Congratulations on making the decision to own your new home. To help make the process as easy and understandable as possible I will answer questions about the process for dealing with a lawyer or notary public and claiming a GST rebate when purchasing a brand new home. If you are a non-resident home buyer, I can help. If you are a first time home buyer you may also have questions about qualifying for an exemption of the provincial Property Transfer Tax and/or using your RRSPs under the federal Home Buyer’s Plan (HBP).
As the purchaser, you will have incorporated into your costs the amount of your down payment, your moving expenses, and the possibility of any upgrades you wish to make to your new home. However, when buying your home, there are one-time closing costs and there may be other expenses to consider:
Lawyer or Notary Public Fees Whether you retain a lawyer or a notary public, these professional fees may range from between $750 to $1000. The lawyer or notary public assists with obtaining and/or preparing the supporting documents for the sale/purchase. Their services may include: title search and title registration at the Land Title Office, tax information specific to the property, transfer of mortgage documents, disbursement of funds, and providing you with a final Certificate of Title (if applicable). When choosing your lawyer or notary public please be aware of the services included in the quote, and which fees may be billed separately.
Other Disbursements Some closing requirements are attended to by the lawyer or notary public, however are billed outside the quote for their professional fees. These may range from obtaining a municipal tax certificate to obtaining the Form F from the Strata Corporation (if you are purchasing into as Strata Lot). The lender may also require a Certificate of Location (Property Survey) The certificate should currently state any improvements to the property; it is required by both the notary/lawyer for transfer of ownership as well as the lender to approve the mortgage.
Closing Adjustments Some adjustments to fees and taxes will be calculated and prorated dependent on the closing date of your new home as well as the location (municipality) of the property purchased. Adjustments may occur to the following expenses: municipal taxes and water and sewer fees, strata maintenance fees, and rent and security deposits. Many of these adjustments will be documented by your lawyer or notary and itemized on the Statement of Adjustment. Any balances to be paid at time of completion will be made payable in trust to your lawyer or notary public.
Insurances Default (or High Ratio) Mortgage Insurance Premium and PST (where applicable): If your down payment is less than 20% of the purchase price, the lender will require you to have this insurance. The premium for the insurance can be added to your mortgage; however, the PST calculated on the premium will be added to closing costs.
Fire Insurance: When the mortgage closes you must have fire insurance effective from the time you take possession. Speak to an insurance agent to confirm that the property is insurable. Also, some insurance companies may require proof of a home inspection. Title Insurance: Your lawyer or notary may suggest an insurance policy to protect you, the home owner, against challenges to the ownership of your home or from problems related to the title to your home.
Obtaining Financing Appraisal (if applicable): As you are obtaining financing, the property may be appraised dependent upon the type of property being purchased. An independent appraiser may be hired to evaluate the property and confirm it meets lending criteria.
Bridge Financing (if applicable): If the sale of your current home does not close before the purchase of your new home, bridge financing can be put in place for a short period of time to finance your new home. The cost of your new home purchase is then financed for a short period of time.
Non-Resident Home Buyer As a non-resident of British Columbia you are welcome to purchase property (as many properties as you require), however, there may be certain considerations when applying for a mortgage, executing closing documents, as well as tax obligations when renting or selling the property.
Property Transfer Tax In the province of British Columbia, when you purchase or gain interest in property that is registered at the Land Title Office (residential, commercial, or industrial) you are responsible to pay a property transfer tax.
The amount of tax you pay is based on the fair market value of the land and improvements (e.g. buildings) on the date of registration unless you purchase a pre-sold strata unit. The tax is charged at a rate of 1% for the first $200,000 and 2% for the portion of the fair market value that is greater than $200,000.
Property Transfer Tax Full or Partial Exemptions You may be entitled to a property transfer tax full or partial exemption for family or other reasons. Frequently, first time home buyers are entitled to an exemption or reduction based on their personal circumstances.
Family or Other Full or Partial Exemption: To confirm if you qualify for a family or other full or partial exemption
As a non-resident of British Columbia you are welcome to purchase property (as many properties as you require), however, there may be certain considerations when applying for a mortgage, executing closing documents, as well as tax obligations when renting or selling the property.
First Time Home Buyer – Home Buyer’s Plan (HBP)
Home Buyer’s Plan (HBP)
According to the guidelines of Canada Revenue Agency, ‘The Home Buyers’ Plan (HBP) is a program that allows you to withdraw funds from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability. You can withdraw up to $25,000 in a calendar year.
Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP, or they may not be deductible for any year.
Wouldn’t it be nice if you had the money to do more of the things you want to do? A CHIP Reverse Mortgage could be just what you need. It’s the simple and sensible way to unlock the value in your home and turn it into cash to help you enjoy life on your terms.Benefits of a CHIP Reverse mortgageYou receive the money tax-free. It is not added to your taxable income so it doesn’t affect Old Age Security (OAS) or Guaranteed Income Supplement (GIS) government benefits you may receive.
You can use the money any way you wish. Maybe you want to build up your savings or cover unexpected expenses. Perhaps you want to update your home or help your family without depleting your current savings. The only condition is that any outstanding loans secured by your home must be retired with the proceeds from your CHIP Reverse Mortgage.
No payments are required while you or your spouse live in your home. The full amount only becomes due when your home is sold, or if you move out.
You maintain ownership and control of your home. You will never be asked to move or sell to repay your CHIP Reverse Mortgage. All that’s required is that you maintain your property and stay up-to-date with property taxes, fire insurance and condominium or maintenance fees while you live there. You keep all the equity remaining in your home. In many years of experience, 99 out of a 100 homeowners have money left over when their CHIP Reverse Mortgage is repaid. And on average, the amount left over is 50% of the value of the home when it is sold.What is a CHIP reverse mortgage? A CHIP Reverse Mortgage is secured by the equity in your home. Unlike a traditional mortgage in which you make regular payments to someone else, a reverse mortgage pays you. The big advantage with the CHIP Reverse Mortgage is that you do not have to make any payments – principal or interest – for as long as you or your spouse live in your home. That’s what has made reverse mortgages such a popular solution in Canada, the U.K., the U.S., Australia and other countries.
The CHIP Reverse Mortgage is designed exclusively for homeowners age 55 and older. This age qualification applies to both you and your spouse.
You can receive up to 50% of the value of your home. The specific amount is based on your age and that of your spouse, the location and type of home you have, and your home’s current appraised value. You can choose how you want to receive the money. CHIP gives you the option of receiving all the money you’re eligible for in one lump sum advance, or you can take some now and more later, or you can receive planned advances over a set period of time.
Every Canadian deserves to live retirement on their terms. Contact us to find out how
RENEWING YOUR MORTGAGE IS EASY
While most Canadians spend a lot of time, and expend a lot of effort, in shopping for an initial mortgage, the same is generally not the case when looking at mortgage term renewals. By omitting proper consideration at the time of renewal, this practice costs Canadian citizens thousands of extra dollars every year. Nearly 60% of borrowers simply sign and send back their renewal that is first offered to them by their lender without ever shopping around for a more favourable interest rate.
Homeowners should never accept the first rate offer from their existing lender. Without any negotiation, simply signing up for the market rate on a renewal is unnecessarily costing the homeowner a lot of money on their mortgage.
Generally it is a good idea to start shopping for a new term between four and six months before your current mortgage term expires. Many lenders send out your renewal letter very close to the time that your term expires and this does not give you ample time to arrange for a mortgage term through a different lender. This means that you need to be tracking your own mortgage term timeframe and know when it is time to start shopping for a good mortgage renewal rate.
Before you ever hear from your lender about renewing your mortgage term, have a licensed mortgage professional shop around for you, you will be amazed at what they can accomplish on your behalf!
Your mortgage is one of your biggest expenses. For this reason it is imperative to find the best interest rates and mortgage terms you possibly can. By shopping around at renewal time you can save substantial amounts of money over the life of your mortgage loan. Don’t be one of the 60% who just simply sign their renewal letter and send it back. Use the services of a licensed Dominion Lending Centres mortgage professional to ensure the lenders compete for your business.
ARE YOU THINKING OF REFINANCING?
You may be thinking of refinancing to access the equity in your home. With low interest rates, refinancing may allow you to meet your financial goals and consolidate payments. Whether your goal is to pay off higher interest credit card balances and loans, purchase a new car or boat, or renovate your home to increase its value, accessing your home equity may be your money saving strategy.
The application process for refinancing is quick and easy, and usually takes 24 hours to approve.
CHOOSE A MORTGAGE THAT IS BEST FOR YOU Conventional or High Ratio Mortgage
Conventional Mortgage: You may qualify for a conventional mortgage if your down payment is at least 20% of the purchase price or the appraised value of the property (whichever is less). You may choose from a fixed or variable interest rate for this mortgage and a conventional mortgage does not have to be insured against default. However, if the amount of your mortgage is more than 80% of the purchase price or appraised value, you will qualify for a high-ratio mortgage.
High-Ratio Mortgage: Many lenders offer an insured mortgage with a lower than 20% down payment – as low as 5%. Therefore, where the down payment is between 5% and 19.9% the mortgage must be insured to cover potential default payment. Canada Mortgage and Housing Corporation (CMHC) or Genworth Canada are insurers and they charge a fee for this service. Fees are calculated according to the percentage of your down payment and the total amount you are borrowing to finance your purchase. A trusted mortgage advisor will help you determine the exact amount. You may choose to pay the fees up front or they may be added to the principal portion of your mortgage.
Fixed or Variable Rate Mortgage
Fixed Rate Mortgage: A fixed rate mortgage is a ‘locked-in’ interest rate for the entire term of your mortgage. Your interest rate, amount of regular mortgage payments, amortization, and the portion of your payment that goes towards the principal and interest is secured.
Variable Rate Mortgage: A variable rate mortgage is a fluctuating interest rate that varies with the prime interest rate. As the interest rate varies from month to month your payment amount will remain the same. As a result of the interest rate fluctuation, the amount your payment that is applied toward the interest and the principal will change. For example, if the interest rate drops, a larger amount of your mortgage payment is applied to the principal balance owing; you may be able to pay off your mortgage faster.
Short Term or Long Term Mortgage
Term of a Mortgage: The term of a mortgage may be six months to 10 years and refers to the length of the current mortgage agreement. Typically, the lower the interest rate, the shorter the term of the mortgage. At the expiry of your mortgage term, you may choose to repay the principal owing on your mortgage or to enter into a new mortgage agreement at the then current interest rates. Ultimately, you must feel comfortable with your mortgage payments.
Short Term Mortgage: If the term of a mortgage is two years or less, it is considered a short term mortgage. Some buyers who believe interest rates will drop at renewal time may prefer this mortgage term.
Long Term Mortgage: If the term of a mortgage is three years or more, it is considered a long term mortgage. Borrowers who prefer the security of budgeting for the future (along with reasonable current interest rates) may prefer this mortgage term.
Open or Closed Mortgage
Open Mortgage: Open mortgages may be paid out at any time without penalty. You may also choose to make additional payments without penalty. Should you wish to have the flexibility to make large, lump sum payments, or you wish to sell in the very near future this mortgage may be suited to you.
Closed Mortgage: Closed mortgages require you to commit for a specific term. Most closed mortgages do not allow you to pay out the mortgage early without incurring a penalty. However, some lenders allow you to pay out up to 20% of the original principle balance yearly (this may vary according to the lender). Although more restrictive in terms of making lump sum payments against the principal, this mortgage is also more stable.