers lower monthly payments resulting in higher cash flow on their investment properties – minimum payment on HELOC products is generally interest only. For example, if you borrow $300,000 in the form of a HELOC at 3% interest rate, your monthly payment will be 300k x 3% = $9000/year making the monthly payment $9000/12= $750/month. If we were to calculate the monthly payment on the same amount for a traditional mortgage at the same interest rate and a 25-year amortization, the monthly mortgage payments would be $1,357/month.
When buying a house in Toronto, there are all kinds of mortgages and lenders available, such as the following:
- Your bank: they hold onto your credit cards, bank accounts, and investments. If all of these things are in good standing, banks are more inclined to provide you with a decent rate.
- Mortgage brokers: a mortgage broker has connections to several lenders. Brokers will speak to lenders representing you in order to secure the best terms and mortgage rates possible. For the most part, banks pay broker fees, so this is an optimal approach to shop comparatively without personally doing all the running around.
- Laith Al-Masri with RBC: this bank has competitive mortgage terms and rates, and they don’t work with brokers. Laith has provided service better than anyone we have ever come across, and he is available when you need him (as opposed to the average mortgage broker working 9-to-5 hours). If you happen to use Laith, be sure to let him know that you were referred by Big City Realty.
When buying a home in Canada, be mindful that not every choice must be made prior to your search for a new home in Canada. The most important step is to get pre-approved by a lender – when you are pre-approved, you can start searching! Information about the rate, term, and your lender of choice can be determined (and altered) after the purchase – and right up until just before the closing of your sale (which is the day the home officially becomes yours). The more knowledgeable you are about your choices, the more prepared you can be on that day.
How the Team at BCR Can Assist With Financing
- Keeping it real: when buying a house in Canada, we will assess financial considerations and coordinate them with what you’ll be able to realistically afford. Strategies will then be developed to aid you in getting what you can afford.
- Surprise-free: we will go over homeownership costs, guiding you through financing and mortgage waters.
- We have the best partners: we will connect you with the best mortgage brokers and lenders in Toronto.
When buying a property, being mindful of what you want and need in your house or condo is important. What do your needs, wants, and repellents entail? Do you require a certain number of bedrooms? What type of exterior space are you looking for? Will your home need certain appliances, countertops, and flooring? You won’t be able to obtain what you’re looking for if you aren’t sure what it is. Obviously, location is a crucial aspect – is there a neighbourhood in Toronto that you feel comfortable in?
Keep in mind that Toronto is always a hot real estate market, so compromise will be a crucial aspect of this process. Just about everyone must make compromises on things, and it tends to boil down to a quartet of things: price, location, finishes, and size. What do you consider important? Do you prefer living in a large house or close to downtown? Do you intend to buy a house at an inexpensive rate and conduct renovations on it on your own? Or do you have the budget to pay for a house that’s already renovated? When buying a home in Canada are you open to residing on a street full of hustle and bustle, or do you have the means to live in a residential area close to schools?
Buying a condo or house will probably be one of the biggest things you will ever buy. Worry not, however – it isn’t something you must do by yourself. Begin by selecting a Realtor in Toronto or the GTA who works for YOU exclusively. You will also require a lender who can help you navigate your way through financing choices. An attorney will be necessary for the legalities of your purchase. There’s a slew of experts waiting to help you out there, all of which have unique specialties. Ask family and friends for recommendations, conduct your due diligence, and interview a variety of candidates who can help you.
94% of people in Canada use the internet to search for potential homes. Although there are an assortment of real estate sites to choose from, here are some resources you may want to consider using:
- Realtor.ca: this is a site the Real Estate Association owns. It puts together properties on the market using a system run by agents –the Multiple Listing Services, a.k.a. MLS. The website seems to be on a 24 to 48-hour delay, based on what’s taking place on the market. Nonetheless, realtor.ca is a helpful tool to see what’s available.
- Customized listings: you can ask a Realtor to send you listings of Toronto condos and houses that are currently available based on the criteria you give him or her. Ask the real estate agent to connect you to Collab, as doing so, you will have the ability to control your searches. You’ll get notifications whenever new listings are available instantly based on your search criteria.
- BCR search tool: though this option is a bit biased, the BCR search tool aggregates condo and house listings straight from MLS every two hours or so. It contains much more details than what you will see on realtor.ca. It is easy to create a customized search that will provide listings based on your own criteria. As such, you won’t have to worry about missing listings.
Suggestions for Browsing Homes on the Internet
- Be open-minded. Pictures do not always indicate what the interior actually resembles.
- Don’t believe everything you read. If you see something along the lines of “ready for a personal touch,” odds are the property will need plenty of work. If you see a listing that says something like “dream home in Forest Hill for less than $600,000,” odds are the home is in the Forest Hill vicinity (as opposed to actually in Forest Hill).
- Don’t forget – sale price and asking price are two different things. The Toronto real estate market is hot, and as such, most homes tend to sell for much more than their original listing price.
- If you are looking for a condominium, be mindful of what the maintenance fees cover, as fees vary for each building. Low maintenance fees might result in higher monthly expenses if electricity and heat aren’t included.
- Figure out how MLS listings are to be read –the acronyms SUMS or ELF may be confusing if you’ve never been on the site before.
Here is your chance to feel out all the neighbourhoods in Toronto. Feel free to refine your list selections and make queries. When buying a house a selection list can be beneficial in determining which properties are worth visiting. Some potential homeowners have an intuition about their ideal home. Granted, they’ll be swayed by a home that satisfies their wants and needs. Nonetheless, the potential of intuition shouldn’t be underestimated.
Homes on the market can be visited either during an open house or with a Realtor. When buying a new home in Canada, be mindful that not every property hosts open houses. As such, an agent may be your only way of seeing a condo or house. With this method, you schedule a certain time to see a place, as opposed to an open house containing a designated window for mass visits.
Suggestions for viewing condos and houses in person when buying a house:
- Have a plan: the city of Toronto is quite big, meaning that it is full of unique neighbourhoods. Concentrate on visiting neighbourhoods one-by-one when making your rounds. Factor in the time necessary for parallel parking before you visit a home.
- Carpool: if you are visiting condos and houses with a Realtor, they should be the ones behind the wheel. That way, you can concentrate on taking in the neighbourhood your potential home is in. If you are attending an open house, consider biking or walking to it. Finding parking when an open house is in the area can be time-consuming.
- Wear footwear that’s easy to slip on and off: you will be slipping your shoes on and off constantly, so bypass the trouble of tying up your laces each time. Make sure you have socks on when your shoes come off.
- Assess the neighbourhood, not just the home: when buying a house go for a ride around the vicinity. When buying a home in Canada, figure out where the schools, grocery stores, and parks are. Take a stroll around the block and see what your neighbours are like. Visit a nearby café, pub, or restaurant close to the home.
- When house hunting, timing should be varied: while things tend to look better under the sun, it is crucial to see what the condo or house (in addition to the neighbourhood) looks like at night, too.
- Take the good with the bad: not every neighbourhood is perfect, so you will need to find a way to figure out what the potential drawbacks are. If the home you have your eye on is situated near railroad tracks, determine when trains are most active. If you’re considering buying a condo close to Queen’s Quay, take a walk there in the peak of tourism season (and when it tends to be filled with rollerbladers, bikers, and people on foot the most).
- Take pictures and notes: it is easy to forget individual aspects of condos or houses when you’re looking at multiple homes. When buying a home in Canada, we provide clients with iPads so that they are able to take photos and notes of each property they have visited. Be mindful that you probably won’t have permission to take pictures of people’s households, but it does happen. If you do take pictures, refrain from sharing them on the internet.
- Overlook the grossness: you may be taken back by the ways people live. However, someone’s outdated preferences, insufficient housekeeping, or poor decorative style shouldn’t influence your opinion.
- Don’t get attached to anything belonging to the seller: this is more prevalent than you may think. The way the condo or house looks with someone else’s things in it may not look the same with your furniture. When buying a home in Canada, visualize what the place will look like after you have styled it.
How the Team at BCR Can Be of Assistance When You Are Shopping Around For a Home
- When buying a property we can help you find what you’re looking for with the strongest potential for a return on investment. We will collaborate with you to assess your wants, needs, and essentials. We will then put together a concept of what the investment property or home of your dreams entails.
- We will stay abreast of properties on the market in the neighbourhoods of Toronto you’re interested in. You will be sent listings every day of what’s out there so that you can see what’s happening (and be updated about any relevant changes).
- We will accommodate your schedule when you’re on the hunt for a condo or house. We will bring you to any property on the market (and occasionally, properties that are not)!
- We can help you preserve time. We will send you previews of what to expect from a property before you even visit it, saving you a lot of hassle and time. We can visit properties on your behalf and give you a live stream of what we see. Alternatively, we can record video for you to check the place out from the comfort of your own home.
At some point, your search for a home will come to a stop. You might have located the perfect home that fulfills your needs and wants. The price is within your budget, and you feel a connection to it. When buying a home in Canada, the process of making an offer can be both nerve-wracking and exciting. We will start things by putting together an Agreement of Purchase and Sale – a document that is legally binding. It chronicles particulars of the deal, including the amount you’re willing to pay for the home, inclusions you desire (dryer/washer, dishwasher), when you want the deal to close by (a.k.a. your intended date of possession), and conditions that must be met to secure the deal. Once your offer has been submitted, the seller has the option to either reject it, accept it, or respond with a counteroffer. When these negotiations are happening, you might have to make a few compromises, but a qualified Realtor will endeavor to get what you’re asking for. If you find yourself a part of a bidding competition, ensure you know how to handle yourself and make an offer too enticing for a seller to pass up.
Conditions are described as necessities outlined in the Agreement of Purchase and Sale which need to be fulfilled in order for a deal to be accepted. Your offer should include financing terms or conditions that allow your attorney to go over the legal aspects of the home. A property inspection will also be a part of those conditions. From there, a deposit will need to be submitted. In the city of Toronto, deposits tend to be 5% of the purchase price. This amount is held in trust and released when the sale closes. After the conditions are acknowledged, the agreement will be solidified. All you have to do is find out when the closing date is. In the meantime, start boxing your things up!
How the Team at BCR Help You Get the Home of Your Dreams in Ontario Through Negotiation
- We have the best negotiation skills in the business.
- When it’s time to negotiate, we will protect you. We do not succumb to intimidation or pressure, nor will we make any moves that you don’t feel comfortable with.
- We will go over any fine print meticulously. There won’t be any mysteries involved with legal obligations and financing. We will look out for your best interests. Some people see us as a shield of armor that can be worn in battle (in this analogy, the battle would be the purchase of your property).
After a deal is firmly secured (the seller and buyer have reached an agreement on terms and price; a deposit has been submitted, and there aren’t any more conditions that need to be waived), the process of closing begins. During this time, you will need to stay connected to your attorney and lender – both of them will require plenty of details (and your money, of course).
The three days before possession becomes official are quite critical. You will need to issue a certified cheque for the remaining balance, sign documentation, and pick up the keys to your new home in Canada.
Closing is described as the period where possession and ownership of home are transferred to you from a seller. It commences once all financial and legal commitments have been addressed. Purchase closing is a group effort: your attorney, lender, and yourself will be part of the deal’s closure.
When you’re going through the motions of buying a home in Canada, you will need to determine how much it will set you back financially. Your accountants, Realtor, and lawyer can be of assistance in determining cost estimates. You can anticipate paying for the following:
- Down payment (minus any amount that has already been issued by way of deposit).
- Taxes for land transfer.*
- Fees for lenders, if applicable (application fees, appraisal fees, and the like).
- Adjustments (a seller might have utilities, prepaid taxes, and similar expenses owing after the date of closing that must be reimbursed during closing.
- Legal expenses (applicable taxes may apply).
*If you purchase property in Toronto, a municipal land transfer tax will need to be paid, along with whatever the land transfer tax is in the province of Ontario.
Your attorney will calculate any final amounts owing. You must present your attorney with a cheque (certified) for the complete amount prior to taking possession of the property.
Be mindful that there are a number of programs offered by the government that can help you save a lot of money in closing costs when selling real estate for the first time (we’re talking thousands of dollars).
Locating the perfect home is an important move. When buying a property we can help you simplify the process from start to finish.
We are the team at Big City Realty. Hundreds of homebuyers in Toronto like you have been assisted by us. We work collaboratively, and as such, numerous styles and skill sets are at our disposal. Each member of the team has a unique schedule, meaning someone is working for you around the clock. We will match you with a suitable agent who can help you obtain what you’re looking for when buying a house in Ontario.
- We will ensure that you purchase a home right for you.
Scary basements and dark corners do not bother us. We aren’t afraid to look in every nook and cranny because we understand what separates bad houses from good ones. Our objective is to safeguard buyer interests above everything else. When buying a house in Ontario, feel free to capitalize on our expertise in houses, condos, and neighbourhoods.
2. You will not pay more than you need to.
Is now the best time to make a purchase? Are there neighbourhoods in Toronto that are particularly hot right now? Will the home you have your eye on be a worthwhile investment? We understand the Toronto real estate market, and we aren’t afraid to tell you the truth. You can make decisions based on our established experience – each agent at BCR is within the top 5% of Realtors in the city. Best of all, our comparative three-way analysis helps you establish fair market value when buying a new home in Canada.
- Our negotiation strategies are advanced, which is beneficial in helping you obtain your dream home without breaking the bank.
We understand what is necessary to get the place you want. Luck isn’t enough. An offer can be made with confidence using our:
- Negotiation experts (who are certified).
- Strategies to win bidding competitions.
- Our attention to detail keeps you protected legally.
- The due diligence we perform before any offers are made is extensive.
- We endeavour to produce flawless documentation.
- We provide progressive legal expertise and can help you decipher things in fine print.
- We ensure that you are always aware of what’s happening.
- Locating the home of your dreams is only the start for us.
From the moment you search for a home to well after you moved into it, you’ll reap the rewards of our associations with:
- Mortgage brokers and lenders
- Home inspectors
- Home service experts