omebuying Step by step A consumer guide and workbook 1 …… 2 · 2004. 1. 3. · Homebuying Step...

omebuying

Step by step

HA consumer guide and workbook

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This book, including any resources recommended, is provided forgeneral informational purposes only. Any reliance on, or actiontaken on, such information is at the sole risk of the user. This bookis not a substitute for professional advice.

Canadian Cataloguing in Publication Data

Main entry under title:

Homebuying step by step: A consumer guide and workbook

Prev. publ. under title: The complete guide to buying your home.

Issued also in French under the title: L’achat d’une maison étape par étape (61143).

ISBN 0-662-26711-7

Cat. no. NH15-144/1998E

1. House buying—Canada—Handbooks, manuals, etc.2. House buying—Canada—Costs—Handbooks, manuals, etc.3. Home ownership—Canada—Handbooks, manuals, etc.I. Canada Mortgage and Housing Corporation

HD7287.55H65 1998 332.7’22’0971 C98-980136-5

© 1998 Canada Mortgage and Housing Corporation. All rights reserved. No portion of this book may be

reproduced, stored in a retrieval system or transmitted in any form or by any means, mechanical,

electronic, photocopying, recording or otherwise without the prior written permission of Canada Mortgage

and Housing Corporation. Without limiting the generality of the foregoing no portion of this book may be

translated from English into any other language without the prior written permission of Canada Mortgage

and Housing Corporation.

Printed in Canada

Produced by CMHC

CMHC–Your Housing Experts

Canadians are among the best-housedpeople in the world, and the majority owntheir homes. Part of this success is due toCanada Mortgage and Housing Corporation,(CMHC), the federal housing agency. Since1946, CMHC has helped to housegenerations of Canadians. We’ve developedthe standards and practices required by agrowing housing industry and found newways to help Canadians finance homepurchases.

Today, more than one third of all mortgagesare insured by CMHC—but there’s more toCMHC than mortgage loan insurance. We’recontinually finding ways to build better, moreefficient and affordable housing, and to makeinformation about it available to you.

In fact, CMHC is Canada’s mostcomprehensive and objective source ofinformation on housing, whether you’re ahomeowner, a potential buyer, a renovator, ora builder, or if you have special housingneeds.

Canada Mortgage and Housing Corporation supports the

Government of Canada policy on access to information for people

with disabilities. If you wish to obtain this publication in alternative

formats, call 1 800 668-2642.

I N T R O D U C T I O N 1

Once upon a time, buying

a home was relatively

straight-forward. Today,

however, buying a home

is a journey with many

twists and turns.

Homebuying Step by Step was created

to provide you with everything you need to

know about completing that journey

successfully. In this book from Canada

Mortgage and Housing Corporation, we take

you through the entire process step by step,

from the moment you decide to buy until the

moment the movers carry the first box

through the front door of your new home.

This isn’t a fairytale. It’s real life.

That’s why this book has been created as

a hands-on workbook. It provides you with

checklists and worksheets to assemble the

right information to make the right decision

for you.

Once upon a time, almost everyone

shared a common homebuying experience.

They bought the same kind of home in the

same kind of neighbourhood. Now the

options are more varied than they’ve ever

been. Urban, suburban or rural? New home

or resale? Condominium, townhouse,

rowhouse, detached house or mobile home?

Which is right for you? This book can help

you decide.

Once upon a time,

almost every home was

bought by a married

couple. Now homes are

being bought by the

widest possible range of

people in the widest possible range of

situations. Yes, newly married couples still

make many of the home purchases that take

place every year. But so do single people with

children, single people without children,

people in second marriages, same-sex

couples, common-law couples, even groups of

friends. Whatever your situation, this book

can help.

Once upon a time, buying a home was

less complicated. Now there are more people

to deal with and more points to discuss. What

questions do you ask your real estate

representative, lawyer (or notary in Quebec),

mortgage lender, builder and housing

inspector? Who are these people and what do

they do? This book makes it all plain. (You’ll

find a Glossary of homebuying terms on

page 42.)

Once upon a time, there weren’t as

many variables to consider when buying a

home. But this book wasn’t developed to be

used “once upon a time.” It’s here to be used

now. In the reality of today’s housing market.

Read it. Use it. And make your journey

toward your new home that much easier.

You’reYou’reon your wayon your way

home.home.

This book will walk you through the exciting journey towardowning your new home.

Everything thathappens in thelarger housingmarket has an

impact on your home purchase. We help you track trends inmortgage rates and housing prices and other key indicatorsthat tell you the best time to buy. Page 10

Helps you figure out exactly whatfeatures you want and need in yourhome. Also, where you want thathome to be. We give you informationand handy worksheets to help youdo that.

Page 4

There are a lot of people involvedwhen you buy a home. Here’s aguide to who they are and whatthey do. We provide worksheets tohelp you choose the right people tomeet your homebuying needs.

Page 19

So you know what kind ofhome you want, but canyou afford it?

Practical information and practical worksheets help you calcu-late how you can be house proud without being house poor.

Page 12

AdditionalHelpfulInformationCall us. Write us. Order our free catalogues.Visit our Web site. CMHC hasvideos, books, reports andother information about everyaspect of owning a home.Check us out.Page41

Did they say what you thinkthey said? Easy-to-understand explanations of all the jargonyou’ll run up against in thehomebuying process. Look itup in the Glossary. Page 42

GLOSSARY

Table of…

There are more mortgagefeatures available today thanever before. What are youroptions? How do you get the bestmortgage for you? And, how canyou save money on yourmortgage? Page 24

Don’t let a down payment comebetween you and your home. Find outhow you could qualify to buy yourhome with as little as 5% down withhelp from CMHC. Page 32

This is the moment you’vewaited for. You’ve found the

right place, you just hope you’reoffering the right price. What to

include in your Offer to Purchase andwhat to expect once your offer’s been

made. Page 34

There are many smallsteps when it’s time toclose the deal. Here’s

information to help make surenothing falls through thecracks. Also, tips to makemoving day a smoothexperience.

Page 38

Home HuntingWorksheet

Take this handychecklist withyou when you gohome hunting. Itwill help yourecall thefeatures anddrawbacks ofeach propertyyou look at.

Contents

Take advantage of our handy

SubjectIndexPages 45-46

Plus

Extra worksheets at the back of the GuideExtra worksheets at the back of the Guide

For most Canadians,

owning their own home is

a lifelong dream. It brings

with it pride of ownership,

security and the feeling of

control over which

improvements are made

and how much they cost.

There’s also the chance

your home will increase in

value, making it a sound

financial as well as a

lifestyle investment.

Save TIME,

DISAPPOINTMENT and

maybe even MONEY. WORK

OUT exact ly what YOUR

NEEDS ARE before YOU

start HOME HUNTING.

GETTING STARTED When buying ahome, you have to juggle three impor-tant factors—your prospective home’slocation, style and cost. For example,your goal may be to buy a single familydetached home in an urban neighbour-hood for $100,000. But you may haveto settle for two out of three. An urbansemi-detached home may be availablefor your price, or you may need to lookin the suburbs for the price and styleyou want.

4 S T E P 1 • H O U S I N G N E E D S

L O C A T I O N

S T Y L E

C O S T

5 km

2.5 km

7.5 km

10 km

RECREATION

FIRE DEPARTMENT

HOSPITAL

DOCTOR/DENTIST

POLICE DEPARTMENT

SCHOOLS/PLACES OF WORSHIP

SHOPPING

WORK

TRANSPORTATION

Location, Location, Location Your choice of location depends primarily on whereyou work and whether you want to commute, andalso on your family lifestyle.

Do you want to live near recreation facilitiessuch as a golf course or skating rink? How close areyour children’s schools? Is publictransportation available?

Urban living usually offers thelargest range of home styles and oftenis closer to amenities such as restau-rants and theatres. On the other hand,you may get more for your money in the suburbs.

Suburban homes often have larger lots andlarger square footage than urban homes in thesame price range.

While suburban homes can have the advantageof being newer, amenities like shopping or play-grounds may not be available yet in a newsubdivision.

If you’re considering moving to an unfamiliarneighbourhood, take time to drive or walk aroundit, both during the day and in the evening. Makesome notes. It’s also a good idea to travel the route

to and from your work. (See the Home HuntingWorksheet following page 6.)

There are many other factors you should consid-er when choosing the location of your home. Forexample, have property values risen or fallen in theneighbourhood?

Future development can also affectproperty values and property taxes,so you’ll want to consider whetherthere are any changes to zoning pro-posed or any major developmentsplanned.

To do this, contact the local municipal office re-garding planning and zoning bylaws. Is a highriseoffice tower going in next to your home? A newhighway? Zoning bylaws may also affect your ownplans, such as conducting a business from yourhome.

Some real estate representatives suggest that,if you’re considering the future resale value of yourhome, it’s wiser to buy a modest home in the bestneighbourhood you can afford than the most expen-sive home in a modest neighbourhood.

Location isan investment

too.

Location isan investment

too.

S T E P 1 • H O U S I N G N E E D S 5

How close to home are the services you need?

Think about what kind of house you want…

Types of housing

Single family detachedA free-standing home which sitson its own lot and is occupied byonly one family.

Semi-detachedA single family home that isjoined to another one by acommon wall.

DuplexTwo units, one above the other.The owner may live in one unitand rent the other.

Row- or townhouseOne of several single familyhomes joined by common walls.These can be condominium orfreehold units.

Link or carriage Houses, freehold orcondominium, joined by garagesor carports which provide accessbetween the front and rear yards.Builders sometimes joinbasement walls so that linkhouses appear to be single familyhomes on small lots.

Highrise condominiumMulti-storey residential buildingcontaining condominium units. Acondominium is not a type ofhouse but a form of ownership.

Mobile or manufactured A factory-built, single familydwelling that is transported toyour chosen location and placedon a foundation.

New or Resale

There are advantages and disadvantages to both new andresale homes. Here are some of the characteristics of both

that may help you make your choice.

New HomeADVANTAGES

� You may be able toupgrade or choose certainitems such as siding, finishmaterials, flooring,cabinets, plumbing andelectrical fixtures.

� The latest building code,electrical and energy-efficiency standards will apply.

� A builder warranty is usually available in all provinces and theYukon (but not the Northwest Territories). This can be important ifa major system, such as plumbing or heating, breaks down.

� Unless you are a builder, warranties do not apply to homesyou build yourself.

� There may also be incentives provided by the provinces andprospective borrowers should consult provincial or localauthorities in this regard.

DISADVANTAGES� Neighbourhood amenities, like schools or shopping, may notbe complete if the house is in a new development.

� There may be construction noise and traffic.

� There may be little to no landscaping or trees.

� The 7% GST applies to new housing. However, there is arebate, to a maximum of 2.5%, on homes which cost less than$450,000. In some provinces, the GST has been replaced by aHarmonized Federal and Provincial Sales Tax known as the HST.

Resale HomeADVANTAGES

� It will probably bein an establishedneighbourhood.

� Landscaping isusually done andfencing installed.

� It may have upgrades such as a built-in swimming pool orfinished basement.

� There is no GST unless the house has been renovatedsubstantially, and then the tax is applied as if it were a newhouse.

DISADVANTAGES� Maintenance costs will likely be higher than for a new house.

� You may require a professional home inspector to check forstructural or other problems, such as a leaky basement or faulty roof.

� You may need to redecorate, or even renovate.


Ho

me

Hu

nti

ng

Wo

rk

sh

eet

Here’s a handyworksheet to help youevaluate the details

of the individualhomes that you view.

When you look at more than a few houses in a day,the special features can get blurred together:

Did the tidy little green house have the skylightsor did it have the fireplace in the family room?

Don’t fill out a worksheet for every home you see—just those you’re seriously considering. ThisHome Hunting Worksheet will assist your memoryand keep home features distinct.


b CHAPTER TITLE

Here are

a few points

to consider.� Exterior condition

Look at the condition of the roof,eavestroughing, brick, mortar, paint, siding,decks and patios.

� Energy efficiencyWhat type of heating and insulation does thehome have? Is the entire house insulated?

� Air qualityDoes the house smell clean and fresh? Checkfor conditions and materials which will maintaina healthy indoor environment.

� Basement/crawlspace conditions Is it moldy? Look for water stains, leaks orcracks.

� Structural problemsDoors and windows that stick and uneven floorscan indicate problems.

� Test the water pressureby turning on the taps or flushing the toilet.

� Is there parking?Does the home have a private or shareddriveway?

Home HuntingWorksheetAttach real estate listing information sheet or fill inbelow.Address

Real estate representative Telephone

Type of home Square footage

Number of bedrooms Lot size

Additional structures on property

Occupancy date Asking price $

Air conditioning � Central � Window � Smoke detectors

� Heat recovery ventilator (HRV)

ANNUAL COSTSProperty taxes $

Garbage pickup $

Other $

Utilities

Heating type � Oil � Natural gas � Electric � Wood $

Electricity � 60 amp � 100 amp � 200 amp � Other $

Water � Municipal � Well $

Other $

Other $

TOTAL ANNUAL COSTS $

Chattel which remains with house

Make a comprehensive list (floor coverings, window drapes, appliances, etc.)

I

I

I

Neighbourhood

Distance to work Distance to spouse’s work

Public transportation � Yes � No

Adequate proximity to Schools � Yes � No

Shopping � Yes � No Playgrounds � Yes � No

Medical � Yes � No Hospital � Yes � No

Fire station � Yes � No Police � Yes � No

Place of worship � Yes � No

Other neighbourhood considerations

Existing environmental problems (noisy traffic, railway, flooding, etc.)

Future development plans

Be sure to indicate NORTH on your plan.


Use the area below to draw floor plans.

E X T E R I O R

Finish � Brick � Siding � Wood

Condition � Fair � Good � Excellent

Roofing � Fair � Good � Excellent

Other

Windows � Wood � Vinyl clad� Aluminum


Number ofentrances � 2 � 3 � 4 � 5

Driveway � Paved � Gravel � Other

Garage � No � Yes � Heated � Not heated

Landscaping � Fair � Good � Excellent

Fencing � Wood � Chain link� Other

Patio or deck � Yes � No

Special features (e.g. pool, barbecue)

I N T E R I O R

Entrance area

Approx. size

Walls � Fair � Good � Excellent

FlooringTYPE

� Fair � Good� Excellent

Lighting fixtures � Yes � No

Special features

Living room

Approx. size


FlooringTYPE



Windows � Fair � Good � Excellent

Special features (e.g. fireplace)

Dining room

Approx. size


FlooringTYPE




Special features

� Den � Study � Family room

Approx. size


FlooringTYPE




Special features

Kitchen

Approx. size


FlooringTYPE




Cupboards & storage � Fair � Good� Excellent

Special features

Appliances included

Master bedroom

Approx. size


FlooringTYPE




Special features (e.g. en suite bathroom, walk-in closet)

Bedroom #2

Approx. size


FlooringTYPE




Special features

Bedroom #3

Approx. size

Walls � Fair � Good� Excellent

FlooringTYPE




Special features

Bathrooms

#1 � � Bath/shower � Sink � Toilet



Special features

Basement

Approx. size


FlooringTYPE




Separate entrance to outside � Yes �

No

Special features

Utility room

Approx. size


FlooringTYPE




Special features

Additional for condominiums

Parking � Underground � Above ground� Balcony; size � Storage� Recreation room � Exercise room

Pool � No � Yes � Indoor� Outdoor

Lobby � Fair � Good � Excellent

Security and special features

General comments

PROS: CONS:


Style When trying to decide what style ofhome to buy, it’s a good idea to draw upa master list of all the features you wantyour new home to have. The HomeFeatures Checklist onpage 8 can help you.Try to be honest aboutwhat you’re lookingfor. Your vision willlikely change based onwhat’s available.

This may not bethe dream homeyou’d buy if you wonthe lottery, but ratherthe home that youand your family can afford now andthat will meet your needs for the nextfew years.

Consider such questions as: Areyou starting a family or having morechildren? How many bedrooms willyou need? Will a home office berequired?

If you think you’ll need morespace, consider buying a larger homenow or one with the potential for ren-ovation or an addition.

Consider compiling this list withthe help of your real estate represen-tative or builder, who can help youdecide which features are importantand suggest ones you have over-

looked. (For tips onchoosing the rightrepresentative foryou, see page 20.)

Make sure yourreal estate represen-tative keeps a copy ofyour list to help pre-screen the housesyou’ll look at.

This list should berevised as you look at

houses and see what is actually avail-able in your price range andpreferred locations. (You’ll find extracopies of the Home Features Checklistat the back of the Guide.)

Cost Cost is such a big step, it has it’s ownchapter. (See Step 3 on page 12.)

Diane and Hugh weremoving to Calgary and sawthis as an opportunity to buy a home before theystarted their family. Theirdream was a home with four bedrooms, a family room, a big yard and apreferred location.

The reality was thatthey couldn’t balance thathome and that location with their budget. Then areal estate representativehelped them find a smallerhouse that they could afford in an idealneighbourhood.

They accepted lesshome than they had hopedfor, but stayed within anaffordable budget. Thoseextra rooms could comelater.

Make a listof all the features

you want in your new home.

Be realisticand consider all

the options.

The word condominium refers to a type ofproperty ownership rather than to a style ofhouse. � Condominiums can be townhouses,highrises or low-rises. They can be attractiveto first-time home buyers because they aregenerally less expensive than single detachedhomes in the same neighbourhood. Whencomparing costs, make sure to includemonthly condominium fees.� When you buy a condominium, you’reinvesting in something you own, but likelyeliminating maintenance such as yard workand snow removal. Condominiums also canoffer extras you won’t get in a similarly priceddetached home, such as security systems andrecreation facilities.� Be prepared to pay monthly condominiumfees that contribute to the corporation’s

reserve fund and go toward covering thecollective cost of property maintenance,repairs, replacements and insurance.� When buying a condominium, many of thesame considerations as buying a detachedhome will apply. For example, the choice oflocation or the decision between new andresale. � With a new condominium, you may beable to specify upgrades or finish materials,while a resale condominium is more likely tobe in an established location and may havelower condominium fees.� Before you buy a condominium, it’s alsoimportant to consider some of their limitations.If a large yard is important to you, for example,a condominium is not a good choice.

A note on buying condominiums

Home

Features

ChecklistCompleting this list willhelp confirm in yourmind exactly what youwant and need in yournew home.

Be realistic, but don’tsell yourself short. If, asyou look at homes, you findyour dreams exceed yourbudget, you can alwaysmake revisions.

The list will also helpyou focus on potentialfuture needs. Be sure totake into consideration anyplans to start or expandyour family. That couldaffect the number ofbedrooms or location.

Determine whichfeatures are must-havesand which are negotiable,perhaps using a highlightingmarker to indicate thedifference.

And, of course, makesure your real estaterepresentative has a copyof the list to prescreenhomes before you seethem.


Sarita and Albert wanted tobuy a small home in Ottawa,as an investment and forthe personal freedom itoffered.

In order to maximizetheir resources, they madesome hard decisions aboutwhich features wereessential and which werenegotiable.

A deck, for example, didn’t have to be there. Itcould be easily built later.But proximity to publictransportation was a must.

Being as practical andrealistic as possible, Saritaand Albert managed to finda home with which theywere very happy. And onethat could expand shouldtheir needs change.

� Resale � New

Type of Home� Detached � Semi-detached� Townhouse � Duplex� Highrise � Low-rise

Type of ownership� Freehold � Condominium

Age of home

Lot size � Small � Medium � Large

Quiet street � Yes � No

Type of exterior finish� Brick � Wood� Aluminum siding � Vinyl siding� Combination brick and siding

WindowsGlazing � Single � Double � Triple

� Low-EConstruction � Wood � Vinyl � Metal

� Other

Insulation values Walls_________________Basement______________ Ceiling________________

Foundation construction � Concrete� Concrete block � Preserved wood

Sewer � Municipal � Septicsystem

Water � Municipal � Well

Water heating � Gas � Electric � Oil

Electrical system � 100 amp � 200 ampOther______

� Fuses � Circuit breakers

Type of heating fuel� Oil � Gas � Electric � Wood

Heat recovery ventilator � Yes � No

Air conditioning � Central � Window


When

considering the

right home for

you, it’s

important to

look beyond

the walls. The

environment

surrounding

your home can

be almost as

important as

the

environment

inside it.


the next step?the next step?Ready for

Bedrooms � 1 � 2 � 3 � 4

Bathrooms � 1 � 2 � 3

Master bedroom en suite � Yes � No

Ground floor bathroom � Yes � No

Eat-in kitchen � Yes � No

Separate dining room � Yes � No

Separate family room � Yes � No

Fireplace � Yes � No

Woodstove � Yes � No

Spare room for den or home office � Yes � No

Basement for storage or workshop � Yes � No

Apartment for rental income � Yes � No

Deck or patio � Yes � No

Private driveway � Yes � No

Garage � Attached � Detached

Carport � Yes � No

Security features � Yes � No

Barrier-free � Yes � No

Close to (approximate km)

Work Spouse’s work

Public transportation Schools

Shopping Parks/playgrounds

Recreation facilities Restaurants

Places of worship

Police station Fire station

Hospital Doctor /dentist

Veterinarian

10 S T E P 2 • M A R K E T F O R E C A S T S

How do you develop an understanding of howthe housing market is evolving? The easiest answeris to take advantage of the information offered byCMHC’s Market Analysis Centre through anyregional CMHC Business Centre.

The Market Analysis Centre is there to give youa clear picture of the current housing market. Localmarket analysis reports are published on a regularbasis. They provide information on recent trends inhousing market conditions.

Your local CMHC market analyst can tell you ifit’s a buyer’s, seller’s or balanced housing market.

In a buyer’s market, the number of homes avail-able for sale exceeds the demand, so prices willeither stabilize or drop.

BY

understanding

THE HOUSING

MARKET,

YOU’LL have

a better SENSE

OF WHAT,

WHERE AND

WHEN to buy .

Buying a home—animportant lifestyle andinvestment decisionYou want to buy at the best price

possible. You want your monthly

payments to be as affordable as

possible. You want your home to

increase in value as much as

possible.

To make sure all that happens, it’s important tolook beyond your individual purchase before youbuy. You need to look at larger market conditions.What’s happening around you (house price trends,mortgage rate movements, new home construction)will have an influence on your purchase. The moreyou know, the more control you have.

S T E P 2 • M A R K E T F O R E C A S T S 11

With fewer buyers and morehomes, you not only have moreoptions to choose from, you also havegreater negotiating leverage.

You have more time to look for theright home and you can evaluate thechoices without feeling pressure to acttoo quickly.

Another major influence on yourdecision to buy is the mortgageinterest rate. What rates are availablenow? Will they drop in the immediatefuture? Will they rise? If so, by howmuch?

Trying to answer these questionscan be difficult. Once again, CMHC’sMarket Analysis Centre can help. Itcan provide you with an analysis ofthe mortgage market and an outlookfor future mortgage rates.

For those who need to see the bigpicture of Canadian housing, theMarket Analysis Centre produces aseries of national and local subscrip-tion reports to provide you with acomprehensive housing view acrossthe country.

You can also use CMHC’s CMHC’sAffordAbility computer software. Itcan help first-time homebuyers,people renewing their mortgages andmove-up buyers determine the homeprice and mortgage they can afford.

If you prefer to access the latesthousing information directly from theweb, visit our Electronic Marketplaceat www.cmhc-schl.gc.ca. Order ourmost popular reports on-line, andwe’ll e-mail them to you in PDF, Lotusor Excel formats—usually on the samebusiness day.

For any of these products, or forother information on the housingmarket in your area, please call your regional CMHC business centreor visit our web site at www.cmhc-schl.gc.ca.

Hamid and Yvonne hadsaved $15,000 for a downpayment on a small olderhome in the Saint Johnneighbourhood where theyhad both grown up.

They wanted to savemore, but they kept acareful eye on mortgage

interest rates, hoping theywould drop lower. Instead,rates began to climb. Hamidand Yvonne called theirCMHC market analyst.

They learned what themortgage rate trends hadbeen over the past fewyears. They also found outrates were expected to risein the near future.

As a result, Hamid andYvonne decided to buy soon.


At a glance, you can see how housing pricescan fluctuate.

These figures apply in a single geographic market. Similar fluctuationsappeared in other Canadian centres at different levels.

Mortgage rates are a critical factor in yourdecision to purchase. This chart illustrateshow rates can change quickly.

Median resale price by house type

SOURCE: TREB * thousands of dollars

$100

$150

$200

$250

*$300

ApartmentTownhouseSemiSingle

9695949392919089

Mortgage ratesMajor financial institutions

SOURCE: Bank of Canada Review.

5%

6%

7%

8%

9%

10%

11%

12%

13%

14%

15%

5-year

1-year

9695949392919089

CMHC’s Market Analysis

Centre offers timely homebuying information.

Homebuying costsThe Down PaymentIf you have a down payment of 25% or more, youmay qualify for a conventional mortgage loan whichdoes not require mortgage loan insurance.

A minimum down payment of 5% is required fora high-ratio mortgage. These types of mortgage loans–– for any amount in excess of 75% of the value of thehome –– are required to be insured against default.(See Step 6 on page 32 for the details.)

The federal government and some provincesoffer incentive programs for homebuyers. Youshould consult an investment or tax advisor regard-ing the value of these plans for your particularcircumstances.

The MortgageA mortgage is security for a loan on the propertyyou own. It is repaid in regular mortgage paymentswhich are blended payments. This means that thepayment includes the principal (amount borrowed)plus the interest (the charge for borrowing money).The payment may also include a portion of the prop-erty taxes.

Possible Extra Costs After YouMove InMaintenance costs You may want to start a sep-arate maintenance fund –– particularly if you’rebuying an older home –– by setting aside $500-$1,000 and adding to it regularly. This reserve canbe used to cover the costs of anticipated or unex-pected repairs or replacement of such things as theroof or appliances.

Buying a home involves many

financial considerations. Some

home buying expenses are one-

time costs and others are

ongoing commitments. In

addition, there are other costs

that you may not be aware

of or that you may forget to

factor into your calculations.

Check out the list on page 15. And

don’t forget the extra costs, such

as buying a lawn mower or new

curtains for your new home.

HERE

ARE

SOME

basic calculations

YOU CAN DO THAT WILL

help you determine

exactly HOW MUCH

HOUSE YOU CAN afford.

Affordability

12 S T E P 3 • A F F O R D A B I L I T Y S T E P 3 • A F F O R D A B I L I T Y

This table gives you an ideaof the maximum home priceyou can afford. Theseestimates take into accounthousehold income and thepercentage down paymentyou have. They assume amortgage interest rate of8%, average tax andheating costs in Canada,and the mortgage anaverage Canadian wouldqualify for based on a 32%debt service ratio. Pleasenote that for loans greaterthan 90% of the value ofthe home, a maximumhouse price of up to$250,000 may apply, basedupon the price levels in yourcommunity. Contact yourlender for the maximumprice in your area.

Renovation costs You may find a “fixer-upper” ––an inexpensive home in need of repair. One generalrule is that renovation always takes longer than, andcosts more than, you think. CMHC publishes a lot ofhelpful information on renovation. Contact your localCMHC office to find out more or order our renova-tion catalogue. (See page 41.)

How Much Can You Afford?The shortest and best answer to that question is:

it depends –– on a number of factors. The mostimportant are your gross household income, yourdown payment and the mortgage interest rate.Lenders also consider your assets and liabilities.Your own lifestyle and debt comfort zone also comeinto play.

If you understand these variables, you can exam-ine all your options. You can make the best choicefor you and even save money. AffordAbility, a newCMHC computer software program, can help youwork out all your down payment and mortgageoptions. (To purchase call 1-800-668-2642.)

Meanwhile, use the table below and theAffordability Guide on the next page to get an ideaof the maximum home price you can afford and themaximum you can afford to pay in monthly housingcosts.

Lenders follow these two simple rules to deter-mine how much you can afford in monthly housingcosts:

The first affordability rule is that your month-ly housing costs shouldn’t be more than 32% of yourgross monthly income. Housing costs include month-ly mortgage principal and interest, taxes andheating expenses –– known as P.I.T.H. for short. Ifapplicable, this sum also includes half of monthlycondominium fees and all of the annual site lease inthe case of leasehold tenure

Lenders add up these housing costs to determinewhat percentage they are of your gross monthly income.This figure is your Gross Debt Service (GDS) ratio.

The second affordability rule is that yourentire monthly debt load shouldn’t be more than40% of your gross monthly income. This includeshousing costs and other debts such as car loans andcredit card payments. Lenders add up these debtsto determine what percentage they are of your grossmonthly income. This figure is your Total DebtService (TDS) ratio.

Based on these ratios, lenders will advise you ofthe maximum home price they think you can afford.

Keep in mind that most homebuyers today keeptheir debt ratios comfortably below the maximumsprescribed above. The lower your debt load, themore affordable your home and lifestyle will be.

S T E P 3 • A F F O R D A B I L I T Y 13

Income, Home Price and Downpayment GuideHousehold 5% Down Maximum 10% down Maximum 25% down Maximumincome payment home price payment home price payment home price

$25,000 $3,000 $60,000 $6,300 $63,000 $18,900 $75,600

$30,000 $3,900 $78,000 $8,200 $82,000 $24,700 $98,800

$35,000 $4,800 $96,000 $10,100 $101,000 $30,300 $121,200

$40,000 $5,700 $114,000 $12,000 $120,000 $36,000 $144,000

$45,000 $6,600 $132,000 $13,900 $139,000 $41,700 $166,800

$50,000 $7,500 $150,000 $15,800 $158,000 $47,400 $189,600

$60,000 $9,300 $186,000 $19,600 $196,000 $58,800 $235,200

$70,000 $11,050 $221,000 $23,400 $234,000 $70,100 $280,400

$80,000 $12,500 $250,000 $27,200 $272,000 $81,500 $326,000

$90,000 $12,500 $250,000 $31,000 $310,000 $92,800 $371,200

$100,000 $12,500 $250,000 $34,800 $348,000 $104,300 $417,200

Figures are rounded to the nearest $100.

14 S T E P 3 • A F F O R D A B I L I T Y

Maximum monthlyhousing costs youcan affordGross Debt Service Ratio

(GDS)

Your gross monthly salary* $

+ Your spouse’s gross monthly salary $

+ Other monthly income $

Total A $

x 32%= Maximum monthly housing costs you can afford B $

This maximum monthlypayment includes principal,interest, taxes, heating(P.I.T.H.), and if applicable allof the annual site lease and50% of the condominium fees.

* Gross salary is income beforetaxes

Maximum monthly debtload you can affordTotal Debt Service Ratio (TDS)

Total monthly income A $

x 40% = Maximum monthly debt service load you can afford C $

– Monthly auto payment $

– Monthly loan payment $

– Monthly credit card/line of credit payment $

– Other monthly payments $

= Monthly income left for housing D $

If the home you want costs more permonth than you can afford right now(D), consider these strategies: loweryour expectations and buy a cheaperhome; lower your non-housing debtobligations; and/or raise a largerdown payment.

Use these important formulas to determine how much you can afford to pay for housing.This is how lenders determine the maximum monthly costs you can carry.

Review the examples to see how you can settle on the best home price for you.

Example:Jane and Deepak have a grossmonthly income of $4,500. Theirtotal debt load should not exceed$1,800 ($4,500 x 40%). They havea monthly car payment of $400, astudent loan of $200 and creditcard payments of $150, for a totalof $750 in non-housing debt pay-ments each month. That meansthey would have no more than$1,050 available for monthly hous-ing payments ($1,800 - $750). Thatis lower than the $1,440 suggestedby their Gross Debt Service calcu-lation (B).

Maximum home priceyou can affordIt depends on how much your downpayment is and how much you cancarry in monthly debt service. Andthat depends on variables such asmortgage rates, your debts andmonthly expenses, and personalpreferences. For a rough idea, take alook at the table on page 13.

Example:Jane and Deepak have a down

payment of $30,000. They want aconventional mortgage with 25%down, so they estimate theirmaximum home price at $120,000.

That would leave them amortgage of $90,000. At 8%interest, amortized over 25 years,that means monthly mortgagepayments of $687.* Add monthlyproperty tax instalments of $200and monthly heating costs of $120.Their total monthly housing costswill be $1,007. That is just belowthe maximum $1,050 allowedaccording to their Total DebtService ratio calculations.

That’s too close for comfort forJane and Deepak. What if mortgagerates go up when it’s time to renew?They decide to look for a homepriced at a maximum of $100,000.

That would leave them with a$70,000 mortgage and monthlymortage payments of $535,* pluslower taxes of $150 and heatingcosts of $100. Now their totalmonthly housing costs will be $785.That makes their Total Debt Serviceratio 34% instead of the maximum40%. And that gives Jane andDeepak a sense of financial comfort.

* Figures are rounded to the nearest dollar.

(AffordAbility, a new CMHC computersoftware program, can help you work out allyour down payment and mortgage options.To purchase call 1-800-668-2642.)

Example:Jane’s gross monthly incomeis $2,500 and Deepak’s is$2,000 for a total of $4,500per month. They should payno more than $1,440 ($4,500x 32%) for their monthlyhousing expenses.

Affordability Guide



Other costs to be aware of when you buyThis is a list of possible extra costs involved in buying a home. Some of them are one-time costs and others,such as condominium maintenance fees and property insurance, will be ongoing monthly expenses. Thegood news is that not all of these costs may apply in your circumstances.

Don’t forget the taxThe 7% GST applies tonew housing. However,there is a rebate, to amaximum of 2.5%, if yourhome costs less than$450,000. There is noGST on resale housingunless the home has beensubstantially renovated,and then the tax is appliedas if it were a new home.In some provinces, theGST has been replaced bya Harmonized Federal andProvincial Sales Tax knownas the HST. Also in otherprovinces, provincial taxesmay be applicable.

Appraisal feeIf your loan is not insured,your lender may require aproperty appraisal at yourexpense. A basic appraisalfor mortgage purposes willprobably cost between$150-$250. Actual costshould be confirmed as itmay vary with the locationand complexity.

Property taxesTaxes are always acertainty. If you have ahigh-ratio mortgage, yourlender may require thatyou have your propertytax instalments added toyour mortgage payments.

Survey feeYour lender will require anup-to-date survey. Ask thevendor to provide one asa condition of your Offerto Purchase, or you willhave to pay to have onedone.

Property insuranceThis insurance covers thereplacement value of thestructure of your homeand its contents. Yourlender will insist on thisbecause your home is thesecurity for yourmortgage.

Prepaid taxes orutility billsYou will have to reimbursethe vendor on a proratedbasis if some bills havebeen prepaid beyond theclosing date.

Land transfer taxThis applies in mostprovinces. It varies asa percentage of theproperty’s purchase price.It is usually about 1%-4%.

Service chargesYou’ll be charged a fee tohook up new services andutilities, such as yourtelephone, at your newhome.

Lawyer (notary) feesEven a straightforwardhome purchase requires alawyer to review the Offerto Purchase, search thetitle, draw up mortgagedocuments and tend tothe closing details.Lawyers’ fees for amortgage range widelydepending on thecomplexity of the deal butwill probably be at least$500.

Mortgage loaninsurance premiumand application feeIf you have a high-ratiomortgage, your lender willrequire mortgage loaninsurance provided byCMHC or a privatecompany. The insurance will cost between 0.5% and3.75% of the amount of thetotal mortgage (additionalcharges may apply) and canbe included in themortgage. The applicationfee will range from $75 to$235 depending upon howthe lender processes yourapplication. (consult yourlocal lender for furtherdetails)

Mortgage broker’sfeeA broker may charge afee to find you a lender.

Moving costsThe cost of a professionalmoving company or arental truck if you moveyourself. Fees for aprofessional mover canrange from $50-$100 anhour for a van and threemovers. These costs maybe 10%-20% higher at theend of the month and inthe summer.

Estoppel certificateA certificate that outlinesa condominiumcorporation’s financialand legal state. Thecertificate and supportingdocuments will cost youup to $50. (Does notapply in Quebec.)

Condominium feesCondominiums chargemonthly fees for common-area maintenance, suchas groundskeeping andcarpet cleaning. Feesrange widely dependingon the type of structurebut will probably be atleast a few hundreddollars.

Home inspection feeInspectors areunregulated in manyprovinces, so fees rangewidely, from about $150-$350 for a home pricedunder $300,000. Larger,more expensive homescost more to inspect. Atwo-hour inspectioncarried out by an engineerwho provides a writtenreport will cost closer tothe upper limit.Municipalities can alsosupply any availableinspection reports on theproperty for a fee.

Renovation andrepairsA home inspection mayindicate that the homeneeds major structuralrepairs such as a newroof. Don’t forget to factorthese costs into the priceof the home.

Water quantity andquality certificationIf you’re buying a homewith well service, you’llhave to pay a fee from$50-$100 to certify thequantity and quality of thewater.


Nowthat you know

your affordable price range,

these worksheets will

help you evaluate the

total cost of your new home.

Since purchase prices affect other costs as well,

use these worksheets to help you establish

the exact cost of differently priced homes in

your price range. This calculation includes closing

costs. Some can be included in your mortgage loan.

Most come out of your pocket.

Home Purchase Costs EstimateAddress

Purchase price $

GST/HST (if applicable) $

House insurance $

Legal fees and disbursements $

Land transfer tax $

Appraisal fee $

Estoppel certificate fee $

Furniture, appliances, drapes, tools, carpeting, paint, etc. $

Home inspection fee $

Interest adjustments $

Lawyer’s fees $

Condominium fee $

Mortgage broker’s fee $

Mortgage loan insurance application fee $

Mortgage loan insurancepremium* $

Moving expenses $

Property taxes (adjustments) $

Renovations/repairs $

Service hook-up fees $

Survey fee $

Utility bills (adjustments) $

Water quality and quantity certificate $

Other $

Total estimated cost $

*Can be included in your mortgage


Purchase price $

GST/HST (if applicable) $

House insurance $


Land transfer tax $

Appraisal fee $





Lawyer’s fees $

Condominium fee $




Moving expenses $




Survey fee $



Other $



Solomon wanted to investhis hard-earned money in ahome rather than payingrent.

After looking at severalsuburban homes, he decidedthat buying an urban condo-minium would give him moreof what he wanted for lessmoney.

He found acondominium with a full fitness centre in aMontréal neighbourhood heliked—for a lot less than ahome in the suburbs.

Solomon believes hisnew condominium willincrease in value over time.And, he prefers not to worryabout exterior maintenanceand yard work.

1 2



Monthly ExpensesChild care $

Groceries/lunches/eating out $

Clothes/personal/sundry $

Life insurance $

Public transportation $

Car: gas/oil $

Car repairs and service $

Car insurance and license $

Electricity/hydro (non-heat) $

Water $

Telephone $

Cable TV/video rental $

Entertainment, recreation, movies, sports, etc $

Beer, wine, liquor, cigarettes $

Newspapers, magazines, books $

Home maintenance and repairs $

Home insurance $

Furnishings/consumer goods $

Savings (bank account, RRSPs) $

Charitable donations $

Car loan/lease $

Line of credit $

Charge accounts/credit cards $

Other loans/payments $

Total monthly lifestyle expenses $

Payroll deductions:

Income tax $

Benefits/other $

Total monthly expenses $

Monthly income $

Subtract: Total monthly expenses _ $

Amount left for housing costs (P.I.T.H.)* $

* principal, interest, taxes, heat

Calculate

the impact

your

monthly

expenses will

have on the

maximum

house price you

should be

considering.

Remember, it’s onlyhuman nature todownplay how muchthings cost—but resist the impulse.

Be realistic. Because if the final

figure is underestimated,you could find yourself ina financial bind oncehouse payments start up.

Make sure you

don’t leave

yourself house

poor. It’s

important to

structure your

monthly

expenses so that

you can still

afford simple

luxuries, like the

occasional

vacation.




You’ll need input from

your immediate family—“I

want my own room!” You’ll

get the inevitable but often

useful advice from relatives

and friends. And you’ll want to

have a team of professionals at

your service when buying your

home. You decide exactly who is on

your team, but there are a few

professionals without whom

buying a home is nearly

impossible.

For example, just about

every homebuyer needs a

mortgage, so

you’ll have to

find a lender.

Also, it’s a

practical and

useful idea to

have a lawyer (or notary in Quebec)

to protect your interests.

Friends, family or other profes-

sionals may be able to refer names

to you.

S T E P 4 • B U I L D I N G Y O U R T E A M 19

Kim and Win found thehome of their dreams—butthey thought the askingprice of $125,000 was fartoo high. They made an offerof $90,000, with a depositof $2,000.

The vendor rejected theoffer outright, making nocounteroffer.

Determined to realize their dream, Kim and Win tried again, this time with areal estate representative.

They increased theiroffer to $105,000 and theirdeposit to $15,000 so thatthe vendor would know theywere really serious.

This second time aroundthey got the vendor’sattention!

A counteroffer for$110,000 was returned andthey sealed the deal within aweek.

Real Estate Representatives

A good real estaterepresentative should beable to save you time andtrouble.

You can deal with thevendor’s real estate agent oryou can enlist one to work

on your behalf. There is no chargeto you if the real estaterepresentative takes his or hercommission from the vendor. If,however, you wish a salespersonto act exclusively for you, theremay be a cost involved. Makesure you are clear on who ispaying the real estaterepresentative and you

understand yourobligations once you’vesigned an agreement. When discussing yourneeds with arepresentative, be as

specific as possible about thekind of homeyou’re lookingfor and yourprice range. Ifyou’re notcertain, setaside some timefor yourrepresentative tohelp youdetermine these.

He or she willknow what is on themarket, in whichneighbourhoods andat what price, andcan save you time byprescreening homelistings—screeningout the ones thatdon’t meet your

needs or budget. Then he or shecan make appointments for youto see the homes that suit you.

A real estate representativecan also assist you in making anOffer to Purchase. Represen-tatives are aware of currentmarket conditions, what priceoffers are realistic and whatconditions to include in anyoffers.

Builders/Contractors

You may deal with a builder orcontractor if you buy a new home,have one custom built or requirerenovations to a resale home.

To ensure a builder’scredibility and quality, askfor references, talk to othercustomers about the builder’swork or check with the new homewarranty program.

If you’re buying a new homefrom a developer or builder, visitother housing developments thatthe company has built. You canalso ask builders or contractors ifthey are a member of a localhome builders’ association, orask for a provincial licensenumber to ensure your contractoris registered.

If you’re building a customhome, you may also want tohire an architect. Standardarchitect’s fees are 10% of

the total projectcost. Builders ofcustom homesand renovatorsusually work oneither a fixed-price or a cost-plus formula.Your contract

should outline what the paymenttype is. All contracts with abuilder should be as specific aspossible about constructiondetails, right down to the brandname or model number of anyfinishes. Any changes to yourcontract should be initialled byyou.

For more information, ask forthe CMHC publication How ToHire A Contractor.

AppraisersYou may wish to have anindependent appraisal done of aproperty before you offer a price.It can keep you from paying morethan the market value. You canstill make an offer, conditional oncompletion of an independentappraisal. If the appraised value

20 S T E P 4 • B U I L D I N G Y O U R T E A M

A good way to startlooking for any

professional is to askfor referrals from satisfied friends.

TEAM

FROM

WHAT

YOUR

TO EXPECT

MEMBERS

If you’re looking for a country home, anurban condominiumspecialist is not the

right real estaterepresentative.

is lower than the asking price, youmay be able to negotiate a newprice. If your lender requires arecognized appraisal to complete amortgage loan, having onecompleted up front may save youtime and money.

The appraisal should include anunbiased assessment of theproperty’s physical and functionalcharacteristics, an analysis of recentcomparable sales and anassessment of current marketconditions affecting the property.This information provides you with anexpert second opinion as to theproperty’s market value.

Real estate appraisal is anunregulated business in mostprovinces and a number of differentappraisal organizations exist.

LendersThe key to finding the right lender isto shop around. Many differentinstitutions lend money formortgages, including banks, trustcompanies, credit unions, caissespopulaires, pension funds, insurancecompanies and finance companies.

You can even find privatelenders listed in your localnewspaper. It will save you money tospeak with more than one lender ineach category because the termsand options of each will vary.

Some lenders, such as creditunions, deal only with members. Butdon’t be shy about approachingnew institutions. For example, ifyou’d like to get your mortgage at atrust company, you don’t need tohave a savings account there.

Mortgage BrokersMortgage brokers don’t usually lendmoney but rather put you in touchwith others who do.

For example, brokers are awareof private lenders that you may notbe able to find on your own.

Brokers are independent, whichmeans that they are not affiliatedwith any specific lending institutions.Their role is to find the lender withthe terms and rates that will bestsuit you.

In some cases, the mortgagebroker will charge you a fee forservices. This charge is more likely ifyou have a poor credit history andwill probably be a small percentageof the value of the mortgage, forexample, 1%-2%. But, in mostinstances, the broker’s fees are paidby the lender.

Lawyers/Notaries

Hiring a lawyer (or notary in Quebec)is one way to ensure that your legalinterests are being protected whenyou buy your home. Your lawyer willreview any contracts you need tosign, especially the Offer toPurchase.

If you make an Offer toPurchase that is accepted, yourlawyer will be responsible formany of the closing arrangements.(See Step 8 on page 38.)

Lawyers’ fees range widely anddepend on the complexity of the deal,but will probably cost a minimum of$500 plus disbursements.

You can check for a lawyerreferral service in your community orcall the local law association for thenames of lawyers who specialize inreal estate law.

Home InspectorsIt is always a good idea to have thehome inspected.

An inspector should supply adetailed written report on how well-built the home is, and whether anyrepairs are necessary and theirestimated cost. The report shouldestimate the cost of repairs and thepriorities—what should get fixed first and how soon.

You can find a home inspectorthrough a local professional associa-tion of home inspectors or by askingyour real estate representative.

Inspectors are unregulated in

most provinces, so you shouldinquire about the inspector’scredentials and ask for references.

Ensure that the inspector haserrors and omissions insurance. Thismeans that if, for example, you buya home that requires a costly repairthat the inspector didn’t report, thenthe inspector can be held financiallyresponsible for the cost of therepair. Home inspectors’ fees canrange from $150-$350 for a homethat costs $300,000 or less.

If you have made a satisfactoryhome inspection a condition in anOffer to Purchase a home, theinspector’s fees are paid by you.

With older homes, you may alsoask an inspector to check fortermites, lead paint, asbestos orother problems.

Insurance BrokersAn insurance broker can provideyou with all your insurance needs,including property insurance and

mortgage life insurance. Lendersinsist on property insurance becauseyour property is their security foryour loan. Property insurance coversthe replacement cost of your home,so premiums vary depending on yourhome’s worth.

Your lender may also suggestthat you buy mortgage lifeinsurance. This is often availablethrough your lender, who then simplyadds the premium to your regularmortgage payments.

But lender-supplied insurancecan be more expensive than from abroker. Don’t confuse property or lifeinsurance with mortgage loan insur-ance which is mandatory for high-ratio mortgages. (See Step 6 onpage 32.)


Ask them to specifyprecisely what

services you aregetting and how much

they will cost.

Ask to see a resume or portfolio,

depending on theprofession, and ask

for references.

Role

Name Company name

Address Telephone

Referral Fees

Strengths

Weaknesses

Role

Name Company name

Address Telephone

Referral Fees

Strengths

Weaknesses

Role

Name Company name

Address Telephone

Referral Fees

Strengths

Weaknesses

Role

Name Company name

Address Telephone

Referral Fees

Strengths

Weaknesses

22 S T E P 4 • B U I L D I N G Y O U R T E A M

Role

Name Company name

Address Telephone

Referral Fees

Strengths

Weaknesses

Role

Name Company name

Address Telephone

Referral Fees

Strengths

Weaknesses

Role

Name Company name

Address Telephone

Referral Fees

Strengths

Weaknesses

Use these

handy worksheets

when you

assemble your

team. As you consider

all the possibilities,

keep track of

what you consider

to be the strengths

and weaknesses

of each candidate.


Almost no

one buys a

home without

a mortgage.

What does

that mean?

What does it

cost? What

are your

options?

Read on.


Role

Name Company name

Address Telephone

Referral Fees

Strengths

Weaknesses

Role

Name Company name

Address Telephone

Referral Fees

Strengths

Weaknesses

Role

Name Company name

Address Telephone

Referral Fees

Strengths

Weaknesses

Role

Name Company name

Address Telephone

Referral Fees

Strengths


Make sure you have a mortgage

you can live with. There are lots

of options available that let you

customize your mortgage to suit

your financial goals and needs.

Mortgage BasicsMortgage payments are made up of a principal sum(the amount borrowed) and interest (the cost to youof borrowing money).

The best plan for any type of mortgage is tominimize the amount of interest you pay—and lenders offer several ways to help do this:• A larger down payment means your home ulti-

mately costs less because a smaller mortgagemeans less interest.

• A shorter amortization, the period over which aloan is repaid.

• A weekly or biweekly payment schedule, instead of monthly.

• Additional lump sum payments.

24 S T E P 5 • A R R A N G I N G Y O U R M O R T G A G E

BUYING

a home

USUALLY MEANS

taking out A

MORTGAGE.

THAT MEANS YOU

borrow MONEY

TO buy A HOME,

using THAT HOME AS

col lateral

FOR THE LOAN.

S T E P 5 • A R R A N G I N G Y O U R M O R T G A G E 25

You don’t have to get your mortgagefrom the same place you have yoursavings or chequing accounts. Also,at the end of each term, you may beable to change the options of yourmortgage, such as the paymentschedule, the term, the rate, evenwho holds the mortgage.

MortgageFeaturesPrepayment Ensure that you have some form ofprepayment clause in your mortgagethat will allow you to paydown your mortgagewith a lump sum, or anextra payment, withoutpenalty.

Portability This means you cantransfer the terms andconditions of your mort-gage to your next home.For example, this mayallow you to keep a low interest rateif you sell one house and buy another.

AssumabilityThis means you may be able toassume (take over) the existing mort-gage on the property. It may haveattractive features, such as a lowerinterest rate than the prevailingmarket.

In turn, an assumable mortgagemay be a selling feature for you whenyou decide to move on in the housingmarket.

Expandability This lets you expand the principal ona first mortgage at the lender’sagreed-upon rate of interest. This canbe a cost-effective way to finance ahome renovation.

Types ofMortgagesConventional MortgageThis mortgage is for an amountwhich does not exceed 75% of eitherthe appraised value of the propertyor the purchase price, whichever is

lower. Your down pay-ment is a minimum 25%of the purchase price.

High-ratioMortgageWith this type of mort-gage, you contributeless than 25% of the costof the home as a downpayment and as little

as 5%.A high-ratio mortgage requires

mortgage loan insurance. CMHCoffers it for a premium of between0.5% and 3.75% of the mortgageamount (additional charges mayapply). This premium can be addedto your mortgage payments or paid infull on closing.

Second MortgageThis usually has a higher interest rateand shorter amortization than a firstmortgage. Secondary financing isoften used to make renovations to ahome.

Consider all the options

to helpcustomize a mortgage to fit your

needs.

You can achievemortgage freedom soonerby increasing the frequencyof your payments.

By making paymentsevery two weeks, instead ofmonthly, a 25-yearmortgage can be reduced to20 years.


OTHER IMPORTANT optionsAND choices THAT YOU’LL

WANT TO consider TO HELP

customizeYOUR MORTGAGE.

MortgageOptionsAssuming an ExistingMortgageYou take over the vendor’s mortgageas part of the price you pay for thehouse. Assuming an existing mort-gage is quick and saves you money onthe usual mortgage arrangementfees, such as appraisals and legalfees.

When you assume a mortgage,you don’t have to arrange financingfrom another lender and the rate onan existing mortgage may be lowerthan the prevailing market rate.

Sometimes, if it is specified in theoriginal mortgage agreement, a mort-gage can be assumed automatically. Ifnot, you may have to qualify with alender first.

Vendor Take Back (VTB)MortgageThis means the vendor lends you themoney to purchase the home. It’sbasically a second mortgage.

For example, on a home thatcosts $150,000, if the vendor has anexisting mortgage of $70,000 that youcan assume and you have $40,000 fora down payment, the vendor maylend you the outstanding $40,000,which you pay back monthly.

The vendor may be able to offerthis loan at less than bank rates.Some vendors will sell this mortgageto a mortgage broker instead of hold-ing it themselves.


Interest Rate Buy DownA vendor—usually a new-homebuilder—pays the lender a lump sum to lower the mortgage interestrate by up to 3% over a fixed term,usually one to two years.

A payment of $2,000–$3,000reduces your mortgage rate byabout 2%, increasing the mortgageamount for which you qualify.

New-home builders may offerbuy downs or discounts on the mort-gage rate to encourage sales. Butvendor financing is usually notrenewable, so you have to be pre-pared to pay the going market ratewhen the mortgage is renewed.

However, the builder may add theamount into the price of the homeand you may end up paying a highermortgage principal.

Rate of InterestInterest is the cost of borrowingmoney and is paid to the lender.Mortgage interest rates are affectedby the prevailing market interestrates. Mortgage rates are either fixedor variable.

A fixed rate is locked in so that itwill not rise for the term of the mort-gage.

A variable rate will fluctuate. Therate is set each month by the lender,based on the prevailing market rates.Your monthly payment is fixed to bethe same each month for the term ofthe loan, but the percentage of eachpayment that goes toward the inter-est, and the percentage that paysdown the principal, changes.

A variable rate can be a goodchoice if rates are high when youarrange your mortgage and then fallafterward. But if rates rise, you maywant to convert to a fixed rate. Bearin mind that this can cost you a cashpayment penalty.

If you select a variable rate, yourlender may restrict the mortgageamount to 70% of the purchase priceof the home and require a higherdown payment on either a conven-tional or a high-ratio mortgage.

Also, some lenders offer a pro-tected or “capped” variable rate. Thismeans your interest rate will not riseabove a predetermined limit.However, you usually pay a premiumfor this protection.

TermThe term of a mortgage is the lengthof time that certain factors, such asthe interest rate you pay, are set at anegotiated level.

Terms usually last anywherefrom six months to 10 years. At theend of the term you either pay offyour mortgage or renew it, possiblyrenegotiating its terms and condi-tions.

Generally, the longer the term thehigher the interest rate. Many expertssuggest you select a long term if inter-est rates are rising. If rates arefalling, you may want to select a shortterm and then lock in the rate whenyou think rates won’t go any lower.

Note that the term is not the amor-tization period.

The inspectionshowed that the homeneeded a new furnace,updated wiring andplumbing, and othersubstantial interior andexterior repairs thatwould cost $60,000.

Corrado and Mariawithdrew their offer andkept on looking.

Corrado and Maria werepre-approved by theirlender for a mortgage of$100,000 and had saved$30,000 for a downpayment.

They found a “fixer-upper” and made an Offerto Purchase of $110,000,conditional on a homeinspection.

AmortizationThis is the amount of time over which the entiredebt will be repaid. Most mortgages are amortizedover 15-, 20- or 25-year periods. The longer theamortization, the lower your scheduled mortgagepayments, but the more interest you pay in the longrun.


Monthly payment per $1,000 borrowed*Interest Cost per Interest Cost per Interest Cost perrate (%) $1,000 rate (%) $1,000 rate (%) $1,000

6.0 $ 6.40 8.5 $ 7.95 11.0 $ 9.63

6.5 $ 6.70 9.0 $ 8.28 11.5 $ 9.98

7.0 $ 7.01 9.5 $ 8.62 12.0 $10.32

7.5 $ 7.32 10.0 $ 8.95 12.5 $10.68

8.0 $ 7.64 10.5 $ 9.29 13.0 $11.03

*Amortized over 25 years based on 10% down payment.

Example:Oliver and Janet can afford $800 per month for a mortgage payment. If the pre-vailing mortgage interest rate is 6%, they will qualify for a mortgage of $125,000amortized over 25 years. If the prevailing mortgage rate is 13%, they will qualifyfor a mortgage of $72,600. The lower the interest rate, the higher the mortgage forwhich they qualify.

Payment comparison over various amortization periods*A shorter amortization means savings on interest payments.This example is based on a $100,000 mortgage at a 10% interest rate.

Amortization Monthly Total Total Interestperiod payment payments interest savings**

paid

25 years $ 895.00 $268,500 $168,500 n/a

20 years $ 952.00 $228,480 $128,480 $ 40,020

15 years $1,063.00 $191,340 $ 91,340 $ 77,160

10 years $1,311.00 $157,320 $ 57,240 $111,260

*These are rounded numbers for illustrative purposes only.

**Assumes a constant interest rate for the entire amortization period.


Open MortgageThis means you can repay the loan, in part or infull, at any time without penalty. Interest rates areusually higher on this type of loan.

An open mortgage can be a good choice if youplan to sell your home in the near future. Mostlenders will allow you to convert to a closed mort-gage at any time.

Many experts suggest taking an open mortgagefor a short term in times of high rates and convert-ing to a longer term when rates fall.

Closed MortgageA closed mortgage usually offers the lowest inter-est rate available. It’s a good choice if you’d like tohave a fixed rate to work your budget around for afew years. However, closed mortgages are not flex-ible and there are often penalties or restrictiveconditions attached to prepayments or additionallump sum payments. It may not be the best choiceif you might move before the end of the term.

Schedule of PaymentsA mortgage loan is repaid in regular payments,either monthly, biweekly or weekly. The more fre-quent payment schedules can save you money byincreasing the amount paid toward the total mort-gage each year.

The more frequent your payments in a year, thelower the overall interest you pay on your mortgage.

Payment frequency*This example is based on a $100,000 mortgage, 25-year amortization and a 10% interest rate.

Payment Total Interest Mortgage-interest savings** freepaid

Monthly $895.00 $168,500 n/a 25 years

payment(12 per year)

Biweekly $447.50 *** $118,927 $49,573 18 years 10 months


Weekly $223.75 *** $118,111 $50,389 18 years 9 months


*These are rounded numbers for illustrative purposes only.

**Assumes an interest rate of 10% for the entire 25 years.*** $895.00 extra paid annually


Split or Multiple-rateMortgageWith this mortgage, you negotiate aportion of your total mortgage loanat one rate and term, and anotherportion at a different rate and term.In this way you can split your mort-gage into two, three or more terms.

There are many more mortgageoptions available, such as a convert-ible mortgage. To find out more, talkto your lender.

Where to get amortgageMany institutions andindividuals lend moneyfor mortgagesThese include insurance companies,banks, trust companies, caisses popu-laires, credit unions, finance companiesand pension funds. You can also checkyour local newspaper classified adver-tisements for a listing of privatelenders. If you have a Self-directedRRSP, you may wish to investigate withyour lender the possibility of borrow-ing some or all of your mortgage fromyour Self-directed RRSP.

Mortgage brokers don’t usuallylend money but can find a lender foryou.

New-house and new-condominiumbuilders may offer lower-than- currentmarket rates by buying down the inter-est rate charged by the lenders so thatthey can sell their homes faster. (SeeInterest Rate Buy Down on page 27.)

A buy down is usually only for ashort term, and is usually not renew-able at the end of the term..

What a lender wants fromyouLenders want plenty of financialinformation about you and your co-buyers to assess your ability to repaythe loan. This ability is based on yourGDS and TDS ratios (see worksheetson page 14) and also on your assets,liabilities, earnings, employment his-tory and your past record of repayingloans. Specifically, your lender maywant the following:• personal information—age,

marital status, dependents• details of employment, including

proof of income (T-4 slips, person-al income tax returns or a letterfrom your employer stating yourposition)

• other sources of income, forinstance, pensions or rental income

• current banking information• verification of your down payment• consent to run a credit investigation• a list of assets, including property

and vehicles• a list of liabilities, for example,

credit card balances, car loans—the total amount you owe and yourmonthly payment amounts

• fees for an appraisal or for a copyof a valid appraisal report if onewas recently done

• mortgage insurance fees if a high-ratio mortgage is required

• a copy of the property listing• a copy of the Agreement of

Purchase and Sale on a resale home• plans and cost estimates on a new

home• the condominium financial state-

ments, if applicable• a certificate for well and septic, if

applicable

Rohinton andRosemary are carefulspenders and carefulsavers with stable jobs,though they don’t havelarge incomes. With a total mortgage of$100,000, the coupledecided to “split” theirmortgage. They locked in$75,000 of it for sevenyears at 10%, assuringthem of no increase inpayments for that periodof time.

For the remaining$25,000 of their mortgage, they negotiateda one-year term at a rate of 7%—expecting that rates would remain thesame or possibly drop.

This split mortgagemeans they can anticipatepaying off $25,000 of their mortgage as soon aspossible—and celebrate a mini-mortgage goal allthe sooner.

Approval ProcessA mortgage approval should take onlya few days, but it’s probably best toallow up to two weeks. During thisprocess, the lender will do a creditcheck and spot check other informa-tion you have provided. In addition, anappraisal of the value of your homemay be obtained.

If required, a request for mortgageloan insurance is submitted to CMHCor a private insurer. The lender thenapproves or rejects your mortgageloan.

Pre-approval A pre-approved mort-gage is very common. Withpre-approval, your lender approvesthe amount of your mortgage and givesyou a written confirmation or certifi-cate for a fixed time period before youstart looking for a home. The pre-approval term, usually lasting from 60to 90 days, also sets the mortgage ratethe lender will offer to you. If rates godown in that period, the lender shouldoffer you the new lower rate.

Pre-approval gives you a headstart on house hunting, but your finalapproval is still subject to a review ofthe property and a credit review ofyour finances.



With the right mortgage—

one that’s flexible and tailored to your

financial situation—

you have the luxury of owning your home.

You also have the luxury of being able to

relax.

When you need a mortgage loan

that is more than 75% of the

purchase price of your home,

a mortgage loan insurance

is required. It protects

the lender and, by law,

most Canadian lending

institutions require it.

Having mortgage loan insur-ance means that if you, theborrower, default on your

mortgage, the lender is paidback by the insurer—CMHC or a

private company1. With the risk oflosing their money removed,

lenders have the confidence to makemortgage loans of up to 95% of the pur-

chase price of the home (subject to priceceilings).

That means your down payment can be aslittle as 5% of the house price. With mortgageloan insurance, many Canadians who might beunable to obtain a 25% down payment can stillbuy a home.

What does mortgage loan insurance cost? There are two components an application feeand an insurance premium. The application feetypically ranges from $75.00 to $235.00 andmortgage loan insurance premiums range from0.5%-3.75% of the amount of your loan (additionalcharges may apply), depending on the size of theloan and the value of your home. The premiumcan be added to your mortgage loan and paidoff as part of your regular mortgage payments,or paid off in a lump sum at the time of purchaseto save interest charges on the premium itself.

GET into YOUR

HOME sooner .

MORTGAGE

LOAN

INSURANCE

helps YOU do i t .PUT as l i t t le as

5% DOWN.

32 S T E P 6 • M O R T G A G E L O A N I N S U R A N C E

1 It should be noted that the protection provided to thelender by the insurer does not relieve the borrower(s) ofthe obligations under his/her mortgage contract.

S T E P 6 • M O R T G A G E L O A N I N S U R A N C E 33

didn’t have a 25% downpayment saved, so theycouldn’t qualify for aconventional mortgage.

While looking forother options, they foundthey could be eligible formortgage loan insurancethat would allow them tobuy with as little as 5%down.

Where can mortgage loan insur-ance be obtained? See your lender,who can obtain mortgageloan insurance fromCMHC or a private insur-er.

CMHC will insuremortgages of up to 95%of the home’s purchaseprice or the market valueof the property, which-ever is less. (Restrictionsmay apply. Contact your local lender.)

Both new and resale homes areeligible. Here are some of the criteriathat must be met:• The home must be in Canada

and must be your principal resi-dence.

• Housing payments, includingprincipal, interest, property

taxes, heating(P.I.T.H.), the annualsite lease in the caseof leasehold tenureand 50% of applica-ble condominiumfees, can’t be morethan 32% of yourgross householdincome (GDS ratio).

• Your total debt load can’t be morethan 40% of your gross householdincome (TDS ratio) .Other critera apply and are sub-

ject to change. For details, pleasecontact CMHC or your local lender.

Right now, over 3 million

Canadians ownhomes with

insured mortgages.

Ruth and Sidney lived in a rented Revelstokehome for seven years.

When the landlorddecided to sell the home,he offered the couple thefirst opportunity to buy it.

While his price wasfair, Ruth and Sidney


Home, Affordable HomeLet’s face it, the sweetest home is

one you can comfortably afford. Whether you’re buying, renovating or simplyrenewing a mortgage, making the most of yourmoney is a challenge. Wouldn’t it be nice tohave a personal financial guide at your side tohelp analyze your home-financing options?Well, now you can—with AffordAbility®, anew software program from CMHC, Canada’shousing expert.

AffordAbility lets you examine as many home-financing scenarios as you can imagine, inprivate and at your own pace. Just plug inyour personal financial information, change asmany variables as often as you like and AffordAbility figuresout the impact instantly. It’s so easy…

For a demonstration of this Windows™-basedprogram, visit CMHC’s web site at www.cmhc-schl.gc.ca/afford

Call 1 800 668-2642 to order AffordAbility directly for $29.95(+ taxes, shipping and handling)

Also available at leading software retailers across Canada.

34 CHAPTER TITLE

Making an offer can be an intense

experience. For instance, you may

decide that this is the perfect home

in which you will live happily ever

after. It’s a lovely dream, but it may

not come true—at least not in this

house. Try not to get ahead of

yourself by moving

into a house in

your mind’s eye

b e f o r e

the deal

is completed. Whenever an offer is

made, you have to be prepared for it

to be rejected.

Once you’ve found a home that

meets both your needs and your

price range, you can present the

vendor with an Offer to Purchase or

an Agreement of Purchase and Sale.

This offer or agreement is legally

binding. It should not be made

casually. You may want to have a

lawyer (or notary in Quebec) look it

over to ensure that your interests

are protected.

HERE’S how TO

HELP

make sure ALL

THE DECISIONS

YOU MAKE

ARE good ONES.

AN

OFFER is morethan A LEGAL

DOCUMENT. IT’S

an emotionalEVENT.

34 S T E P 7 • P R E P A R I N G A N O F F E R 34 S T E P 7 • P R E P A R I N G A N O F F E R

Offer to Purchase

Page 2

� The Purchaser shall not call for the production of any title deed, abstract, survey or other evidence of title except such as are in the

possession or control of the Vendor. The Vendor agrees that he will deliver any existing survey to the Purchaser so soon as possible and prior

to the last day allowed for examining title.

�This Agreement shall be completed on or before the........................

...................day of...........

........................

......, 19.........on which date vacant

possession of the real property shall be given to the Purchaser unless otherwise provided for herein.

� Until completion of sale all buildings and equipment on the real property shall be and remain at the risk of the Vendor, and the Vendor

will hold all policies of insurance effected on the property and the proceeds thereof in trust for the parties hereto, as their interests may

appear. In the event of damage to the said buildings and equipment before the completion of this transaction, the Purchaser shall have the

right to elect to take such proceeds and complete the purchase, or cancel this Agreement, whereupon the Purchaser shall be entitled to the

return, without interest or deduction, of all moneys theretofore paid on account of this purchase. Vendor agrees to furnish Purchaser with

copies of existing fire insurance policies within seven days of the date of acceptance hereof.

� Unearned fire insurance premiums, fuel, taxes, interest, rentals, and all local improvement and water rates and other charges for

municipal improvements to be apportioned and allowed to the date of completion of sale (the day itself to be apportioned to the Purchaser).

Provided Purchaser may elect not to accept assignment of fire insurance in which case no adjustment for insurance premiums.

�The deed or transfer, save for Land Transfer Tax Affidavit, to be prepared at the expense of the Vendor in a form acceptable to the Purchaser and

if a mortgage or charge is to be given back, it shall be prepared at the expense of the Purchaser in a form acceptable to the Vendor.

� Provided that this Agreement shall be effective only if the provisions of Section 49 of the Planning Act, as amended, are complied with.

The deed or transfer shall contain the statement of the Vendor and the Vendor’s solicitor referred to in section 49 (21a) of the Planning

Act, 1983 as amended.

The Vendor represents and warrants to the Purchaser that the buildings on the property have not been, and will not be at the

date of completion, insulated with urea formaldehyde foam insulation. This warranty shall survive the completion of this transaction.

The Vendor represents and warrants that no consent to this transaction is required pursuant to section 21(1) of the Family Law

Act, 1986 unless the Vendor’s spouse has executed this agreement to consent thereto, and that the Transfer/Deed shall contain a

statement by the Vendor as required by subsection (3) of section 21 or the spouse of the Vendor shall execute the Transfer/Deed to

consent thereto.

� Vendor further agrees to produce evidence that he is not now and that on closing he will not be a non-resident of Canada within the

meaning of Section 116 of the Income Tax Act, or, in the alternative, evidence that the provisions of said Section 116 regarding disposition

of property by a non-resident person have been complied with at or before closing.

� This Offer, when accepted, shall constitute a binding contract of purchase and sale, and time in all respect shall be of the essence of this

Ag

re

em

en

t.

�It is agreed that there is no representation, warranty, collateral agreement or condition affecting this Agreement or the real property or supported

hereby other than as expressed herein in writing.

� Any tender of documents or money hereunder may be made upon the Vendor or Purchaser or upon the solicitor acting for the party on

whom tender is desired, and it shall be sufficient that a cheque certified by a chartered bank or trust company be tendered instead of cash.

�Each party to pay the costs of registration and taxes on his own documents.

�This Offer and its acceptance to be read with all changes of gender or number required by the context.

DATED at....................

........................

....this........................

........................

day of.......................

........................

.19........

�IN WITNESS WHEREOF........................

..have hereunto set.......................

hand........................

and seal.

SIGNED, SEALED AND DELIVERED

In the presence of:�

........................

........................

........................

........................

......(Affix Se

�Purchaser

�.......................

........................

........................

........................

.......(Affix Seal)

�Purchaser

I/We, hereby accept the above offer, and covenant, promise and agree to and with the above-named Purchaser to duly carry out the

on the terms and conditions above mentioned, and

hereby accept the deposit of $

out of which th

hereby authorized to retain $

commission of

per cent of an amount equal to the above mentioned sa

Commission payable only if, as and when transaction is completed.

AND I ........................

........................

........................

........................

........................

..................., spouse of the said Vendor, hereby conse

to consent to the transaction evidenced by the deed for transfer.

day of.......................

........................

.19........

96December

fifteenth

thSeptember 96

Reginathirteenth

September 96

R.E. Agent

Joseph P. Homebuyer

Marion J. Homebuyer

7,440.006%

10,000.00

Your offer or agreement will include:• Basic details, such as your legal name, the name

of the vendor, and the legal and civic address ofthe property.

• The purchase price. In a first offer, price is nego-tiable, so you may want to start lower than yourmaximum affordable cost.

• The chattel or items in the home which will beincluded in the purchase price. These mayinclude window coverings, appliances or satel-lite dish. Whatever items are in or around thehome that you think are included in the saleshould be specifically stated in writing in youroffer.

• All financial details. The amount of deposit, anyinterest to be paid on it and details of mortgagefinancing.

• The closing date. The day you take possessionof the home. Usually 30 or 60 days from the dateof agreement, but with some home sales, it’soften 90 days or longer.

• Request for a current land survey of the prop-erty.

• Expiration date and time indicates when theoffer becomes null and void.

In addition, it is common to make a conditional offer.For example, you may make an offer that is goodonly on the condition that you obtain mortgagefinancing or that the house passes a home inspec-tion.

This is the front andback of a standardOffer to Purchase(also known as anAgreement ofPurchase and Sale).This document has tobe filled out before thepurchase of a homecan be transacted.

I/We......................

......................

......................

......................

......................

...........................

......................

......................

......................

.....

of the........................

..............of...........

........................

........................

..................................

.........(as Purchaser), having inspected the property, hereby

agree to and with........................

........................

........................

........................

........................

............................

........................

....................(as Vendor)

through........................

........................

........................

........................

....................................

........................

........................

...................Agent for Vendor

to purchase All and Singular the premises on the........................

..............side of...........

........................

........................

....................................

.................

in the........................

..............of...........

........................

........................

..................................

........................

........................

........................

.........known as

........................

........................

........................

........................

........................

...............................

........................

........................

........................

...having a

frontage of.......................

........................

........................

...more or less, by a depth of.......................

........................

........................

...more or less, being

Lot No........................

........................

......according to plan No........................

........................

....registered in the Land Registry Office for the Registry/

Land Titles Division of.......................

........................

........................

........................

..................................

...................(herein called the “real property”)

at the price of.......................

........................

........................

........................

.............................

........................

.........Dollars ( $........................

..................)

�

cash

of lawful money of Canada, payable ..............

........................

........................

........................

.....................Dollars ( $............

........................

......)

�

cheque

to the said agent/Vendor on this date as a deposit to be held in trust pending completion or other termination of this Agreement and to be credited on

the account of the purchase price on closing, and agree to

The Vendor represents that as at the date of acceptance hereof the Vendor has not received from any municipal or other governmental

authority any deficiency notice or work order affecting the real property pursuant to which any deficiencies are required to be remedied or

any demolition, repairs or replacements are required to be carried out. If the Vendor receives any such deficiency notice or work order after

the date of acceptance hereof, the Vendor shall forthwith produce same to the Purchaser for inspection. If by the date of closing the Vendor

has not either (a) complied with such deficiency notice or work order, or (b) settled with the Purchaser any question of an abatement of the

purchase price arising out of such deficiency notice or work order, the Purchaser may at his option either (a) accept the real property subject

to such deficiency notice or work order or (b) terminate this Agreement. In the event of termination as aforesaid, all moneys paid hereunder

shall be returned to the Purchase without interest or deductions.

The spouse of the Vendor shall consent to this Agreement, and shall agree to consent to the transaction evidenced by the deed or transfer.

Tenancy, if any

The purchase price herein shall include the following, free and clear of encumbrances:

All fixtures, which shall remain affixed to the real property, except the following fixtures which may be removed by the Vendor

prior to closing:

The following chattels all of which are owned by the Vendor:

This Offer shall be irrevocable by the Purchaser until.....................

.p.m. on the........................

.................day of...........

........................

.......19............

after which time, if not accepted, this Offer shall be null and void and the deposit returned to the Purchaser with out interest or deduction.

P vided the title is good and free from all encumbrances, except as aforesaid, and except local rates, and except as to any registered

t that run with the land provided that such are complied with, and except for any minor easements for hydro, gas,

to accept the real property subject to municipal and other governmental requirements, including

vided the same have been complied with. Vendor agrees to authorize municipal and

any information on file pertaining to such requirements.

title at his own expense, and to satisfy

presentuse may be

tion

Joseph P. Homebuyer & Marion J. Homebuyer

CityRegina, Saskatchewan

CityRegina, Saskatchewan

Peter John Seller & Greta Seller

Gordon David Agent/Hometown Realty Inc.

EastPrairie Drive

1723 Prairie Drive

47 feet

134 feet

149

728

Regina, Saskatchewan

One hundred and twenty-four thousand124,000.00

Ten thousand

10,000.00

The balance of the purchase price on closing.

Vendor agrees to discharge any mortgages, liens and/or other encumbrances

registered against the property on or before closing at his/her expense.

Dining room chandelier, master bedroom drapes

Patio furniture, garden shed5:00

fifteenthSeptember 96

S T E P 7 • P R E P A R I N G A N O F F E R 35

Tips on making an offer• You may want to submit a conditional

offer, a standard contract with yourown conditions. However, a cleanoffer with no conditions attached isoften more attractive to the vendorbecause it is most straightforward.

• Often the vendor will make changesand return your offer. This is calleda counteroffer. You may accept, rejector even revise a counteroffer. Offersand counteroffers often makechanges to closing dates or chattel—but most often they hinge on money.

• It’s best to know what your absoluteupper limit is before you start nego-tiating or you may get caught up inthe action and offer more than youreally can afford.

Buying a condominiumResale condominiums You may wishto hire an independent inspector tocheck the condominium’s structure andits major systems or ask to see thebuilding’s own recent inspection auditand make your offer conditional on asatisfactory report.

Ensure that the condominium iswell maintained and managed and thatsecurity systems are effective. Tour thecommon areas and grounds and speakwith other residents.

Consider the age of the building,what improvements and repairs havebeen done and when. Make sure tocheck that there is adequate money inthe condominium’s reserve fund. Inaddition, you may wish to review the con-dominium’s declaration and bylaws.

Make your offer conditional onreceiving an estoppel certificate. (Doesnot apply in Quebec.) There may be a feefor this document but it will provideinformation including the develop-ment’s finances and insurance, and giveyou an overview of the condominiumcorporation’s affairs. (In Quebec, the

The process of making anoffer, receiving a counterofferand then revising it again isnot uncommon. However, itcan seem like a bit of a rollercoaster ride—exciting buttense too. Still, it’s all part ofmaking the deal work best forthe individuals andcircumstances involved.

Your offer must be madewith a deposit to the vendor orthe vendor’s agent. This

deposit will go toward thepurchase price on the closingdate. Deposits are usually nomore than 10% of thepurchase price. But a largerdeposit may tell the vendorthat you’re very serious aboutyour offer.

A deposit on anunaccepted offer will bereturned. If you cancel anaccepted offer, you may loseyour deposit.

The vendor accepts your offer.

The deal is concluded.

YOU

The deal is concluded.

VENDOR

Your real estate representative

helps you prepare an Offer to

Purchase. This offer should

include all the details of

the sale.

Your real estate representative or lawyer will then

present the offer to the

vendor, who will accept, reject or

make a counteroffer.

The vendor may make a counter-offer, asking a higher price.

You reject the counteroffer of a higher price and

decide not to make a subsequent counteroffer.

The vendor may make a counteroffer,

asking a higher price.

If a counteroffer is returned to you at a higher price, ensure

that you know exactly how much you can

afford before you start negotiating. You don’t want to get caught up

in the heat of the moment with costs you can’t afford.

The vendor accepts this counteroffer.

You sign the offer back to the vendorwith a higher price than your original offer, but lower

than the vendor’s counteroffer.

You may want your lawyer to

look at the offer BEFORE you show it to the vendor,

because it is a legally

binding document.

The sale doesn’t go through and your

deposit is returned.

The process of presenting an Offer toPurchase

36 S T E P 7 • P R E P A R I N G A N O F F E R

purchaser is entitled to request astatement of common expenses.)

You’ll want to know if there arerestrictions on whether your unit canbe renovated or leased.New condominiums If you’ve madean offer to purchase a condominiumbefore the development is registered,you should ensure that the bylawsand other regulationsyou were shown at thetime are the same onesthat are registered.

Any major differ-ences may give youlegal grounds to termi-nate the agreement.

Ensure that any special upgradesor finishes you’ve specified to com-plete your unit are outlined in theOffer to Purchase.

New home warranties are avail-able in most provinces, but checkwith your home warranty program tosee if they cover condominiums.

These warranties guaranteedeposits and down payments to aspecified maximum, in the event adeveloper is unable to complete acondominium project. They alsoinsure units and common elementsagainst defects for a given time period.

Building your own homeIf you are hiring a contractor orbuilder to construct your home, thereare some special considerations.Custom-built homes are usually con-tracted at a predetermined fixed costor on a cost-plus contract, whichmeans you pay the builder the costprice of labour and materials and anagreed-upon overhead charge. Thatcharge is either a fixed fee or a per-centage of the cost of the job.

It is important to detail all tradesused in construction of the home ifyou want to claim a rebate on the

GST charged.Always use a written contract with

a builder. This contract should out-line the payment schedule and otherdetails of the construction process,such as who is responsible for deal-ing with public authorities, gettingbuilding permits and arrangingwiring inspections.

Specify materials asprecisely as possible.Be specific aboutfinishes, the type oftile or broadloom.Provide brand namesand model numbers,

if possible.A typical payment schedule

begins with a deposit of 10% of theagreed-upon total cost of the homewhen work starts.

Payments are then made inscheduled instalments, in accordancewith the percentage of work com-pleted.

Don’t make the final paymentuntil the entire job is finished,inspected and approved by the build-ing inspector.

In some provinces, constructionlien legislation requires that you holdback 10% of the total cost of eachpayment to the builder until 45 daysafter the building is completed. Thisprotects you from any liens againstthe property by subcontractors.Check for details of this legislation inyour province.

Finally, check for provincial andprivate programs that offer war-ranties for new homes.

S T E P 7 • P R E P A R I N G A N O F F E R 37

The process of

buying a home

has its ups and

downs. As long

as you’re

prepared for

them, the ride

can be exciting

and

rewarding.

Especially on

the day the

deal is done!

Know yourfinancial limitsbefore you start

negotiating.

the last step?the last step?Ready for

38 S T E P 8 • C L O S I N G A N D M O V I N G

Closing is a process during which all thelegal and financialobligations stated inyour Offer toPurchase will be met.Your real estaterepresentative orlawyer should keepyou informed of thesteps involved, buthere’s an outline ofwhat to expect.

Closing and.....MAKE A smooth transition TO YOUR new HOME

BY taking care OF ALL THE small details AHEAD OF TIME.

1Show yourlawyer

(notary) theagreementA copy of the signedOffer to Purchase issent to your lawyer,who will examine anyconditions of sale andnote the closing date.You’ll also tell yourlawyer how you, andany other co-buyers ofthe house, will beregistered on the titleto the property.

2 All conditions ofyour offer are

met During closing, allconditions in the Offer toPurchase must be satisfiedby the stated dates. Forexample, you may havemade the sale conditionalupon a home inspection.This inspection should becompleted before youcontinue closing.

3 A land survey is doneYou’ll have to arrange for an up-

to-date land survey on the property.Your lender will insist on this survey.So, if you did not receive one fromthe vendor, you’ll have to pay to haveone done.

4 Your lawyer(notary) searches

the title Once all specifiedconditions have been met,your lawyer will search the titleto the property. This ensuresthat the vendor does have aclear title to the home andthat you can purchase itwithout any legal problems.

6Mortgagedetails

are finalized Yourlawyer or lender will alsodraw up and finalize yourmortgage documents. Ifyou are using financingoptions, such as a vendortake back mortgage,you’ll need your lawyer toprepare this documenttoo.

5Check intotaxes and liens

Your lawyer will also be checking intogovernment regulationsand other legalities.These include ensuringthat the property taxeson the house are up todate and that there areno liens on the chattel,that is the personalproperty the vendor hasagreed to sell with thehouse.

7Arrange yourutilities It’s

up to you to makearrangements for finalpayments of utilities atyour old home and tobegin service at yournew home. Now is alsothe time to makearrangements formoving.

8 It’s all over butthe signing of

the cheque Yourlawyer will prepare aStatement of Adjustment,which will confirm theselling price, the amountyou have to pay thevendor, the balance of thedown payment andadjustments. A certifiedcheque for this totalshould be made payableto your lawyer in trust.You’ll also owe yourlawyer for legal fees,which include closingcosts and disbursements.

� � � � �

��

��

��

��

��

��

� �

� � �

Saying goodbye to one home andneighbourhood and discovering anew one is an exciting process. But itcan also be hectic and, if it’s not wellplanned, it may seem to get morefrenzied as the big day approaches.To help make moving a smooth tran-sition for everyone, plan ahead!Hiring a mover Friends or relativesmay be able to recom-mend a mover, but youcan also ask the moverfor references. You’ll alsowant the mover to giveyou an estimate and out-line of fees. Is there a flatrate or hourly charge?

During the move,you’ll want to ensure thatyour belongings are insured. Yourhome or property insurance maycover goods in transit but call yourbroker to make sure and to see whatthe limits are. Many moving compa-nies offer additional insurancecoverage.

Once you’ve selected a mover,have a representative come to yourhome to see what will be moved. Tellthe mover how much of the packingyou will do yourself.

If you decide to do your own pack-ing to save money, keep in mind thatyou need the proper materials andthe time. Experts estimate that ittakes two people approximately two

to three days to prepare and pack thecontents of an average three-bed-room home—that’s a full-time job!

Professional movers have specialcrates and wooden cases for mirrorsand dishware. But they are notresponsible for items such as jewel-ry, currency or important papers. Youwill have to move these personally.

On moving day, gothrough the house withthe van supervisor andgive any special instruc-tions. For example, ifyou want a certain item,such as a crib, to be thefirst out of the van atyour new home, itshould be packed last.

The movers will also make note of thecondition of your goods on an inven-tory list.

Accompany the supervisorthrough the house as the list is madeto make sure it is complete and accu-rate. Then, when the van arrives atyour new home, mark off the items onthe mover’s list as they are unloaded.

You’ll sign for the receipt of goods,subject to complete unpacking andinspection.

Most movers will unload andunpack boxes and remove packingmaterials, but movers do not putdishes or linens into cupboards.

........Moving

Packing foryourself will save money

but could take up tothree days.

The day you finallysucceed in realizingyour goal! It’s the dayyou can actually callyour new home yours.Closing is the day youget the keys and legallytake possession.

It’s a day for feelinggreat satisfaction atreaching your goal. Butthe process isn’t quiteover yet. There are alot of other things thatalso happen on closingday.✔ Your lender will

provide themortgage money toyour lawyer (ornotary in Quebec).

✔ You must providethe balance of thepurchase price toyour lawyer.

✔ You will also beresponsible forpaying legal fees,disbursements andland transfer taxes.

✔ Your lawyer paysthe vendor,registers the homein your name andprovides you with adeed and the keys.

Closing day

S T E P 8 • C L O S I N G A N D M O V I N G 39

40 S T E P 8 • C L O S I N G A N D M O V I N G

There are a variety of people and companies to inform when you’removing into your new home. You need to call thephone company andother utilities todiscontinue serviceat your old addressand start it at your new home.

You may want tonotify them as soon aspossible and thenconfirm with themcloser to your actualmoving day.

It’s also a goodidea to send writtennotifications of changeof address to friends,family, and variousother interestedparties.

Your real estaterepresentative ormoving company mayalso be able to provideyou with a handymoving-day checklist.

Telephone

Relatives and friends

�

�

�

�

�

� Landlord, if necessary

� Insurance broker(s)

� Schools

� Post office

� Phone company

� Electricity/hydro

� Natural gas

� Heating fuel company (ask if you receive a deposit refund)

� Cable television

� Doctor

� Dentist

� Lawyer/notary

� Veterinarian

� Bank

� Employer

� Income tax

� Family allowance

� CPP/QPP

Telephone

� Old Age Security

� Driver’s license

� Car ownership

Credit cards

�

�

�

Clubs, associations and charities

�

�

�

�

Subscriptions

� Newspapers

�

� Magazines

�

�

� Book club

� CD or tape club

� Video club

Others

�

�

Extra worksheets at the back of the GuideExtra worksheets at the back of the Guide your new home!your new home!Now step intoNow step into

A D D I T I O N A L H E L P F U L I N F O R M A T I O N F R O M C M H C • 41

Home Care: A Guide to Repair and MaintenanceIf your home came with an owner’s manual, this would be it! A complete well-illustrated guide to operating a home—from housekeeping tips to putting together abasic tool kit, from replacing a light switch to painting and controlling condensation.Ideal for anyone moving into their first home. (1985, 116 pages, 143 illustrations)Order # 61019 $6.95

Healthy Housing Renovation PlannerThe Healthy Housing Renovation Planner is your complete guide to

renovating the healthy way. With the most up-to-date advice on popularrenovation projects like: kitchens, baths, basements, doors and windows,

the Healthy Housing Renovation Planner will help you make informeddecisions for your next renovation project. Illustrations, step-by-step

guides, money-saving project planning worksheets and handy comparisoncharts will help you through the important planning stages of a renovation

- whether you are hiring a contractor or doing the work yourself!Order # 60957 $34.95

Your Next Move: Choosing a neighbourhood with sustainable featuresIf you are considering a move, this brochure will help you identify neighbourhoodfeatures that benefit you and the environment. You will learn about the features, likeclose access to shopping and jobs as well as see examples from real neighbourhoodsacross Canada. When searching for your next home, use the checklist to compareneighbourhoods. (2001, 10 pages)Order # 62180 Free

The Clean Air Guide: How to Identify and Correct Indoor Air Problems in Your Home

The homeowner’s first step to better air quality. This guide will help youevaluate indoor air quality, identify contaminants and their sources,

and determine what corrective measures to take. Crucial informationfor those with asthma, allergies, respiratory diseases or environmental

sensitivities. Includes a personal action plan. (Revised 1998, 40pages)

Order# 61082 $5.95

Before You RenovateThinking of renovating? Get advice from Canada’s renovation experts… whether you’replanning to do it yourself or to hire a professional—we have the information to helpmake your renovation a success. Make CMHC your first stop.Order # 61001 Free!

FlexHousing Homes That Adaptto Life’s Changes

FlexHouses? They’re houses to last you a lifetime, adaptable toyour changing needs, attractive yet practical, and one of the

smartest investments on the market. The FlexHousing movement ischanging the way Canadians build their homes. Here’s your chance

to get in on the ground floor!Order# 60945 $9.95

ome carehA GUIDE TO REPAIR AND MAINTENANCE

efore you

renovate. . .

renovation guide

and catalogue

b

LOOK BEFORE YOU LEAPWhat to know before jumping into your project

THE PEN IS MIGHTIER THAN THE HAMMERWhy you should always get

it in writing

KNOW HOW NOWCheck out CMHC’s books and

videos for expert advice

DISCOVER THE EIGHT STEPS TORENOVATION SUCCESS

�

�

�

�

�

�

Additional Helpful Information from CMHC

The staff of the CANADIAN HOUSING INFORMATION CENTRE

is dedicated to providing EASY ACCESS to a WEALTH of HOUSING INFORMATION

CALL US toll-free at 1-800-668-2642.E-MAIL US AT [email protected] OR VISIT US ON OUR WEB SITE AT: www.cmhc-schl.gc.ca

42 • G L O S S A R Y

Amortization The period of time, most often 15,20 or 25 years, required to reducea debt to zero when payments aremade regularly.

AppraisalA process for estimating themarket value of a particularproperty.

Approved LenderA lending institution authorized bythe Government of Canadathrough CMHC to make loansunder the terms of the NationalHousing Act. Only ApprovedLenders can negotiate mortgageswhich require mortgage loaninsurance.

Assumption Agreement A legal document signed by ahome buyer that requires thebuyer to assume responsibility forthe obligations of a mortgage bythe builder or the original owner.

Blended PaymentA mortgage payment that includesprincipal and interest. It is paidregularly during the term of themortgage. The payment totalremains the same, although theprincipal portion increases overtime and the interest portiondecreases.

Building PermitA certificate that must be obtainedfrom the municipality by the prop-erty owner or contractor before abuilding can be erected orrepaired. It must be posted in aconspicuous place until the job iscompleted and passed assatisfactory by a municipalbuilding inspector.

Closing CostsCosts, in addition to the purchaseprice of the home, such as legalfees, transfer fees anddisbursements, that are payableon the closing date. Closing coststypically range from 1.5%-4% of ahome’s selling price.

Closing DateThe date on which the sale of aproperty becomes final and thenew owner takes possession.

CMHCCanada Mortgage and HousingCorporation. A Crown corporationthat administers the NationalHousing Act for the federalgovernment and encourages theimprovement of housing and livingconditions for all Canadians.

CMHC also creates and sellsmortgage loan insuranceproducts.

Conditional Offer/Conditions of SaleAn Offer to Purchase that issubject to specified conditions, forexample, the arranging of amortgage. There is usually astipulated time limit within whichthe specified conditions must bemet.

Collateral MortgageA mortgage which secures a loanby way of a promissory note. Themoney which is borrowed can beused to buy a property or foranother purpose such as homerenovation or for a vacation.

Commitment Letter/Mortgage ApprovalWritten notification from the mort-gage lender to the borrower thatapproves the advancement of aspecified amount of mortgagefunds under specified conditions.

Conventional MortgageLoanA mortgage loan up to a maximumof 75% of the lending value of theproperty. Mortgage loan insuranceis not required for this type ofmortgage.

CovenantA clause in a legal documentwhich, in the case of a mortgage,gives the parties to the mortgage aright or an obligation.

For example, a covenant canimpose the obligation on aborrower to make mortgagepayments in certain amounts oncertain dates. A mortgagedocument consists of covenantsagreed to by the borrower and thelender.

DeedA legal document which is signedby both the vendor and purchaser,transferring ownership. Thisdocument is registered asevidence of ownership.

GLOSSARYTHESE SIMPLE

JARGON-FREE definit ions

AND examples WILL help YOU

ON YOUR WAY HOME.

G L O S S A R Y • 43

DefaultFailure to abide by the terms of amortgage loan agreement. Afailure to make mortgagepayments (defaulting on the loan)may give cause to the mortgageholder to take legal action topossess (foreclose) the mortgagedproperty.

DepositMoney placed in trust by thepurchaser when an Offer toPurchase is made. The sum is heldby the real estate representativeor lawyer until the sale is closed,and then paid to the vendor.

Discharge of MortgageA document signed by the lenderand given to the borrower when amortgage loan has been repaid infull.

Down PaymentThe portion of thehouse price the buyermust pay up frontfrom personalresources, beforesecuring a mortgage.It generally rangesfrom 5%-25% of thepurchase price.

EasementA right acquired foraccess to or over, orfor use of, anotherperson’s land for aspecific purpose, such as adriveway or public utilities.

EncumbranceA registered claim for debt againsta property, such as a mortgage.

Equity The difference between the pricefor which a home could be soldand the total debts registeredagainst it.

Equity usually increases asthe outstanding principal of themortgage is reduced throughregular payments. Market valuesand improvements to the propertyalso affect equity.

ForeclosureA legal procedure in which thelender gets ownership of theproperty if the borrower defaultson the mortgage loan.

Gross Debt Service Ratio(GDS)The percentage of the borrower’sgross monthly income that will beused for monthly payments ofprincipal, interest, taxes, heatingcosts and half of any condominiummaintenance fees.

High-ratio MortgageA mortgage loan in excess of 75% of the lending value of theproperty. This type of mortgagemust be insured—for example, byCMHC—against payment default.

HoldbackAn amount ofmoney withheldby the lenderduring theprogress ofconstruction of ahouse to ensurethat constructionis satisfactory atevery stage. Astandardholdback amountis 10% of the totalcost of thebuilding project.

InterestThe cost of borrowing money.Interest is usually paid to thelender in instalments along withrepayment of the principal loanamount.

Interest Adjustment Date (IAD)A date from which interest on themortgage advanced is calculatedfor your regular payments. Thisdate is usually one payment periodbefore regular mortgage paymentsbegin. Interest due from the dateyour mortgage is advanced to theIAD is due on closing.

Lending ValueThe purchase price or marketvalue of a property, whichever isless.

Lien (Mechanic’s)A claim against a property formoney owing. A lien may be filedby a supplier or a subcontractorwho has provided labour ormaterials but has not been paid. Alien must be properly filed by aclaimant. It has a limited life,prescribed by statute that variesfrom province to province.

If the lienholder takes actionwithin the prescribed time, thehomeowner may be obliged to paythe amount claimed by the lien-holder.

Alternatively, the lienholdermay force a sale of the property topay off the debt.

Loan-to-value Ratio The ratio of the loan to the lendingvalue of a property expressed as apercentage. For example, the loan-to-value ratio of a loan for $90,000on a home which costs $100,000 is90%.

Maturity DateThe last day of the term of themortgage agreement. On this daythe mortgage loan must be eitherpaid in full or the agreementrenewed.

MortgageA mortgage is security for a loanon the property that you own. It isyour personal guarantee to repaythe loan as well as a pledge of theproperty as security for the loan.

Mortgage Loan InsuranceIf you have a high-ratio mortgage(more than 75% of the purchaseprice), your lender will requiremortgage loan insurance—available from CMHC or a privateinsurer. The insurance premiumwill cost between 0.5% and 3.75%of the amount of the mortgage(additional charges may apply).

The Deed

44 • G L O S S A R Y

Mortgage Life InsuranceThis insurance guarantees that ifyou die your mortgage will be paidin full. This insurance can beconveniently purchased throughyour lender and the premiumadded to your mortgage payments.However, you may want tocompare rates for equivalentproducts from an insurancebroker.

Mortgage PaymentA regularly scheduled paymentthat is blended to include bothprincipal and interest.

MortgageeThe lender whoprovides themortgage loan.

MortgagorThe borrower whopledges theproperty as securityfor the loan.

Net WorthYour total financialworth, calculatedby subtracting yourtotal liabilities from your totalassets.

Offer To PurchaseA written contract setting out theterms under which the buyeragrees to buy. If accepted by theseller, it forms a legally bindingcontract subject to the terms andconditions stated in the document.

Option AgreementA document stipulating that, inexchange for a deposit, a specifiedindividual is to be given the firstchance of buying a property at orwithin a specified period of time.

An option holder who does notbuy at or within the specifiedperiod loses the deposit and theagreement is cancelled.

P.I.T.Principal, interest and taxes —payments due on a regular basisunder the terms of the mortgageagreement.

Generally, payments are mademonthly and include one-twelfthof the estimated annual municipaland school taxes. Since thesetaxes change from year to year,this section of the mortgage willchange accordingly.

P.I.T.H.Principal, interest, taxes andheating—costs used to calculate

the Gross Debt Serviceratio (GDS).

PrincipalThe amount of moneyactually borrowed.

RealtorA real estaterepresentative who is amember of anorganization of personsengaged in thebusiness of buying andselling real estate, such

as the Canadian Real EstateAssociation.

RefinanceTo pay off a mortgage or otherregistered encumbrance andarrange for a new mortgage,sometimes with a different lender.

Second MortgageAn additional mortgage on aproperty that already has amortgage.

Statement of AdjustmentA balance sheet statement thatindicates credits to the vendor,such as the purchase price andany prepaid taxes, and credits tothe buyer, such as the deposit andthe balance due on closing.

SurveyA document that illustrates theproperty boundaries andmeasurements, specifies thelocation of buildings on theproperty, and indicates anyeasements or encroachments.

TermThe length of time during which amortgagor pays a specific interestrate on the mortgage loan.

The entire mortgage principalis usually not paid off at the end ofthe term because the amortizationperiod is normally longer than theterm.

Title A freehold title gives the holderfull and exclusive ownership ofland and buildings for anindefinite period of time.

In condominium ownership,land and common elements ofbuildings are owned collectively byall unit owners, while theresidential units belongexclusively to the individualowners.

A leasehold title gives theholder a right to use and occupyland and buildings for a definedperiod of time.

Total Debt Service Ratio(TDS)The percentage of gross monthlyincome required to cover allmonthly payments for housing andall other debts, such as carpayments.

Vendor Take BackMortgageMortgage financing arrangedbetween the seller of the propertyand the buyer. The title is trans-ferred to the buyer.

Often this type of loan is asecond mortgage which the selleris willing to arrange at belowmarket rates to ensure the buyercan purchase the house. Most ofthese arrangements are notrenewable or transferable to thenext owner of the house.

Zoning BylawsMunicipal or regional laws thatspecify or restrict land use.

Easement

INDEX • 45

Note: * indicates Glossary term

Agreement of Purchase and Sale, see

Offer to Purchase*

Amortization* ………24, 27, 28, 42, 44

Appraisal* (property) 15, 20, 26, 30-

32, 42

Approved Lender*, also see Lender 42

Assumption agreement*………………42

Blended payment*, also see Mortgage

payment* ………………………12, 42

Builder, also see Holdback, Lien

and Warranty .......6, 20, 27, 30, 37

Building code ……………………………6

Building inspector…………………37, 42

Building permit* …………………37, 42

Canada Mortgage and Housing

Corporation, see CMHC*

Chattel ………………………35, 36, 38

Closing ……15, 21, 25, 38, 39, 43, 44

Closing costs *…………………16, 38, 42

Closing date* ……15, 35, 36, 38, 39, 42

CMHC* ………10, 11, 13, 15, 20, 25,

30-33, 41-43

Conditional Offer*, see Conditions of

Sale*

Conditions of Sale* ……15, 20, 21, 35,

36, 38, 42, 44

Condominum ………6, 7, 15, 30, 36, 37

Condominium fees ……7, 13-15, 33, 43

Collateral mortgage* …………………42

Commitment letter*……………………42

Contractor ……………………20, 37, 42

Conventional mortgage loan* …12, 42

Counteroffer ……………………………36

Covenant* ………………………………42

Custom-built home, see Housing types

Deed* ……………………………39, 42

Default* ……………………………32, 43

Deposit* …………………35-37, 43, 44

Disbursements……………21, 38, 39, 42

Discharge of mortgage* ………………43

Down payment*…12-14, 24-27, 30, 32,

33, 37, 38, 43

Easement* …………………………43, 44

Encumbrance* ……………………43, 44

Equity* ………………………………43

Estoppel certificate ………………15, 36

Fees, also see Condominium fees and

Legal fees................15, 20, 21, 25,

26, 30, 32, 37, 39, 42

Foreclosure* ……………………………43

Freehold, see Title*

Gross Debt Service

ratio (GDS)* …13, 14, 30, 33, 43, 44

Heating, see P.I.T.H.*

Holdback* …………………………37, 43

Home inspection …………15, 21, 35-38

Housing market ……………10, 11, 20

Housing types ………………………6, 8

carriage home ………………………6

condominium (highrise, low-rise,

row and townhouse), also see

Condominium……………………6, 7

custom-built home,

also see Builder ……………20, 37

duplex …………………………………6

healthy ………………………………41

link home ……………………………6

manufactured housing ……………6

mobile home …………………………6

new housing, also see Builder and

Warranty ……………6, 10, 15, 20,

27, 30, 33, 37

resale housing ………… 6, 7, 15, 20,

30, 33, 36

rowhouse ……………………………6

semi-detached ………………………6

single family detached ……………6

townhouse ……………………………6

Inspection, see Home inspection

Insurance

errors and omissions insurance 21

mortgage life insurance* ……21, 44

mortgage loan insurance*, also see

Mortgage*, high-ratio..... …12, 15

21, 25, 31-33, 42, 43

property/home insurance 15, 21, 39

Insurance broker ………………………21

Interest,* also see P.I.T* and P.I.T.H.*

11- 14, 24-31, 35, 43, 44

Interest Adjustment Date (IAD)* ……43

Interest rate …………11, 13, 25-31, 44

fixed ………………………………27

protected (“capped”) variable …27

variable………………………………27

Interest rate buy down …………27, 30

Lawyer/legal fees ……………15, 19, 21,

34, 38, 39, 42, 43

Leasehold, see Title*

Legal fees, see Lawyer

Lenders …………13-15, 19, 21, 24-33,

38, 39, 42-44

Lending Value* ……………………42, 43

Lien ………………………37, 38, 43

Lien (Mechanic’s)* ………………37, 43

Loan-to-value ratio* …………………43

Location ………………………………5-9

Maintenance costs, also see

Condominium fees ……6, 12, 15, 41

Market Analysis Service

(CMHC) …………………………10, 11

Maturity date* …………………………43

Mechanic’s lien, see Lien*

Mortgage* ………12-15, 21, 24-35, 38,

39, 42-44

assumable mortgage …………25, 26

closed mortgage ……………………29

conventional mortgage loan* ......12,

25-27, 29, 42

expandable mortgage ……………25

high-ratio mortgage* ..........12, 15,

21, 25-27, 43

multi-rate (split) mortgage ………30

open mortgage ……………………29

portable mortgage …………………25

pre-approved mortgage …………31

prepayment option ………………25

second mortgage* ………25, 26, 44

split (multi-rate) mortgage ………30

vendor take back mortgage*

(VTB) ……………………26, 38, 44

Mortgage approval* …………31, 35, 42

Mortgage broker…………15, 21, 26, 30

Mortgage market analysis ………10, 11

Mortgage payment* ……12, 14, 24-30,

42, 44

Mortgage rate, see Interest rate

Mortgage Rate Protection Program

(CMHC) ………………………………31

Mortgagee* ……………………………44

Index

46 • INDEX

Mortgagor*………………………………44

Moving ……………………………38-40

Net worth* ……………………………44

New housing, see Builder, Housing

types and Warranty

Notary, see Lawyer

Offer to Purchase* …………15, 20, 21,

34-38, 42-44

Option agreement* ……………………44

P.I.T.* (principal, interest and

taxes) ………………………………44

P.I.T.H.* (principal, interest, taxes and

heating) ………………13, 14, 33, 44

Prepaid taxes and utility bills …15, 44

Principal*, also see P.I.T.*

and P.I.T.H.* …………12, 24, 25, 27,

30, 42-44

Property appraisal, see Appraisal*

Property value ………………………5, 21

Property tax, see P.I.T*, P.I.T.H.* and

Tax

Real estate representative, see also

Realtor* ........5, 7, 8, 20, 21, 36, 38,

43

Realtor* ………………………………44

Refinance* ………………………………44

Renovation/repair costs 12, 13, 15, 20,

25, 41, 42

Resale housing, see Housing types

Service charges, also see Fees ………15

Statement of Adjustment* ………38, 44

Survey* …………………15, 35, 38, 44

Survey fee ………………………………15

Tax, also see P.I.T.* and P.I.T.H.*

GST …………………………6, 15, 37

property tax ……………5, 12, 15, 38

land transfer tax ………………15, 39

prepaid tax …………………………15

Term* …………25-27, 29, 30, 42-44

Title* ……………………………6, 44

Total Debt Service ratio (TDS)* 13, 14,

30, 33, 44

Utilities ………………………15, 38, 40

Utility bills (prepaid) …………………15

Vendor, ………15, 20, 26, 34-36, 38,

39, 42-44

Vendor take back mortgage* (VTB),

see Mortgage*

Warranty ……………………………6, 37

builder warranty ……………………6

Water quality/quantity ………………15

Zoning/zoning bylaws* ……5, 7, 37, 44

WORKSHEETS 1

Home Hunting Worksheet

Attach real estate listing information sheet or fill inbelow.Address









Garbage pickup $

Other $

Utilities




Other $

Other $




I

I

I

Neighbourhood











Use the area below to draw floor plans.Be sure to indicate NORTH on your plan.

2 WORKSHEETS

E X T E R I O R




Other










I N T E R I O R

Entrance area

Approx. size


FlooringTYPE



Special features

Living room

Approx. size


FlooringTYPE





Dining room

Approx. size


FlooringTYPE




Special features


Approx. size


FlooringTYPE




Special features

Kitchen

Approx. size


FlooringTYPE





Special features

Appliances included

Master bedroom

Approx. size


FlooringTYPE




Special features (e.g. en suite bathroom, walk-in

closet)

Bedroom #2

Approx. size


FlooringTYPE




Special features

Bedroom #3

Approx. size


FlooringTYPE




Special features

Bathrooms




Special features

Basement

Approx. size


FlooringTYPE





No

Special features

Utility room

Approx. size


FlooringTYPE




Special features






General comments

PROS: CONS:

WORKSHEETS 3











Garbage pickup $

Other $

Utilities




Other $

Other $




I

I

I

Neighbourhood













4 WORKSHEETS

E X T E R I O R




Other










I N T E R I O R

Entrance area

Approx. size


FlooringTYPE



Special features

Living room

Approx. size


FlooringTYPE





Dining room

Approx. size


FlooringTYPE




Special features


Approx. size


FlooringTYPE




Special features

Kitchen

Approx. size


FlooringTYPE





Special features

Appliances included

Master bedroom

Approx. size


FlooringTYPE





closet)

Bedroom #2

Approx. size


FlooringTYPE




Special features

Bedroom #3

Approx. size


FlooringTYPE




Special features

Bathrooms




Special features

Basement

Approx. size


FlooringTYPE





No

Special features

Utility room

Approx. size


FlooringTYPE




Special features






General comments

PROS: CONS:

WORKSHEETS 5











Garbage pickup $

Other $

Utilities




Other $

Other $




I

I

I

Neighbourhood













6 WORKSHEETS

E X T E R I O R




Other










I N T E R I O R

Entrance area

Approx. size


FlooringTYPE



Special features

Living room

Approx. size


FlooringTYPE





Dining room

Approx. size


FlooringTYPE




Special features


Approx. size


FlooringTYPE




Special features

Kitchen

Approx. size


FlooringTYPE





Special features

Appliances included

Master bedroom

Approx. size


FlooringTYPE





closet)

Bedroom #2

Approx. size


FlooringTYPE




Special features

Bedroom #3

Approx. size


FlooringTYPE




Special features

Bathrooms




Special features

Basement

Approx. size


FlooringTYPE





No

Special features

Utility room

Approx. size


FlooringTYPE




Special features






General comments

PROS: CONS:

WORKSHEETS 7











Garbage pickup $

Other $

Utilities




Other $

Other $




I

I

I

Neighbourhood













8 WORKSHEETS

E X T E R I O R




Other










I N T E R I O R

Entrance area

Approx. size


FlooringTYPE



Special features

Living room

Approx. size


FlooringTYPE





Dining room

Approx. size


FlooringTYPE




Special features


Approx. size


FlooringTYPE




Special features

Kitchen

Approx. size


FlooringTYPE





Special features

Appliances included

Master bedroom

Approx. size


FlooringTYPE





closet)

Bedroom #2

Approx. size


FlooringTYPE




Special features

Bedroom #3

Approx. size


FlooringTYPE




Special features

Bathrooms




Special features

Basement

Approx. size


FlooringTYPE





No

Special features

Utility room

Approx. size


FlooringTYPE




Special features






General comments

PROS: CONS:

WORKSHEETS 9











Garbage pickup $

Other $

Utilities




Other $

Other $




I

I

I

Neighbourhood













10 WORKSHEETS

E X T E R I O R




Other










I N T E R I O R

Entrance area

Approx. size


FlooringTYPE



Special features

Living room

Approx. size


FlooringTYPE





Dining room

Approx. size


FlooringTYPE




Special features


Approx. size


FlooringTYPE




Special features

Kitchen

Approx. size


FlooringTYPE





Special features

Appliances included

Master bedroom

Approx. size


FlooringTYPE





closet)

Bedroom #2

Approx. size


FlooringTYPE




Special features

Bedroom #3

Approx. size


FlooringTYPE




Special features

Bathrooms




Special features

Basement

Approx. size


FlooringTYPE





No

Special features

Utility room

Approx. size


FlooringTYPE




Special features






General comments

PROS: CONS:

WORKSHEETS 11











Garbage pickup $

Other $

Utilities




Other $

Other $




I

I

I

Neighbourhood













12 WORKSHEETS

E X T E R I O R




Other










I N T E R I O R

Entrance area

Approx. size


FlooringTYPE



Special features

Living room

Approx. size


FlooringTYPE





Dining room

Approx. size


FlooringTYPE




Special features


Approx. size


FlooringTYPE




Special features

Kitchen

Approx. size


FlooringTYPE





Special features

Appliances included

Master bedroom

Approx. size


FlooringTYPE





closet)

Bedroom #2

Approx. size


FlooringTYPE




Special features

Bedroom #3

Approx. size


FlooringTYPE




Special features

Bathrooms




Special features

Basement

Approx. size


FlooringTYPE





No

Special features

Utility room

Approx. size


FlooringTYPE




Special features






General comments

PROS: CONS:

WORKSHEETS 13

Home Features Checklist

� Resale � New

Type of Home� Detached � Semi-detached� Townhouse� Duplex� Highrise � Low-rise


Age of home






� Other






Electrical system � 100 amp � 200 amp� Other______� Fuses � Circuit breakers




Bedrooms � 1 � 2 � 3 � 4























Places of worship



Veterinarian

14 WORKSHEETS


� Resale � New



Age of home






� Other










Bedrooms � 1 � 2 � 3 � 4























Places of worship



Veterinarian

WORKSHEETS 15


� Resale � New



Age of home






� Other










Bedrooms � 1 � 2 � 3 � 4























Places of worship



Veterinarian

16 WORKSHEETS


� Resale � New



Age of home






� Other










Bedrooms � 1 � 2 � 3 � 4























Places of worship



Veterinarian

WORKSHEETS 17


� Resale � New



Age of home






� Other










Bedrooms � 1 � 2 � 3 � 4























Places of worship



Veterinarian

18 WORKSHEETS

Affordability Calculations

Maximum monthlyhousing costs youcan affordGross Debt Service Ratio

(GDS)

Your gross monthly salary* $

+ Your spouse’s gross monthly salary $

+ Other monthly income $

Total A $

x 32%= Maximum monthly housing costs you can afford B $

This maximum monthlypayment includes principal,interest, taxes, heating(P.I.T.H.) and 50% ofcondominium fees, ifapplicable.

* Gross salary is income beforetaxes

Maximum monthly debtload you can affordTotal Debt Service Ratio (TDS)

Total monthly income A $

x 40% = Maximum monthly debt service load you can afford C $

– Monthly auto payment $

– Monthly loan payment $

– Monthly credit card/line of credit payment $

– Other monthly payments $

= Monthly income left for housing D $

If the home you want costs more permonth than you can afford right now(D), consider these strategies: loweryour expectations and buy a cheaperhome; lower your non-housing debtobligations; and/or raise a largerdown payment.

Example:Jane and Deepak have a gross month-ly income of $4,500. Their total debtload should not exceed $1,800($4,500 x 40%). They have a month-ly car payment of $400, a studentloan of $200 and credit card pay-ments of $150, for a total of $750 innon-housing debt payments eachmonth. That means they would haveno more than $1,050 available formonthly housing payments ($1,800 -$750). That is lower than the $1,440suggested by their Gross Debt Servicecalculation (B).

Maximum home priceyou can affordIt depends on how much your downpayment is and how much you can carryin monthly debt service. And thatdepends on variables such as mortgagerates, your debts and monthly expenses,and personal preferences. For a roughidea, take a look at the table on page13.

Example:Jane and Deepak have a down

payment of $30,000. They want aconventional mortgage with 25%down, so they estimate theirmaximum home price at $120,000.

That would leave them amortgage of $90,000. At 10%interest, amortized over 25 years,that means monthly mortgagepayments of $805.* Add monthlyproperty tax instalments of $160and monthly heating costs of $60.Their total monthly housing costswill be $1,025. That is just belowthe maximum $1,050 allowedaccording to their Total Debt Serviceratio calculations.

That’s too close for comfort forJane and Deepak. What if mortgagerates go up when it’s time to renew?They decide to look for a homepriced at a maximum of $100,000.

That would leave them with a$70,000 mortgage and monthlymortage payments of $626,* pluslower taxes of $135 and heatingcosts of $60. Now their totalmonthly housing costs will be $821.That makes their Total Debt Serviceratio 35% instead of the maximum40%. And that gives Jane andDeepak a sense of financial comfort.

* Figures are rounded to the nearest dollar.

(AffordAbility, a new CMHC computer softwareprogram, can help you work out all your downpayment and mortgage options. To purchasecall 1-800-668-2642.)

Example:Jane’s gross monthly incomeis $2,500 and Deepak’s is$2,000 for a total of $4,500per month. They should payno more than $1,440 ($4,500x 32%) for their monthlyhousing expenses.

WORKSHEETS 19


Purchase price $

GST (if applicable) $

House insurance $


Land transfer tax $

Appraisal fee $





Lawyer’s fees $

Condominium fee $




Moving expenses $




Survey fee $



Other $




Purchase price $


House insurance $


Land transfer tax $

Appraisal fee $





Lawyer’s fees $

Condominium fee $




Moving expenses $




Survey fee $



Other $



20 WORKSHEETS


Purchase price $


House insurance $


Land transfer tax $

Appraisal fee $





Lawyer’s fees $

Condominium fee $




Moving expenses $




Survey fee $



Other $




Purchase price $


House insurance $


Land transfer tax $

Appraisal fee $





Lawyer’s fees $

Condominium fee $




Moving expenses $




Survey fee $



Other $



WORKSHEETS 21




Life insurance $


Car: gas/oil $




Water $

Telephone $






Home insurance $




Car loan/lease $

Line of credit $




Payroll deductions:

Income tax $

Benefits/other $


Monthly income $







Life insurance $


Car: gas/oil $




Water $

Telephone $






Home insurance $




Car loan/lease $

Line of credit $




Payroll deductions:

Income tax $

Benefits/other $


Monthly income $




22 WORKSHEETS

Your Team of Professionals

Team MembersRole

Name Company name

Address Telephone

Referral Fees

Strengths

Weaknesses

Role

Name Company name

Address Telephone

Referral Fees

Strengths

Weaknesses

Role

Name Company name

Address Telephone

Referral Fees

Strengths

Weaknesses

Role

Name Company name

Address Telephone

Referral Fees

Strengths

Weaknesses

WORKSHEETS 23

Your Team of Professionals

Team MembersRole

Name Company name

Address Telephone

Referral Fees

Strengths

Weaknesses

Role

Name Company name

Address Telephone

Referral Fees

Strengths

Weaknesses

Role

Name Company name

Address Telephone

Referral Fees

Strengths

Weaknesses

Role

Name Company name

Address Telephone

Referral Fees

Strengths

Weaknesses

24 WORKSHEETS

Moving to Your New Home

Change of address notification

Telephone

Relatives and friends

�

�

�

�

�

� Landlord, if necessary

� Insurance broker(s)

� Schools

� Post office

� Phone company

� Electricity/hydro

� Natural gas

� Heating fuel company (ask if you receive a deposit refund)

� Cable television

� Doctor

� Dentist

� Lawyer/notary

� Veterinarian

� Bank

� Employer

� Income tax

� Family allowance

� CPP/QPP

Telephone

� Old Age Security

� Driver’s license

� Car ownership

Credit cards

�

�

�

Clubs, associations and charities

�

�

�

�

Subscriptions

� Newspapers

�

� Magazines

�

�

� Book club

� CD or tape club

� Video club

Others

�

�

Visit our web site at www.cmhc-schl.gc.ca

Protect yourmost importantinvestment insideand out...

Homeowner's Inspection Checklist

Keep your home healthy all year round!With this practical, easy-to-follow guide, you can ensure your home is safer, more energy-efficient and more comfortable all year round, in as little as a few minutes per week.

The Homeowner's Inspection Checklist helps you identify symptoms, causes and cures forcommon problems.With our handy Evaluation Tool and basement-to-roof MaintenanceCalendar, you are equipped to stop potential problems before they begin.

Thinking of buying a new home? You can bring this guide to conduct a preliminary investigation. Once in your home, use it for preventive maintenance and to avoid costly repairs.

Get your copy today by calling 1 800 668-2642

Order # 62114$19.95 plus taxes and shipping fee

Ask for your Homeowner's ManualA permanent reference tool to operate and maintain your home.The Manual includes comprehensive and customized information, that helps you understand the workings of your house-its systems and components, how they workand how they fit together. In plain language, the Manual tells you how to keep them atpeak performance and enjoy a trouble-free home. Filled with easy to follow instructionsand lots of clear illustrations, it offers troubleshooting advice on how to resolvecommon problems and gives tips on how to run your house in a healthy, efficientand environmentally friendly way.

Because it is customized to your home, you need to ask your builder for your copy.He knows best what went into making your house and can fill the form with wich itcan be customized.

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