Buying a House Chapter 5

Outcomes Learn some terminology about buying a house in Nova Scotia Learn rights/responsibilities of a homeowner and the bank

How is renting and buying different???

Types of Houses Condominium (condo): A building or group of buildings in which each unit owner has title to a certain unit You still have to pay monthly maintenance fees

Types of Houses Town House: a row of homes sharing one or two common walls

Types of Houses Semi-detached: Two houses side by side, sharing one common wall

Types of Houses Fully Detached: a house that is owned by one family or person that does not have shared walls

Key Terms Mortgage: A legal contract that is registered against the title to a property in order to guarantee that a loan will be repaid (the money you borrow to buy a house that is paid back over many years)

More Key Terms Mortgage Rate: the interest rate, set by the bank, on a mortgage loan. Principal: The amount of debt, not counting interest, left on a loan Amortization: The period of time during which you will owe interest and the principal to your lender (usually 30 years)

More Key Terms Maturity Date: The date on which the principal balance of a loan is due and payable Appraisal: An estimate of the value of a property, made by a qualified professional. It is required by the bank to determine how much money the bank will lend you.

Key Terms Appreciation: An increase in the value of a property due to changes in market conditions, or for other reasons. The opposite of depreciation. Foreclosure: A legal process by which the lender (bank) or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage. Also known as repossession.

Key Terms Market value: The highest price that a buyer would pay and the lowest price that a seller would accept on a property. Market value changes over years and also over seasons. Realtor: A real estate broker or an associate holding active membership in a local real estate board.

Key Terms Asset: Anything with a dollar value that you own. Your assets are tallied up when the bank is trying to figure out what it can afford to lend you.

Key Terms Debt to Income Ratio: The ratio, expressed as a percentage, which results when a borrower’s monthly payment obligation on long-term debts is divided by his or her gross monthly income. DtI ratio = Debt ÷ income x 100

Key Terms Property Taxes: Taxes paid to the government for services in the community (road paving, street lights, etc) Equity: The portion of the property which the owner actually owns, having already paid for it.

Key Terms Closing costs: Expenses for buyers and sellers when they transfer ownership of a property (taxes, transfer fee, realtor fees, lawyers, etc). They often total thousands of dollars! Down payment: Money paid to make up the difference between the purchase price and the mortgage amount. You need to have 5% (at least) to buy a home. Most people put down between 5% and 20%.

Key Terms Fixed rate mortgage: A mortgage on which the interest rate is set for the term of the loan, regardless of future interest rate fluctuations. This makes payments predictable but it not always the cheapest alternative. Variable rate mortgage: The amount you pay can go up or down, depending on Canada’s interest rate at the time. Payments are unpredictable.