B UYING A HOME

R ENT OR B UY Why do you think being a lifelong renter is not a good idea? Are there some instances that renting is better than buying a home?

R ENT OR B UY Handout- advantages vs. disadvantages /

T HE PROCESS phase 1: determine home ownership needs ■ What type of housing should I (we) buy? ■ How much can I (we) afford to spend? Don’t buy too much home. You should not spend anymore than 32% of your gross monthly income on housing, this includes mortage, taxes and utility costs. phase 2: locate and evaluate a home ■ Where do I (we) want to live? ■ What aspects of the home need improvement? Are you going to live in this area for an extended period of time? phase 3: price the property ■ What is an appropriate market price? ■ How much negotiation movement exists?

phase 4: obtain financing ■ How much down payment is available? ■ What are current mortgage rates? ■ Can I (we) qualify for a mortgage? ■ What type of mortgage should be selected? phase 5: close the purchase transaction ■ What is the closing date? ■ What funds and documents will be needed for the closing? ■ Is everything understood before the final signing?

S HOULD I BUY A HOUSE, TOWNHOUSE OR CONDOMINIUM ? Condos Maintenance fees First to fall in value when the real estate market takes a hit. Townhouse Sometimes maintenance fees apply Be careful when purchasing “to be built” condos and townhouses.

M ICRO CONDOS

QUALIFYING FOR A MORTGAGE your mortgage acceptance will be based on your credit record. The amount of the mortgage for which you qualify will be influenced by: ■ Your income ■ The amount available for a down payment ■ Current mortgage rates

H ANDOUT Rent or buy

TYPES OF MORTGAGES open mortgages: ■ Interest rate fluctuates with the market ■ Flexible to pay without penalty at any time ■ More popular when interest rates are falling ■ Sometimes called a “variable rate” mortgage

closed mortgages ■ A set term eg., 5 years, 10 years ■ A fixed rate of interest ■ Provides security ■ Less flexibility for making payments

convertible mortgages ■ Provides a low rate for a short period of time ■ Must “lock in” before the time period expires refinancing ■ Obtaining a new mortgage on your current home ■ Usually a penalty for breaking the existing mortgage agreement

B REAKING YOUR MORTGAGE There is a penalty for breaking your mortgage. The interest left on your term.

I MPORTANT THINGS TO REMEMBER The longer your mortgage is amortized the more interest you will pay.

N EW MORTGAGE RULES – D O NOT WRITE THIS The maximum Canadians can withdraw when refinancing their mortgages drops to 90 per cent of the value of their home, from 95 per cent. Buyers must make now a minimum 20 per cent down payment — up from five per cent — to qualify for Canada Mortgage and Housing Corp. insurance for non-owner-occupied properties purchased as an investment. ex. $ X 20% = $20,000 down payment.

O NLINE A SSIGNMENT Find 3 homes for sale in the Campbellton area. Find homes in Vancouver, Toronto, Montreal, Fredericton and Halifax (1 for each city). Calculate the mortgage for each (20 year mortgage). Provide the link to the listing and the payment (monthly, bi-weekly or weekly) Choose between fixed and variable rates. Calculate the down on each home. ex. $ X 20% = $20,000 down payment Use the mortgage payments calculator services/banking/mortgages/calculators-and-tools.jsp

H ANDOUT Conduct a home inspection

C LOSING COSTS Title search fee ($50-$150) ■ Title insurance ($100-$200) ■ Lawyer’s fee (amount varies) ■ Appraisal fee ($100-$300) ■ Credit report ($25-$75) ■ Home inspection ($200-$400) ■ Reserves for home insurance and property taxes (amount varies)

■ Interest paid in advance (if applicable) ■ Land transfer tax (amount varies) ■ CMHC Insurance (depends on the amount of the loan) ■ Mortgage Registration Fee ($50)

Y OU BOUGHT A HOUSE Costs associated with having a home: Home insurance – required with mortgage, guaranteed replacement cost Property taxes Utility costs Maintenance costs

Home insurance pays for damage to or loss of the interior and exterior of your house or property. Home insurance can cover: damage, theft or loss of your personal possessions. personal property stolen from your vehicle. damage or injury to others who visit your home or property. For example, if someone slips and falls in your driveway, that person may be able to make a claim against you for the expenses incurred as a result of damage or loss caused by the injury. accidental damage you cause to others’ property. For example, if a fire starts in your house, your home insurance can pay for the damage the fire causes to your neighbour’s house.

Condominium insurance is different from home insurance because it covers only the inside structure of your unit and your personal liability. Tenant (renter’s) insurance can protect you if you live in an apartment or rent your home from someone else.

Tenant insurance can pay for: damage to or loss of your possessions if you rent or lease your apartment or home from someone else. personal property stolen from your vehicle. accidental damage you cause to any part of the apartment building or home you are renting. For example, if the bathtub overflows and floods your apartment, tenant insurance can pay for the damage caused to your apartment, the apartment building and other tenants or their property. injury caused to visitors.

Home or property insurance is usually required as a condition of getting a mortgage. Most financial institutions will not give you a mortgage without proof of insurance.

S ELLING YOUR HOME prepare your home for selling to increase appeal and market value ■ Make necessary repairs ■ Paint exterior and interior areas ■ Update various features (such as new carpeting or plumbing fixtures)

determine the selling price, based on: ■ An appraisal to estimate current market value ■ The location, features, and age of the home ■ Current mortgage rates and market demand in your area

decide if you will do a "sale by owner" ■ Advertise your home in various media (newspapers, Internet, flyers) ■ Be ready to meet and show your home to prospective buyers ■ Make use of the services of a lawyer or title company for the legal aspects

consider using the services of a real estate agent ■ Interview two or more agents to compare their service and experience ■ Expect the agent to provide a marketing plan and to handle the financial and legal aspects of the sale ■ Communicate with the agent on a regular basis regarding the selling price and prospective buyers ■ Consider holding an open house for potential purchasers

R ENT TO OWN Home owner, rents out their property to a tenant, but gives the tenant the “option” to purchase the home after a certain period of time at a predetermined price. The tenant has to pay the investor an upfront “premium” for the option to purchase the house, this is called the “option deposit”. The option deposit, along with any rent credits, are used as part of the down payment on the house.

C ONDO C RUNCH episodes/condo-crunch