What You Need to do BEFORE You Buy a Home

Why do you want to buy a home?

• You want to invest in something that you hope will be worth more some day.
• You like the home, its location, size, or neighbourhood.
• You want to own, not rent.

Be a smart investor and do your homework before you buy. You’ll be less likely to end up with something you can’t afford, or that isn’t worth what you pay for it.

Remember: Buying a home is a big move

Most people think buying a home is one of the best things they can do with their savings. Make sure you invest wisely.

What’s the first thing you should do before you buy a new home? If you said go out and look at homes, you’re wrong. First, sit down and work out how you’ll pay for it. If you don’t, you may end up looking at homes you can’t really afford. That makes it a lot harder to stick to your budget.

How much home can I afford?
Follow these steps to find out.

1. Find out how much you can borrow to buy a home
Ask your bank how much they will lend you for your new home. Or, ask your real estate agent to estimate the amount for you. The bank looks at:

• What you make each month and how much you can spend on mortgage payments.
• How much the house is worth and how much you can pay in cash (your down payment).
• What it will cost you to run your home – including taxes, heating, and insurance. If you are buying a condo, there will be a regular monthly charge called a maintenance fee. This pays for your share of common costs, such as snow clearing and building insurance.

Example: Let’s say your household income is $60,000 and you have no debts. Guidelines suggest that you can afford to pay $1,600 per month for your housing costs. That includes your mortgage, taxes and heating. The bank will likely give you a mortgage for up to $200,000. The amount also depends on what you can save as a down payment.

2. Decide how much you will save as a down payment
For many people, saving for a down payment is the hardest part of buying a home. At one time, you needed a down payment of 25% of the price of your home. Nowadays, you can sometimes buy a home without any down payment at all.
Tip: It costs less to borrow if your down payment is at least 25%. If you put less down, you will have what is called a "high-ratio mortgage." This means you will have to buy insurance from the Canada Housing and Mortgage Corporation (CMHC), at an additional cost to you.

Example: If you qualify for a $75,000 mortgage and have saved $25,000, you can buy a $100,000 house. The $25,000 is your down payment, which equals 25% of the purchase price.

Remember: Make sure your home fits your budget
If you spend too much, you’ll have a bigger and more costly mortgage.

Try this mortgage calculator to estimate what you can afford.

Canada Mortgage and Housing Corporation’s CMHC's mortgage calculator

How do I save for a down payment?

A down payment on a home is an investment in your future. In fact, it may be one of the biggest investments you’ll ever make. So what’s the best way to save?

Three tips to save a down payment

1. Keep the money apart from your other savings. That way, you’ll be less likely to spend it.

2. Find a way to grow your money safely. You don’t want to wake up a month before you plan to buy your home and find you have lost money due to a drop in the stock market.

3. If you’re a first-time buyer, you might want to save for a down payment in a Registered Retirement Savings Plan (RRSP). Under the government’s Home Buyer's Plan, you can take up to $25,000 from your RRSP for a down payment on your first home.You won’t pay any tax on the money as long as you pay it back over the next 15 years.

What are some safe places to invest while I save for a down payment?

• High-interest savings account
Every time you get paid, you can put some money into this account. When you’re ready to buy, you can easily get your savings out. For some people, that’s not a plus, however, because it’s a little too easy to take the money out and spend it on something else.

• Guaranteed Investment Certificate (GIC)
As your savings grow, you may want to buy GICs. If you think you’ll be tempted to spend some of your savings, you can lock your money in with a GIC so that you can’t easily get at it.

• Canada Savings Bond (CSB)
The federal government offers CSBs to investors at certain times each year. They pay minimum interest and you can invest as little as $100. One type of CSB is cashable any time. Certain provinces also offer provincial savings bonds.

• Money market fund
A money market fund is a mutual fund that invests in safe, short-term products. The fund is run by a professional investment manager who invests the money for you. You can get your money quickly and easily, usually within 24 hours. However, like other mutual funds, there are fees to pay for having your money in the fund. There may also be fees for taking your money out.

Remember: It takes time to save up a down payment
You can speed up the process if you invest your money so it will grow. Just don’t take more risk than is comfortable for you.

This blog is based on a series of articles from the Globe and Mail.

Please contact me if you are looking to buy or sell real estate - an educated REALTOR is a effective REALTOR.

Happy House Hunting!

Do You KNOW What You are Signing? The Very Real Dangers of Joint Bank Accounts....

This article exposes the dangers of joint accounts as well as the "blind eye" often given to the process of attaining and using them.  It is from Maclean's Magazine. 

"At 85 and with failing eyesight, Donna (not her real name) was relieved when her daughter returned to Toronto to assist her. Eventually, she added her daughter’s name to her bank accounts to facilitate bill payments. A year and a half later, Donna’s eldest son, who works overseas, hired Jayne-Ann Steele, a long-term care specialist, to surrogate some of his sister’s duties. “One day Donna asked me to read her bank statements aloud,” says Steele. “She was shocked when I read out the huge sums of money being withdrawn like clockwork every month—to the tune of over $200,000″ in the span of 18 months. When I saw her daughter’s name beside hers, I instinctively knew who was taking the money.” Today Donna no longer speaks to her daughter. She must rely on her other three children to subsidize her retirement expenses. “These families never recover from the betrayal,” says Steele.

Joint bank accounts are increasingly being used as a vehicle to defraud Canadian seniors. Although the banking industry recognizes the problem, most banks do little to curtail it, say experts. Toronto lawyer Jan Goddard, an estate and elder law specialist, says banks are making it dangerously easy for their senior clients to add others to their accounts. In fact, sometimes the bank staff “steers” them into this arrangement, she says, because they recognize they need help with the simplest of banking tasks. (Raising the question: are seniors giving informed consent if they can’t even decipher a bank statement?) It’s a process that can take mere minutes, ruin lives, and yet seniors may be encouraged to do it without the benefit of legal advice.

Often aging parents are adding adult children to their accounts simply to assist with the logistics of bill payments and managing the account. “The child knows this is the parent’s intent and so does the bank, yet the bank forms proclaim that the asset in the account is equally and rightfully the property of the child,” explains Goddard. In a recent joint account case Goddard is litigating, the grandchildren are alleged to have absconded with $650,000.

Kelly D’Amour, an investment sales coach with Scotiabank, says her bank is educating its staff and customers to recognize the pitfalls of joint accounts. “There are many types of joint accounts,” she explains, “but the most commonly used is called joint tenants with right of survivorship.” This means two or more people have the same cheque-writing and withdrawal privileges, and if one of the account holders dies, the other automatically obtains ownership of the account long before the deceased’s estate is settled. In the wrong hands, says D’Amour, a joint account is “the perfect vehicle” for an adult child to abscond with savings from the estate. “It’s a backdoor method of rewriting the parent’s will.”

Douglas Melville, Canada’s ombudsman for banking services and investments, who investigates public complaints, acknowledges that abuse of joint accounts is a growing problem. “Many Canadians don’t understand that once you add your adult children to your account, it’s legally as much their money as it is yours.” Some say that it’s wise to avoid joint accounts altogether, because your money and your adult child’s personal life become legally entangled. According to Michael Solnes, a financial planner in Vancouver, “If your child’s marriage goes off the rails, their ex can now make a claim on the senior’s joint account. If your child owes money to creditors or is successfully sued, your money can be garnished or seized.”

Judith Milliken, a Vancouver lawyer who specializes in estate litigation, says any parent considering a joint account should document their intentions and provide copies of this documentation to multiple trusted individuals. Melville suggests opening up a new account with just enough money to cover regular expenses. “Set up most of your bills to be paid automatically from that account or provide cheques to the other individual on that account, but watch out for two things,” he advises. “Don’t let your joint account holder set up a line of credit and make sure there are no overdrafts on this account.”

D’Amour says an even better alternative is to use a power-of-attorney document that precisely spells out your intentions and which powers you’re granting and which ones you choose to limit. At least with a POA there is a legal requirement for accountability.

Melville warns every adult should have a plan in place. “Often people don’t take the initiative until there is a medical problem or a cognitive deficit kicks in, and then it becomes too difficult or too late.” "

A Video on How the HST Impacts New Home Prices

There are many factors for homebuyers to consider when purchasing a house these days-particularly in the province of Ontario, where the HST has become a factor over the last several months.

The Ontario  Real Estate Association, in partnership with Ontario Revenue Minister Sophia Aggelonitis, have released a video to clarify the rules for those looking to purchase a home and to eliminate confusion around HST as it applies to resale and new home purchases.

The video aims to educate Ontarians that there is no HST on resale homes, maintaining similar taxation rules to those under the old provincial tax. In addition, HST is only applied to the portion of new home purchases above $400,000. For first time homebuyers, a refund of Land Transfer Tax of up to $2,000 is available on resale homes.

Watch the video www.youtube.com/oreagr

Four Questions (and a bunch more) to Ask Yourself BEFORE Embarking on a Major Home Renovation

What is the real estate potential of your home?
Who was it that said “Context is everything”? Perhaps it’s the same sage as gave us “Location, location, location.” However you look at it, you need to have an accurate picture of your environs before you commit to a renovation.

The first step is to take a look yourself and try to assess how your neighbourhood is evolving. Are small bungalows becoming two-story homes? Are single-family dwellings being converted to duplexes or townhouses?

Next, get in touch with a good real estate agent working in the area. He’ll assist you in strategic decisions related to what’s happening in the next five years – changes in zoning and the like. You may find that it pays to do a modest renovation now and an ambitious one later – or vice versa.

What level of quality do you require?
This can be a slippery calculation. In addition to considering your own needs and tastes, you’ll want to take your neighbours’ homes into account. It’s good to know how your renovated home rates against its peers. Does the average new home in your neighborhood have marble countertops? Top-flight appliances? In-floor heating? If so, you’ll want to consider comparable items or risk losing a step on your neighbours (which will definitely affect future resale value). A couple of weekends of open houses will give you the correct perspective.

What kind of heating system do you have? How old is it? Can you afford to upgrade if you must?
Heating systems really affect a home’s functionality and appearance. Because of the need for duct work in a forced air system or plumbing in a hot-water radiant heat system, these structural items severely impact the renovation options available and must carefully be considered.

Sometime the renovation funds might be better spent on switching or upgrading the current heating system.

Where are your blueprints?
It might seem an obvious question, but it stops many people in their tracks. Are the drawings necessary? If you are doing a major renovation, they would be essential to your designer or architect in assessing and creating your renovation plans.

If you didn’t receive an original set when you purchased your home, you have two options. The first is to go to the municipality. As the owner on title, the city will (for a fee) give you a copy of whatever is in its files. The information may be on microfiche – not optimal, but better than nothing – but in most cases you’ll get a full set of drawings.

If you don’t, you’ll need to have them made, which will cost up to $5,000. The money goes to measuring your house from scratch and producing “as-built drawings” – your design starting point.

There you have it – four questions which should focus your mental and financial preparations for home renovations in 2011 and beyond.

What is the Real Foundation of Great Service? Listening to the Customer!

How can great service be provided to a customer unless you know what service they need and how they want it provided?

In today’s marketplace, Canadian consumers are constantly being inundated with advertising claims from a number of real estate brands, many of which sound very similar from one company to the next.  The consumer is left wondering whether there really is a difference between real estate companies.      

That was a key reason why Coldwell Banker developed Ultimate Service®.  It all starts with listening.  Every customer and every transaction is different.  Only by listening to the customer and truly understanding their individual needs, can you deliver a value proposition that will meet those needs. 

There are three distinct steps to the Ultimate Service marketing process:

-- First, we listen to the customer, to understand their needs and goals.  

-- Second, -- together with the customer -- we develop a customized service plan to meet their needs…and then commit to that service plan, in writing.  We offer a signed pledge to customer satisfaction in the form of our Buyer and Seller service guarantees

-- And finally, we give our customers an opportunity to evaluate our service in the form of customer satisfaction surveys. 

These satisfaction surveys benefit the consumer in two ways.  First, it provides valuable feedback which allows us to continually evaluate and refine our service offering.  Only by constantly improving can you ensure that your service stays ahead of your customers’ expectations.  

But there’s another way that our survey benefits the consumer - it offers them a proven track record of our performance.  In fact, Coldwell Banker Canada has just earned a 98% overall satisfaction rating from Canadian Home Buyers and Sellers.  And what’s more, we’ve now done it for 14 years in a row!

This satisfaction rating is unique in the real estate industry.  Why?  Because it’s based on what real, live customers had to say about the service experience delivered by their Coldwell Banker professional.  This 98% satisfaction rating was tabulated by an independent third party company, and is based on the responses of over 55,000 Canadian home buyers and sellers.  No other company in real estate can make that claim.

When you choose Coldwell Banker, you don’t have to take our word for it that we provide outstanding service – just ask our customers!

By the way, I am happy to say that I am an Ultimate Service Award winner!  Contact me and find out why my clients are very satisfied with the service I provide...

More Than Two-Thirds of Candians Own Their Own Homes - Why?

The Pros of Buying a Home 

If you’re one of the many Canadians who are wondering whether this is the right time to buy a home, you may find that a good place to start is by weighing the ‘pros’ and ‘cons’.  Consider the many advantages of owning your own home.  There are many practical and financially sound reasons for buying a home in today’s market, whether you’re thinking of a condo, a duplex flat, a townhouse, or even a single family home:

 

• Home ownership is an excellent way to build equity.  That’s an important consideration if you’re trying to build some financial stability – especially if you happen to be single and are doing it on just one income. 
• There’s the security that comes with making an investment for the future.  When you own your home, you have a resource to fall back on
• Paying a mortgage off is usually better than “throwing money away” on rent.  You could be paying high rents for years, adding up to many thousands of dollars, yet never end up with anything that’s yours.  
• Your rental expenses can potentially increase significantly over time.  Even a three or four percent annual increase can really add up, especially when you consider that it’s compounded year after year.  However, if you buy a home and lock in a long term mortgage at today’s affordable rates, you’ll know exactly how much your payment will be for years to come.
• Owning your own home gives you the option of earning extra income, by renting out a specific portion of the property or by taking in a roommate.
• Homeownership affords an asset to borrow against if you ever need to.  Even if your mortgage isn’t paid off, you can still borrow against the equity you’ve built up in your home – and often at far better interest rates than you’d normally get for almost any other type of personal loan.
• Property values tend to appreciate over time.  Historically, real estate has proven to be one of the best returns on investment for Canadian consumers.  And you’re enjoying your investment by living in it, versus just a piece of paper sitting in a safety deposit box!  

 Finally, and most importantly, by purchasing a home a buyer specifically chooses the lifestyle they want and can tailor their home to their needs - it provides a great sense of satisfaction and stability.

If you have any questions on what is happening in the market, lending rates or any other real estate related issues, please consider me as your local real estate resource.