How to pay for your first home?

Besides saving for years and years and living on ramen noodles, there are ways to purchase your first home.

1. The Home buyers plan

A 15 per cent income tax credit towards closing costs for eligible applicants. The credit applies to a maximum of $5,000 in closing costs which would result in a credit of $750.

2. 5% Down Payment plan
Although, it is advisable to have a bigger down-payment as you have to pay a premium to insure your property.

3. HST Rebate

Available when you purchase a renovated home from a builder, a new mobile home, shares in a co-op, or substantial renovations to your home, even from fire. May get up to 36 percent rebate of the federal portion of the HST paid to a maximum of $6,300 on a home costing less than $350,000. The new home buyer can also apply for a rebate of 75% of the provincial portion of HST to a maximum of $24,000.00.

4. Rebate on Provincial and Municipal Land Transfer Taxes

Up to $2,000 for Ontario and up to $3, 725 for the City of Toronto for first time buyers who have never owned a house anywhere in the world nor been with a spouse who has.

5. Bank of Mom and Dad

In addition to the purchase price, land transfer taxes, there is also legal fees, title insurance, moving and new services costs, insurance for your property and adjustments made prior to closing for things such as property taxes, any shortfalls from the loan, registration of the transfer and mortgage, common expenses (for a condominium) and oil if you are purchasing a home. These additional costs can be at least another $5,000.

Make sure you ask about all available ways to finance your property, what programs you may be eligible for and all costs prior to closing. Try to save as much money as possible so you can purchase your first place.

Is that basement apartment legal?

It is important to check whether there has been any Landlord and Tenant board claims prior to purchase and if the apartment is legal. If it is not legal you may have trouble insuring your property which is needed for your lender, and you may have to bring the apartment up to code at considerable cost to you. Find out first.

Here is a link to a detailed article by Joseph Richer in the Star.

Condominium Insurance

For the condominium unit owner, there are several insurance concerns.
Does their condominium corporation have adequate insurance to cover anticipated property damage or physical injury caused in the building? Does it have coverage for mechanical or electrical breakdown? This is usually assessed before closing by your lawyer. Follow up with any information you receive from the corporation about renewal of insurance and what it covers.

The unit owner has to be concerned about what happens in their unit and obtain adequate insurance. Here are some types of coverage you may wish to consider and discuss with your insurance broker. Property and contents, this is not covered by the corporation, improvements to your unit may not be covered by the corporation’s insurance for a standard unit. If damage is caused to your unit and the corporation is at fault, they will only pay for a standard unit and not the ebony wood floors that took 12 weeks to be delivered and make your unit the feature of the latest condominium living.

If your tenant or guest causes damage to the common elements you will be held responsible so a policy covering guest/tenant liability may be in order. You may be held responsible for the corporation’s deductible on their insurance.

If you have to live at a hotel while your unit is being repaired may be covered by insurance.

It is often suggested that you use the same insurance company as your condominium corporation which may reduce a gap or delay in having your claim assessed.

You may have other concerns about your unit, so speak to your insurance broker who specializes in residential condos about a policy that will address your needs and potential losses.

Mortgage Terms

Acceleration clause – the requirement to pay the mortgage in full if there is non-payment of mortgage, property taxes, common expenses, property insurance.

Amortization period – the amount of years that the mortgage has been calculated for you to pay back.
Here is a website to the Canada mortgage calculator:

Collateral Mortgage – a mortgage that is a loan agreement and the security of the loan is the mortgage against a property. Often is 125% of the value of the property. The borrower will be able to return to the same lender and borrow more money for the property. This may allow the lender to use the equity in the property to pay outstanding debts with the same lender such as a credit card balance or car loan. With a collateral mortgage, if the original lender will not lend any further funds, it may difficult to go to another lender as there is no room on the property to register a second mortgage.

Closed mortgage – a mortgage agreement that can not be pre-paid, negotiated or re-financed earlier than the length of time agreed to.

Conventional mortgage – a loan agreement with terms such as interest, term, amortization period which is secured against property to to the amount borrowed. Usually is first in line to be paid once the property is sold.

Fixed rate mortgage – the interest rate is set and is part of the agreement. Pre-payment is allowed according to the terms of the agreement which can be a percentage of the mortgage, or at a particular time. A good idea if interest rates are rising.

High-ratio mortgage – the borrower has put less than 20% of the property’s purchase price as a down payment. This type of mortgage will usually require mortgage protection insurance.

Interest Rate – is the amount calculated on your mortgage that will be in addition to the amount borrowed.

Interest adjustment date – date
Low ratio mortgage – the borrower has put at least 20% of the property’s purchase price as a down payment and will not require mortgage protection insurance.

Principal amount – the amount borrowed

Second mortgage – a second loan which is secured against property and is second place after the original mortgage.

Security – attaching a loan against something that can be seized and sold in order for the debt to be repaid. This can be property, a car, tractor etc.

Term – length of time you will be paying the mortgage.

Variable rate mortgage – the interest rate will change at specified intervals if the market interest rates rise or fall.

**Signing a mortgage is a legally binding agreement. Make sure that you understand all of the rights and obligations of your mortgage(s) with the lender and that is the same as your understanding or what you requested.