Your home buying process is well underway. The sellers accepted your offer to purchase. The home is officially under contract and you're counting down the days to closing. The lender pre-approved you, so buying the house is a sure thing, right?

Not quite. Nothing is certain until the keys are in your hand and the deed is recorded. There are still hurdles to get past before it's yours, and your actions between now and closing can create headaches, slowdowns and even stop the transaction.

1. Don't Make a Major Purchase

You've just found out your credit is A+. That's great news, because a new car would look fantastic in the driveway of your new home. But hang on--if you are depending on a mortgage to move in, you'd best wait until after closing to buy that car.

An increase in your debt to income ratio reduces the amount of monthly income available for your mortgage payment. If you tack on a higher car payment, the bank might decide you can't afford the home.

Using cash to purchase the car could also create a problem, since banks consider cash reserves when approving your mortgage. If you must make a major purchase before closing, talk to your loan officer before you do it.

2. Don't Change Jobs Unless It's Necessary

Lenders like to see a consistent job history. They aren't usually as nervous if you change jobs within the same field, but it's better to stay put until the house is yours.

3. Don't Give an Earnest Money Deposit Directly to a For Sale By Owner Seller

Your good faith deposit should go into a trust account. Some for sale by owner sellers don't understand that funds are not their to spend until closing.

I've heard many stories about sellers who spent the deposit money prior to closing. When the transactions didn't take place for valid reasons--such as financing or repair issues, the buyers had to fight for a refund.

Find an attorney or other neutral party who will hold the deposit for you until closing day and make sure your contract dictates what happens to the funds if the transaction doesn't close.

4. Don't Let Your Emotions Take Over

Keep a cool head during the entire home buying process, especially during and after a home inspection. Be realistic. No home is perfect, especially older homes. It's not unusual for new owners to take care of some repairs themselves. Don't let the seller's refusal to do a small repair kill the deal on a home you truly love.

On the other hand, don't fall so much in love with the house that you'll buy it no matter what needs to be done--unless you're sure you can handle it emotionally and financially. Decide what type of repairs you can realistically tackle, then stick with the decision.

5. Don't Forget to Switch Utilities

That sounds simple, but you'd be surprised how many people forget to apply for utility service at their new home. Call the utility companies as soon as you have a contract. Find out how many days lead time they need to switch the service, then get back with them when you have a firm closing date. Don't forget to discontinue services at your old home.

6. Don't Forget to Line Up Your Hazard Insurance

A no-brainer, right? But it's another often-forgotten task that buyers scramble to take care of at the last minute. Before closing, your lender will want to see an insurance binder showing you have coverage for the new home. Get it as early as possible so that closing isn't delayed.

In some locations, additional types of insurance coverage might be necessary. Talk to your lender about insurance requirements well before the closing date.

7. Don't Become Best Friends with the Seller

I'll get some flack on this one. It's great to be friendly, but don't get into too many long discussions with the sellers, because personality conflicts often cloud judgments.

Remember, this is their home. You're no doubt excited about moving in, and if you didn't like the house you wouldn't have offered to buy it. But you'll make changes--everyone does. A casual statement about "ripping up that ugly carpet" might be hurtful enough to keep the seller from negotiating with you about repairs or other issues that crop up.

8. Don't Panic if the Appraisal Comes in Low

At least not at first. There are some things you (and your agent) can do to correct the problem. Study your options.

9. Don't Go It Alone

If you're working with an agent, it's the agent's duty to track many of the day to day details that involve the lender, the seller, or the seller's agent. Be sure your agent schedules a final walkthrough just before closing.

10. Don't Ignore Lender Requirements

Know what is expected of you and take care of it. For instance, a Certificate of Eligibility is required to move forward on a VA loan. That's something you must handle yourself. Answer lender questions and provide required paperwork as quickly as possible--moving into your new home depends on it.

• Lawyer's Fees
  $500- 650
• Land Transfer Tax
  $1,000 + - (refer to the chart)
• Mortgage Appraisal
  $200
• Mortgage Application and Processing Fees
  $185
• Home Inspection
  $300
• New Home Warranty Program premiums
  $600
• Land Survey or
  $750 or
• Title Insurance
  $250
• CMHC fees
  $3,000 + - (added to mtg*)
• Closing Adjustments
  $ ask your attorney
• Connection Charges
  $200 + -
• TOTAL POSSIBLE COSTS
  $ what applies to you?

Closing Costs When Buying A Home
Closing costs are often the last thing a person thinks of when buying a home. While closing is the joyous moment the home becomes yours, the costs can be surprisingly aggravating.

(A number of these costs vary by Province, and many change frequently)

MORTGAGES -

Everyone's mortgage needs are unique, that's why you should know the solutions to suit your budget, circumstances, needs and goals. Ask your mortgage specialist about competitive mortgage offers and a mortgage that's tailored to your needs.

1. Purchase Price

   The starting point in your calculation...if you're like the average first-time homebuyer you'll need a mortgage for the majority of this!

   On a high-ratio insured mortgage (mortgages above 75% of the purchase price), the mortgage insurer (CMHC or GE Capital) charges a fee of $165-$185 for applying and processing the file, as well as appraising the property. On new homes, this fee drops to $75.

   If you have excellent credit and you are a first time homebuyer, you could qualify to buy your first home with 0 down payment. Ask your mortgage specialist.

   If you are using the services of a Mortgage Broker (different from a bank) ask up front what their fees are!!!

   Also remember, banks will compete for your business so make sure you are getting the best rate possible. Also remember, there are no stupid questions!

2. Legal Costs and Disbursements:

   A lawyer or notary will charge a fee for their professional services involved in drafting the title deed, preparing the mortgage, and conducting the various searches. The disbursements, on the other hand, are out-of-pocket expenses incurred, such as registrations, searches, supplies, etc., plus G.S.T. This money is due on closing day unless you have made optional arrangements with your lawyer.

3. Land Transfer Tax:

4. Home Inspection Fee:

   A professional inspection of the home, top to bottom, is for the benefit of the buyer, therefore, that's who absorbs the cost. A typical home inspection can cost anywhere from $250-$350, but our opinion is that they are well worth the investment. New homebuyers may not worry about it, but a definite must for buyers purchasing properties older than 5 years. When hiring a home inspector, make sure the inspector has liability insurance, just in case a mistake is made.

5. Provincial "New Home Warranty Program" premiums - New Homes Only!

   A third party (provincial) warranty program between a builder and a buyer. With the exception of Ontario and Quebec, membership in such a program is voluntary for the builder. Through these programs, your home is guaranteed against defects for at least one year. All homes with a high-ratio insured mortgage (greater than 75% loan to value) must be enrolled in such a program. The cost to the purchaser for this warranty is approximately $600 and should the builder default or fail to build to an agreed-upon standard, the fund will finish or repair the deficiencies.

6. Appraisal Fee:

   The appraisal provides the lenders with a professional opinion of the market value of the property. This cost is normally the borrower's responsibility and it ranges as low as $100 for a drive-by appraisal to as much as $200 for a full appraisal, and the average being $175, plus G.S.T. Occasionally, the costs could be slightly higher for larger, custom-built homes, or homes in remote parts.

7. Home Inspection

   A report commissioned by a property owner or purchaser, usually to verify the condition of a property prior to the "firming up" of a Real Estate transaction. The scope and detail may vary, but most reports indicate the specific problem and the cost to repair. Unfortunately, no licensing is required, and this service is not specifically regulated other than by general consumer protection legislation. The best safeguard against inadequate work is to ask for the resume of the Inspector, and if possible check references from previous customers.

8. Land Survey Fee Or Title Insurance Fee:

   A recent Survey of the property is usually required by the lender, and if one is not available, it normally costs anywhere from $600-$900 for a new survey. In lieu of the Survey, most lenders today will accept Title Insurance, at a much lower price of approximately $225 - $250.

   Title Insurance:
   This protects you from any unpleasant revelations about your property's history that might crop up in the future. Unless you pay for a survey, it's difficult to ascertain a comprehensive history of your property. In order to deal with potential errors or omissions in the public registry or secret heirs to the land, most new homeowners buy title insurance. For a typical residence in Peterborough, for example, the cost for this insurance is $225. The fee depends on two factors. The first is whether the property is urban or rural; title insurance costs more out in the country because there's a greater chance that the property may contain an undisclosed structure, such as a well or a septic tank. The second factor depends on whether it's a single residence or a multiple-family dwelling (such as an apartment); the cost is more in the latter case.

9. Connection Charges:

   Some local utility companies (hydro, gas, oil) charge a fee on closing to connect new buyers up to their service. More normal, however, is an extra charge on the first billing.

10. Property Tax and Prepaid Utilities Adjustments:

    An estimate should be made for closing adjustments for bills that the seller has prepaid such as property taxes, utility bills, and other charges. Any bills after the closing date are the purchaser's responsibility. Your lawyer/notary will let you know what they are exactly once the various searches have been completed. Likewise, if the seller is paying month to month, chances are there is a very small or no adjustment to be made.

11. GST

    Although most residential re-sale homes are exempt from GST, most services involved with the transaction will be subject to GST. This includes lawyer's fees, appraisals, processing fees, insurance, moving costs, real estate fee, home inspection, survey or title insurance, etc. Substantially renovated houses are subject to GST if purchased from the builder/renovator. Approximate cost: Varies

    On new homes only. Fortunately the 7% is almost without exception paid by the builder as it is a 'built-in cost added to your home when being built. The builder will ask you to sign a form usually with your lawyer, allowing him to recoup or apply for some of the 7% back.

12. Fire Insurance:

    All mortgage lenders will require a certificate of fire insurance to be in place from the time you take possession of the home. The amount required is generally at least the amount of the mortgage or the replacement cost of the home. This cost can vary on the property size and extras being insured, as well as the insurance company and the municipality. The cost can vary anywhere from $250-$600 for most properties.

13. Moving Costs

    Whether the move into your new home is a do-it-yourself affair or you hire movers, there will certainly be costs involved. If you plan to move during the peak spring/summer months, you should contract for service two to three months in advance if possible. Now, if you are buying or selling with Grant Hayes and Jay Lough Hayes, we offer to lend you our FREE moving trailers.

    
    
14. New Home Costs

    Most new home owners will likely need to buy certain items early on - kitchen appliances, tools, gardening equipment, cleaning materials, perhaps some new furniture, carpets or curtains. It's a good idea to tally up the costs of items you think you'll need in the short-term and factor these expenses into your initial costs. We give all our customers a Brick Certificate allowing you special Brick discounts.

15. Forwarding your mail:

    You've made a point of apprising the important people in your life -- family, friends, employers, the bank, the utilities, and your credit card company -- of your new address. But you're bound to forget someone. To ensure you don't miss any crucial mail, you should get Canada Post to forward mail sent to your old address to your new residence. You can sign up for the service online or at any post office. The cost is about $30 for six months, but peace of mind is priceless

Quick Reference


To make it easier to understand the process of buying a home, we've put together of list of common mortgage and home-buying terms.

If you still have questions, we're here to help you. Just call Grant or Jay. We will be happy to help you 24 hours a day. 705-748-4056

• Amortization
  The number of years that you take to fully pay off your mortgage (not the same as your mortgage term). Amortization periods are often 15, 20, or 25 years long.
• Appraisal
  The process of determining the lending value of a property. There is usually a fee to have an appraisal done.
• Assuming a mortgage
  Taking over the obligations of the previous owner's (or builder's) mortgage when you buy a property.
• Buy down rate
  This is the portion of the interest rate on a buyer's mortgage that you assume when they buy your home. If you're selling your home and the prospective buyer doesn't like the interest rate on their mortgage, you can offer to add a certain percentage of it onto your existing mortgage. At CIBC, you can add a maximum of 3%.
• CMHC - Canada Mortgage and Housing Corporation
  A Crown corporation that administers the National Housing Act for the federal government and encourages the improvement of housing and living conditions for all Canadians. CMHC is one potential source of mortgage insurance for high-ratio mortgages.
• Capped rate
  An interest rate with a pre-determined ceiling - usually associated with a variable-rate mortgage.
• Closed mortgage
  A mortgage that has a fixed interest rate (usually lower than an open mortgage rate) and a set, unchangeable term. You cannot pay off a closed mortgage before the agreed end date without paying a penalty.
• Closing costs
  Costs that are in addition to the purchase price of a property and which are payable on the closing date. Examples include legal fees, land transfer taxes, and disbursements.
• Closing date
  The date on which the sale of a property becomes final and the buyer takes possession of the property.
• Convertible mortgage
  A mortgage that you can change from short-term to long-term, depending on your financial needs.
• Down payment
  The money that you pay up front for a house. Down payments typically range from 10%-25% of the total value of the home.
• GE Capital Mortgage Insurance Company of Canada (GEMI)
  A private mortgage insurance company. One potential source of mortgage insurance for high-ratio mortgages.
• High-ratio mortgage
  The mortgage you obtain when you have less than 25% of the total purchase price to put down as your down payment. This type of mortgage must be insured (through sources such as CMHC or GEMI).
• Home insurance
  Insurance to cover both your home and its contents in the event of fire, theft, vandalism etc. (also referred to as property insurance). This is different from mortgage life insurance, which pays the outstanding balance of your mortgage in full if you die.
• Inspection
  The process of having a qualified home inspector identify potential repairs to the property you are interested in and their estimated cost.
• Interest adjustment
  This is the amount of interest due between the date your mortgage starts and the date the first mortgage payment is calculated from. Sometimes there is a gap between the closing date of your home purchase and the first payment date of your mortgage. Let's say that the closing date on your new house is August 10th - but your mortgage payments are on the 15th of each month (so your first payment is calculated from August 15th and paid on September 15th). That leaves four days (August 10th to 14th) that are not accounted for in your first mortgage payment. Interest adjustment is the extra payment that makes up for these four days; the payment is generally due on your closing date. You can avoid all this by arranging to make your first mortgage payment exactly one payment period (e.g., one month) after your closing date.
• Land transfer tax
  A tax that is levied (in some provinces) on any property that changes hands.
• Legal fees and disbursements
  Some of the legal costs associated with the sale or purchase of a property. It's in your best interest to engage the services of a real estate lawyer (or a notary in Quebec).
• Lump sum payment
  An extra payment that you make to reduce the amount of your mortgage. This is the same as pre-paying, which you cannot do if you have a closed mortgage.
• Mortgage
  A loan that you take out in order to buy property. The collateral is the property itself.
• Mortgage life insurance
  This form of insurance pays the outstanding balance of your mortgage in full if you die. This is different from home or property insurance, which insures your home and its contents.
• Mortgage rate
  The percentage interest that you pay on top of the loan principal. For example, you may take out a mortgage of $100,000 at a rate of 12%. Your monthly payments will consist of a portion of the original $100,000, plus 12% interest.
• Moving expenses
  The cost of hiring packers, movers or renting a van.
• Offer to Purchase
  A legally binding agreement between you and the person who owns the house you want to buy. It includes the price you are offering, what you expect to be included with the house, and the financial conditions of sale (your financing arrangements, the closing date, etc.).
• Open mortgage
  A mortgage which you can pay off, renew or refinance at any time. The interest rate for an open mortgage is usually higher than a closed mortgage rate
.
• Porting
  Transferring an existing mortgage from one home to a new home when you move. This is known as a "portable" mortgage.
• Pre-approved mortgage certificate
  A written agreement stating that you will get a mortgage for a set amount of money at a set interest rate. Getting a pre-approved mortgage allows you to shop for a home without worrying how you'll pay for it.
• Prepaid property tax and utility adjustments
  The amount you will owe if the person selling you the home has prepaid any property taxes or utility bills. The amount to reimburse them will be calculated based on the closing date.
• Pre-payment
  Repaying part of your mortgage ahead of schedule. Depending on your mortgage agreement, there may be a penalty for pre-paying.
• Property survey
  A legal description of your property and its location and dimensions. Your mortgage lender usually requires an up-to-date survey. If not available from the vendor, your lawyer can obtain the property survey for a fee.
• Refinancing
  Increasing the amount of your current mortgage, at a new interest rate. The term of the new mortgage must be equal to or greater than the term remaining on your current mortgage.
• Renewal/renewing
  Once the original term of your mortgage expires, you have the option of renewing it with the original lender or paying off all of the balance outstanding.
• Sales taxes
  Taxes applied to the purchase cost of a property. Some properties are exempt from sales tax (GST and/or PST), and some are not. For instance, residential resale properties are usually GST exempt, while new properties require GST. Always ask before signing an offer.
• Service charges
  The extra costs incurred when hooking up hydro, gas, phone, etc. to a new address.
• Term
  The length of time during which you pay a specific rate on the mortgage loan (i.e., the number of years in your mortgage contract). This is different from the amortization period. A mortgage is usually amortized over 20-25 years, with a shorter term (typically 6 months to 5 years). After the term expires, the interest rate is usually renegotiated with the lender (your bank, for example).
• Variable rate mortgage
  A mortgage with an interest rate that changes with the market. The rate changes each month, meaning that the portion of your monthly payment that goes towards interest may go up or down each month. However, your total monthly payment

Land Transfer Tax

Purchasers in most large Canadian centres can add Land Transfer Taxes to their list of closing costs.

Unless you live in Alberta, Saskatchewan, or rural Nova Scotia, land transfer taxes (or property purchase tax) are a basic fact of life. These taxes, levied on properties that are changing hands, are the responsibility of the purchaser. Depending on where you live, taxes can range from a half a per cent to two per cent of the total value of the property.

Many provinces have multi-tiered taxation systems that can prove complicated. If you purchase a property for $260,000 in Ontario, for example, .5 per cent is charged on the first $55,000, 1 per cent is charged on $55,000 - $250,000, while the $250,000 - $400,000 range is taxed at 1.5 per cent. Your total tax bill? $2,375.00.

The following chart illustrates Land Transfer Taxes by province.

• BRITISH COLUMBIA
  Property Purchase Tax
  • Up to $200,000 X 1 % of total property value
  • >From $200,000 up X 2 % of total property value
• MANITOBA
  Land Transfer Tax
  • Up to $30,000 N/A
  • >From $30,000 to $90,000 X .5 % of total property value
  • >From $90,000 to $150,000 X 1 % of total property value
  • >From $150,000 up X 1.5 % of total property value
• ONTARIO
  Land Transfer Tax
  • Up to $55,000 X .5 % of total property value
  • >From $55,000 to $250,000 X 1 % of total property value
  • >From $250,000 to $400,000 X 1.5 % of total property value
  • >From $400,000 up X 2 % of total property value
• QUEBEC
  Transfer Tax
  • Up to $50,000 X .5 % of total property value
  • >From $50,000 to $250,000 X 1 % of total property value
  • >From $250,000 up X 1.5 % of total property value
• NOVA SCOTIA
  Land Transfer Tax
  • Halifax Metro - 1.5 per cent on total property value
  • Outside Halifax County - Check with local municipality.

Choosing a Neighbourhood
It is important that the neighbourhood you choose to live in is well suited to you and your family. The following is a list of considerations and possible problem areas:

Environment
The quality of air, water and soil is a top concern as a polluted neighbourhood can be detrimental to both your health and property value. Ask your real estate agent, neighbours and local media about any known environmental issues in the area.

Appearance
The home you are considering may be tidy and attractive inside and out, but how does it compare to the surrounding area? Explore the neighborhood, keeping an eye open for signs of neglect (overgrown lawns, houses in need of paint, trash and junked appliances littering yards). No matter how diligent you are in the upkeep of your property, a run-down neighbourhood can drive your property value down.

Crime rate
Check with the local police department to find out if the home you are considering is in a safe neighbourhood. Police may be able to provide statistics regarding break-ins and other crimes.

Schools
If you have children, the proximity and quality of schools is an important consideration. Talking to neighbours with school age children can be helpful. In some areas schools will provide data (such as average test scores) that can aid you in determining a school's quality.

Transportation
Convenient access to public transportation and/or major highways can mean the difference between a pleasurable and not-so-pleasurable commute to work. Use the links below to find out more.
Peterborough Public Transit
Trent Express Bus Route

Amenities
Amenities like a grocery store, parks, recreational facilities, post office, dry cleaner and a doctor's office can make life easier if they are located nearby.

Property Values
By researching the selling prices of homes in over the past decade or so, you may be able to predict future trends. Your real estate agent may be able to provide helpful data.

Utilities
Avoid unpleasant surprises by finding out what utility costs are before you decide to purchase. Fees for water, electric, cable tv, phone and gas vary greatly by region.

Noise and Nuisances
It can be hard to get an accurate impression of a neighbourhood in just one visit. Be sure to return to the neighbourhood at different times of the day and night. Listen for traffic noise, barking dogs, low-flying airplanes and any other noises that could bother you as a resident.