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Hidden Defects and Your Toronto Home

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Buying a home in Toronto can be expensive enough as it is – the last thing any new homeowner needs is to suddenly find themselves faced with the unenviable task of repairing a hidden defect. If you are not familiar with this term, hidden defects are faults with a property that cannot be seen through regular visual inspections. Usually they involve incorrectly wired electricity, mould problems, plumbing issues, roofing defects, foundation cracks, etc… While discouraging, the potential of having to deal with such defects can be minimized by doing your due diligence.

In Ontario there are two types of defects that can crop up on a property sale – patent and latent. A patent defect is something that you can see easily when you walk into a home or that can be uncovered by a good inspector. For instance, if a window latch is broken and the window does not close fully, you cannot then claim damages from the seller to have it either changed or fixed. A patent defect is covered by caveat emptor, which basically means that you are soley responsible for ensuring the quality of the property you are buying.

The other form of defect is the latent defect, which is something that you cannot see easily. Regardless of the problem, you will need to establish whether the seller was aware of the issue and tried to conceal it from you during the sale. If you can prove that the seller was aware of it and either did not declare it or tried to hide it from you, then you can pursue the seller for the cost of repairs and/or damages.

For buyers, it is essential to request that the seller fill out a form called Seller’s Property Information Statement (SPIS). The form requires sellers to fill out “yes” or “no” answers to questions regarding different aspects of the home. While these forms used to be regularly filled out previously, in recent years, sellers have been cautioned away from them for liability reasons. However, these forms can work for the seller’s benefit as well. It is also essential to have insist that the sale only be concluded once a proper home inspection has been done to ensure to surprises down the road.

For sellers, by declaring whatever you know about your property, you are actually protecting yourself by demonstrating good faith. It is best to be upfront because it will minimize the chances of being sued after the fact and of having to return to repair or pay damages. It will also allow you to ask for a higher asking price.

In the end, it is hard to completely protect yourself from defects, but by doing your homework you should be good to go!

For some good reads on this topic go //bit.ly/1xhL1OE and also here //bit.ly/1BZMfT2.

Toronto Down Payments and Closing Costs

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The Toronto real estate market is a very competitive one with housing prices being the second highest in Canada. Therefore knowing how much you should save for a down payment can be a tough decision. After all, conventional wisdom says that 20% of the house price is what you should typically put down when buying. However, when the average house costs nearly $700K, that means you would need to save up $140,000 to put down on a property; add to this the closing costs of the home sale and you might be looking at several years of saving before you are able to fund your real estate dreams.

Down payment
For most people saving up such a sum of money will take far longer than they want to wait when looking to purchase in Toronto and it is why the minimum down payment required for a home sale is 5% of the asking price. However, remember that putting anything less than 20% down on a home will put your purchase into the “high risk” category and require you to have mortgage insurance from the Canada Mortgage and Housing Corporation (CMHC). The lower the percentage of your down payment, the higher the insurance that you will have to pay. The insurance can be paid up-front in cash or added to your mortgage amount. If you aren’t sure from where you will be able to save up for your down payment, there is a very good article on this very subject written by Gail VazOxlade over here //bit.ly/1xCOcUU.

Closing Costs
The costs that most first time buyers forget about when purchasing a home are the closing costs. These include all of the fees you will be called upon to cover in order for the purchase to go through. They include everything from notary fees to home inspector fees to the reimbursement of any monies paid towards property taxes. Here is a shortlist of the costs you can expect to cover:

House Inspection
Notary
Property valuation
Property survey
Land transfer tax where applicable
GST/HST where applicable
Title insurance
Interest adjustments
Prepaid property and utility adjustments
Mortgage life insurance
Movers/van rental for moving

A good overview of what to expect when it comes to costs can be found over here //bit.ly/14ibgPb. Also keep in mind that you’ll need money for renovations, paint, window dressings, etc…

As long as you are prepared with your down payment and the extra costs needed when buying a house, you will have an easier transition when the time comes.

Financial Aid for First Time Toronto Home Buyers

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Toronto is the second priciest city in Canada when it comes to home-buying. It is therefore no surprise that along with a sizeable down payment, many first-time homebuyers need other forms of financial assistance when it comes to making that leap from renting to buying. There are a few incentive programs designed to encourage first home-buyers. We cover a few of them over here.

Ontario Home Ownership Savings Plan (OHOSP)
Conceived as a savings vehicle for first time homebuyers in the province of Ontario, this plan allows you to open a savings account in any financial institution that will give you a tax credit of up to $500 per person ($1000 per couple) on your income tax return. It is not a tax shelter so any interest earned is taxable. To qualify your net income must not exceed $40,000 ($80,000 for couples). There is a maximum contribution to the account of $2000 per year ($4000 per couple) although there is no limit to how much you can actually put into the account. You can make contributions for 5 consecutive years before you have to close the account and you have 2 years to buy a home once the account is closed. You can ask your financial institution for more information on this incentive.

First-Time Home Buyers Tax Credit (HBTC)
The Canadian government has also devised a tax credit scheme to assist new home buyers with their first purchase of real estate. According to the government information page: The $5,000 non-refundable HBTC amount applies to qualifying homes acquired after January 27, 2009, and provides up to $750 in federal tax relief. You can read more about this incentive at the Revenue Canada Agency website.

First-Time Home Buyers RRSP Plan
The most well-known of all first-time home buyer incentives is the RRSP plan that allows first-time buyers to withdraw their RRSPs without penalty in order to use the money towards a down payment on their first property purchase. You then have 15 years in which to repay the amounts taken. You can consult your financial institution for more information on this program.

Ontario First-Time Home Buyer’s Land Transfer Tax Credit
The province of Ontario provides this tax refund of the land transfer tax up to $2000 for first time home buyers up to a maximum property price of $227,500, after which the cost is charged at a rate of 1.5%. So basically, you won’t have to pay the land transfer costs for the first $227,500 on your new home. You can read more about this over here //bit.ly/1B5boNL.

Raising the money needed to purchase your first home is never easy, which is why the federal and provincial governments offer these incentives to new homebuyers to help ease the financial burden. With a little planning, good budgeting and the help of these tax credits and incentives, you can be well on the path to homeownership!

First Time Home Buying Tips

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Buying a home for the first time can be a daunting and stressful business. Just saving for the down payment on a property in the Greater Toronto Area can be tough enough – for those just starting out, you might want to consult our article on budgeting over here //bit.ly/1wXnmYX to get an idea of how to budget when trying to save for the purchase of Toronto real estate. Once you have saved up enough cash for a down payment on your pad, there are a few things to consider before rushing out to visit open houses. Read on for a few tips that will help savvy first time-home buyers navigate the sometimes tricky waters of buying a house.

1. Know your neighbourhoods

As simple as that sounds, knowing your Ontario neighbourhoods involves more than just knowing what streets make up a community – it includes knowing the demographics, the transportation, the community services, the facilities and the available schooling. Whether you want a specific community for it’s proximity to your work or it’s abundance of nightlife will definitely determine the areas best suited for you and your family’s lifestyle. A couple of good sites delivering such information can be found here //bit.ly/1xuaM4Z and here //bit.ly/13OXiTP.

2. Know your budget

While we will all sometimes get carried away when house-hunting and wander into properties that are clearly out of our budget range, be prepared to know exactly how far out you can comfortably go before ending up house-poor. Set a realistic sliding scale of minimum and maximum price projections and then stick to it. And remember – always create your budget using your NET salary to have the clearest understanding of what you can afford.

3. Know what you want

We all want as much as we can get from a home, but realistically there will be certain elements that will make or break a sale. The best thing to do is to sit down and write out all of things you absolutely must have in a home and all of those elements you would like to have in a home. By knowing what you want and what you can live without, you will more easily be able to narrow down your choices when out hunting for homes.

4. Know that you are pre-approved

Once your budget is set, your down payment is saved, your list of must-have’s is created and you know your top-three neighbourhoods, it is now time to start searching for the right mortgage lender. Getting yourself pre-approved is necessary in a hot-market. Some sellers won’t even consider offers from a buyer who doesn’t already have the backing of a financial institution. Knowing that you are pre-approved for a mortgage will also give you confidence when you are house-hunting and will make securing that perfect property far easier when you do find it.

5. Know your realtor

Although finding a realtor might seem straight-forward, there are many elements that go into getting the right pairing for you. Firstly, you need to feel comfortable with your agent. Secondly, you need to be 100% sure that s/he is working for you and not for themselves. The best place to find agents is through family and friends, colleagues or other sources of referrals. A good agent will sit down and talk to you to find out what it is you’re looking for before anything else. Once they have a handle on what you want and the neighbourhoods that interest you, only then will they begin their search for you. Be prepared to go through at least one or two agents before you find the right one.

As long as you are prepared, house hunting can be a fun and memorable experience.

Toronto Homebuyer’s Budget

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Buying your first home in Toronto – or anywhere for that matter, requires you to have a sizeable down payment as well as money for the closing costs, which can run into several thousands of dollars and for which many first-time buyers are unprepared. The best way to find money for your downpayment is to put together a proper budget that will take into account all of your fixed and variable expenses and to live according to that budget for several months prior to starting your home search.

The very first thing you must do when setting out to make a budget is to track your monthly expenses for a good three months in order to establish your spending patterns so that you have an accurate snapshot of your monthly expenses. Once you have a good idea of how much you spend for your variable expenses, then you will be ready to sit down to create your home buying budget.

The secret to budgeting is to be as realistic as possible. Here is a breakdown of the major categories you must include in your budget breakdown:

Total monthly income (Net, from all sources including any government assistance)

Fixed Expenses:
Rent (Mortgage & property tax)
Electricity
Gas & Water
Maintenance/Condo fees
home Insurance
Cable
Internet
Television
Cell phone
Car (payment)
Car Insurance/registration/licence

Variable Expenses:
Gas
Repairs (car maintenance)
Transportation (public)
Medical/Dental
Groceries
Clothing
Pet
Entertainment
Vacation
Misc

Debt repayment (credit cards, line of credit, etc…)

Emergency Fund
Savings

Total Expenses

In the end, your total monthly expenses must be lower than your monthly income. If it isn’t, then you have to adjust to ensure that it is. Next, you should adjust your current rent/housing allotment to include what you would expect to pay if you bought a house in the price range you are targeting. Remember that you should factor in whatever taxes you will anticipate paying for the house. You should also then adjust your electricity and other fixed expenses to reflect what the higher costs would be for the house. The difference in cost you should put aside in a savings account for your down payment.

By doing this, you will get used to living with the costs of what you can expect the costs to be when owning your own home while also saving towards that eventual goal.

Real Estate Resolutions

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Entering the Ontario property market can be a daunting thought. However, with the New Year just hours away, there’s never been a better time to buckle down your short list of Toronto real estate goals to start the next twelve months off on solid footing. You can now sweep away the old to make way for the new and if you plan on purchasing a home within the next year, then planning for it and budgeting for it are the best ways to ensure that you will be bringing in 2016 in a new home.

While the Toronto property market does not show any signs of slowing as yet, there is hope for those hoping to either enter the real estate game for the first time or to move up to a more luxurious home and neighborhood. In one of our previous articles, found here //bit.ly/1wWtlPf we cover up-and-coming neighborhoods in the city that still offer very good value for money while in this article over here //bit.ly/1xq0sui we talk about the city’s most prestigious neighborhoods. In a third article found here //bit.ly/1wDaJS5 we discuss how urbanization is going to be keeping housing prices up in Canada’s most popular cities including Toronto.

To join Toronto’s real estate game you need to first put together a realistic budget of just how much home you can afford. Next, you need to research those neighborhoods with the kind of homes and services you want in order to lead the kind of lifestyle you envision for yourself. Once you have a budget and a short list of the neighborhoods in which you are interested, next you need to decide what features you want in a house. After listing all of the features important to you, whittle that list down to “must-haves” and “would be nice to have” columns. The “must haves” will be those elements that you definitely want in a home. Although it might sound silly to do this, it is important because, depending on your budget and the neighborhoods you want, you might have to comprise to get the most that you can afford.

Lastly, when looking for a new place, you need to get a hold of a good realtor who can show you the ropes of property buying and who can steer you toward the best deal and those properties offering the most value for your money. A good realtor will not only help you find a home, but they will only show you the kind of home that would interest you, in the communities of your choice.

Once all of these elements are in place, you are sure to find the perfect pad for your family.