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First Time Home Buyer Glossary of Terms - to help you prepare:

  • An appraisal is a professional assessment of a property's market value conducted by a certified appraiser. It is usually required by lenders to confirm that the property is worth the amount being loaned.
      - Why It’s Important: Knowing the appraised value is crucial to ensure you’re not overpaying for a home. It also influences how much you can borrow from a lender.

  • A buyer's agent is a real estate professional who represents the interests of the home buyer during the property purchase process.

       - Why It’s Important: Having a buyer's agent ensures that you have someone looking out for your best interests, guiding you through negotiations and helping you find a property that fits your needs.

  • Closing costs are the expenses and fees that must be paid when a real estate transaction is finalized. They can include legal fees, land transfer taxes, home insurance, and adjustments for utilities or taxes.

       - Why It’s Important: Understanding closing costs helps you budget for the entire home-buying process, so you’re not caught off guard with unexpected expenses on closing day.

  • Condo fees are monthly charges paid by owners of condominium units to cover building maintenance, amenities, repairs, and other communal expenses.

       - Why It’s Important: Being aware of condo fees is essential to budgeting accurately for your monthly expenses and understanding the overall cost of living in a condo.ription

  • A down payment is the upfront amount of money you put towards the purchase of a home. In Canada, it’s typically at least 5% of the property’s purchase price for homes up to $500,000.

       - Why It’s Important: Your down payment impacts your mortgage amount and whether you’ll need mortgage loan insurance. Larger down payments reduce your borrowing costs.

  • A fixed-rate mortgage has a set interest rate that does not change for the term of the loan. In Canada, terms usually range from 1 to 10 years, with 5 years being the most common.

       - Why It’s Important: Understanding fixed-rate mortgages helps you manage your budget because your payments remain consistent, making it easier to plan your finances.

  • Land transfer tax is a fee paid to the province when real estate changes ownership. Most provinces in Canada charge this tax, with rates varying based on the property's value.

        - Why It’s Important: Being aware of the land transfer tax helps you budget for this significant closing cost, as it can add thousands to your expenses depending on the property’s location.

  • Mortgage pre-approval is when a lender evaluates your financial situation and determines how much they are willing to lend you, subject to specific conditions.

        - Why It’s Important: A pre-approval gives you a clear idea of your budget, locks in your interest rate, and positions you as a serious buyer when making an offer on a home.

  • Property taxes are annual fees based on the assessed value of your property, paid to your local municipality to fund services like schools, roads, and emergency services.

        - Why It’s Important: Knowing the property taxes in the area you plan to buy can help you factor these costs into your overall housing budget.

  • The mortgage stress test is a qualification requirement in Canada that ensures borrowers can afford their mortgage payments even if interest rates rise. It uses a higher qualifying rate to test affordability.

        - Why It’s Important: Understanding the stress test helps you realistically assess your borrowing capacity and avoid taking on a mortgage you cannot afford if rates increase.

  • A variable-rate mortgage has an interest rate that fluctuates based on the prime rate set by the lender. Your monthly payments may change over time if interest rates rise or fall.

        - Why It’s Important: Knowing how variable-rate mortgages work allows you to weigh the risk and potential benefits of lower interest rates against the possibility of higher payments in the future.

  • Mortgage loan insurance is required if your down payment is less than 20% of the home's purchase price. It protects the lender if you default on your mortgage and is usually provided by CMHC, Genworth, or Canada Guaranty.

        - Why It’s Important: Understanding mortgage loan insurance can help you evaluate your down payment strategy and the overall cost of your mortgage.

  • An examination of a home's condition, recommended before purchase to identify potential issues.

  • Insurance that protects against issues with the property's ownership history or legal problems.

  • A loan used to purchase a home, typically repaid over 15-30 years. In Canada, mortgages are generally amortized over 25 years.

  • A shared equity mortgage program offered by the Canadian government, where they contribute to your down payment in exchange for a share of your home's equity.

  • A rebate on the GST or HST paid on a new or substantially renovated home for eligible buyers.

  • Annual tax paid to your municipality based on your property's assessed value.

  • A type of home ownership where you own both the building and the land it sits on.

  • A Chattel is any item that is deemed to be a moveable possession or personal property that is NOT part of the house sale. In normal circumstances these are considered to be exclusions of the inclusive purchase.
    **Not permanently affixed to the property.

Q

What is the first step I should take when buying a home before anything else?

A

It may be an unpopular answer, but the first thing to do before anything else is to assess your personal readiness. Have the circumstances in your life (including: needs, priorities and living situation) evolved to a point that home ownership is the logical next step?

If so, begin a preliminary assessment of your financial standing and research the home buying process. This is the first step to set you up right for the home buying journey.

Q

Can I change my agent even if I already signed with them?

A

Yes, you can absolutely change your real estate advisor if you’re unhappy with the service. It’s important to note: When you remove real estate representation you must remain with the brokerage, and will have to choose from their staff. If you’re dissatisfied with the Brokerage, a formal request will need to be made - or you can simply wait for the contract term to expire.

Q

What are the main steps to buying a house in Ontario?

A

The main steps include:
Personally review your finances (cash, debts, obligations), Define your expectations and goals for the process, investigate mortgage options, research representation, establish search criteria. When suitable options are found: evaluate the property (inspections), work with your Realtor to draw up an offer/terms, review and READ Contract TERMS!

Q

What is a Real Estate Representation contract in Ontario?

A

The contract you sign as a buyer or seller states that you’ve agreed to work with a brokerage. The contract also identifies the Realtor you’ve chosen from that brokerage. These contracts have term limits, and can also be voided when/if the circumstances arise.

Q

How long does the home buying process take on average in Ontario?

A

For most people it’s 2-3 months after the search begins (this doesn’t include the closing time line). Your individual circumstances and selection time could differ from this, but the majority of home buyers fit into this window.
** If it can be avoided.. never rush the process**

Q

How to choose the right neighbourhood for your first home?

A

The 2 words to consider here: Liveable & Saleable.

Firstly, the neighbourhoood must address your requirements to suit your daily life (liveable). This will be different for everyone, but here are some common examples: safety, amenities, commuting, green space, schools, maturity.. and of course the neighbours!

Secondly, the neighbourhood’s future plans, expansion and place within its greater surroundings is crucial to the investment side. Looking at your potential property with forward-thinking will help you anticipate future sale value.

Q

Do I need a mortgage approval before I start looking?

A

No, of course not. Getting approved for a mortgage is often recommended as the first step in the home buying journey, but it’s not. This is a step to be completed once you are ready to begin your search with a Realtor. But, there are several personal preparatory tasks that need your attention before you should think of visiting a lender.

Q

Does a First Time Home Buyer pay a land transfer tax?

A

Any time (in residential real estate) land ownership is transferred in Ontario, a land transfer tax amount is applied. First time home buyers may be eligible to receive a partial or full refund of this amount.

Q

What should I be looking for during a walk-through?

A

When possible, you should always get an inspection done, but here are some things to keep your eye on as you check out a potential house:

The roof, the foundation (basement), windows (drafts/sound), plumbing (run the taps/flush toilets), electrical (turn lights on).

Q

What is the minimum down payment required to buy in Mississauga?

A

The minimum down payment for a home is 5% of the purchase price, if it is less than $500,000. If it’s priced between $500,000 and $999,999, you’ll need 5% on the first $500,000 and 10% on the remaining amount.

Q

What is the difference between down payment and the deposit?

A

The deposit is a part of the down payment. The deposit can be any amount, but its purpose is to show the sellers that you’re a motivated buyer. The amount will be deducted from the down payment when the deal proceeds. The amount of the deposit will be strategized with your real estate advisor, there is no set amount.

Q

What is the Closing process and how long does it take?

A

The majority of the closing process involves legal and financial documentation. This includes transferring ownership, moving money and the protocol of checks and balances between all parties. Each close is unique to the contract agreed to, but in most cases closes fall with the 30-90 day window. The remainder of the close process is about your logistics, plans and prepartion for the physical move.

Q

What is a title search and what do I need to know about it?

A

A title search verifies ownership. It confirms the house/property for sale has a ‘clean title’. This means that the house/property is being sold without liens, claims or legal disputes regarding its ownership. A clean title ensures that - once sold to you - there are no outstanding legal claims to the property that can be imposed in the future.

Q

What is a the difference between a ‘Buyers’ and ‘Sellers’ Market?

A

Put simply, it’s supply V demand. In a Buyers market there are more homes available than buyers, and in a Sellers market there are fewer homes and more buyers. Each of these offers distinct opportunities. It’s imperative to understand that regardless of the type of market, it’s the strategy you and your real estate advisor employ that will determine how well you’ll do in any market environment.
The market’s state will always dictate the approach required for success. If a Realtor uses the same process regardless of the market’s clues - that’s a red flag.

Q

What should I know about how strategy affects the offer process?

A

This is a team effort with your real estate advisor. While the tendency is to focus solely on the price, an offer contract includes many other functional elements that will impact the agreement.
Things like conditions, timing and requests etc.

Pro Tip: The highest price offer does NOT always win the deal. Yes, buying a house is a financial transaction, but the human element of ‘homes’ and ‘families’ is important - and its leverage is powerful.

Q

What are the most common conditions (contingencies) in a real estate offer/agreement?

A

Home sales conditions are varied, but these are the ones you’ll encounter most often:
Financing approval (the ability to pay), Home inspections (the house is in X condition), the sale of the Buyer’s house, Cleanliness (the house should be professionally cleaned), Closing Cost specifics, Title inspection, fixtures and appliances etc.

Conditions are part of the offer strategy to come to terms on a deal. These should NEVER be an afterthought.

Q

How do I make my offer more attractive to sellers without adding more money?

A

Any way that you can make the process easier for the Seller will help improve your chances. Things like flexible closing dates, personal interest letters, larger earnest money deposits to show heightened motivation. Work with your real estate advisor to better understand the specific needs of the seller and try to accommodate them.

Q

What's the difference between freehold and condominium ownership?

A

Freehold means you own the house and the property. In a condominium scenario (non-freehold) ownership means you are a ‘unit owner’ with shared use/responsibility of common areas/amenities.

Each ownership type comes with responsibilities, obligations/costs, and living consideration that will impact your lifestyle and financial investment.

Q

What are the pros and cons of buying a new build vs resale property?

A

New developments offer the opportunity to enter the market without the higher price tag of established neighbourhoods. It also offers recent build advantages like warranties and opportunities for upgrades and customization. There really is no better or worse, your goals, plans and preferences will determine the option that fulfill your requirements.

Pro Tip: You can buy a new build with the assistance of real estate advisor.

Q

What is a Condo Status Certificate and what should I know?

A

A Condo Status Certificate (also called: Good Standing or Compliance) is a crucial document that provides you with details about the “health” of the building you’re buying into. This certificate provides documentation about the building ownership group, legal issues, budget (including its reserve fund), rules of operation and fees.

If you’re buying a condo, especially as a first time home buyer, it’s imperative you have access to - and understanding of its contents.