Buying a home - What to expect in terms of your costs

Most of my clients are uneducated in terms of the costs involved when buying their first house. Many of them believe that once you have the down payment, you are all set. Not knowing these costs can frustrate buyers because they don’t realize that they are necessary in the buying process. In the next few paragraphs, I will outline a few of the costs associated with your purchase so you can be prepared.

 Building Inspector

 Most people try and find the cheapest building inspector they can find. Most building inspectors cost at least $300-350 depending on the size of the property. 

Some inspectors can cost over $500. What is important to remember is to not be penny-wise but pound foolish. If you pay an inspector $50 more, but he finds a defect in the house like a crack in the foundation, you will be more than happy to pay it. A crack in the foundation can lead to hundreds if not thousands of dollars of unwanted repairs, and even lawsuits to recoup the money for repairs.

Appraisal

Most of the time, a bank will cover the cost of the appraisal up front, while some ask you to pay for it and then reimburse you. Please make sure to get this information up front since different lending institutions work in different ways. Usually, an appraisal will cost $300, and most banks will cover it. If you are trying to get a loan through an alternative lender, the cost is always at the expense of the client.

Provincial sales tax on CMHC Premium

When you buy a home with less than 20% down, you have to pay an insurance premium. If you put 10% down, for example, on a purchase of $200,000 your mortgage will be $180,000. Once you add the 2% premium, the new mortgage amount will be $183,600 with the $3600 insurance premium.  There is a 9% provincial tax on the $3600, making the total amount $3924. This $324 of tax must be paid when the loan is at the notary. It cannot be added onto the loan.

Notarial Costs

When you secure a mortgage on a home, it must be registered with the land registry office by an accredited notary. This professional’s job is to make sure that they verify that the property’s new mortgage is registered properly, to verify that the title is clean, as well as verify the certificate of location. They make sure that the buyers have the proper documentation with them at the closing to make sure that the transaction goes smoothly. Typically, for a home purchase, a notary will cost anywhere between $1,050 and $1,400. Once again, it is important to use a notary that you trust is competent, because a bad notary can wreak havoc on an otherwise straight-forward transaction. If you refinance a property, the fees are usually cheaper, but it depends from one notary to the next.

As always, should you have any questions regarding costs, or the mortgage process in general, please let me know. Anything I can do to educate you, or make the process easier, it would be a pleasure.

www.mortgageratesmontreal.com

(514) 771-1352   Fax : (514) 666-9166

info@mortgageratesmontreal.com

Bankruptcy: A decision with strong ramifications

I encounter a number of calls/emails from people who have declared bankruptcy and are looking for financing. Although there are mortgage solutions for these people, they are almost always more expensive than it is for people who have not declared bankruptcy.

I have seen people declare bankruptcy for amounts under $10,000, to over $100,000. I have seen people who are 25 years old declare bankruptcy and people in their 50’s and 60’s do so. The stigma is still the same: Whatever the reason for it, people cannot and will not accept responsibility for their debts. I understand some people have no choice, but at the end of the day, it affects your ability to buy a home in the near future.

If you have had a bankruptcy and have been released, the first thing you should do is to get a secured credit card with a $1000 limit. Once this has been open a few months, get a second card with the same limit. Use both sparingly, making sure to use each one every month. Using two cards at the same time, and keeping the balances low, will assure your credit improvement. 

NEVER MISS A PAYMENT ON THESE CARDS OR THERE IS A GOOD CHANCE YOU WILL NOT BE ACCEPTED FOR CREDIT/FINANCING AGAIN!

Typically banks want to see you released from bankruptcy for one year, with a year of re-established credit on one or two cards. Since different banks have different policies on this, it is impossible to give you a strict answer. Once you have re-established your credit, you can re-apply with me to a regular chartered bank. Should you require a mortgage, and you were given poor advice, chances are you do not have re-established credit. In these cases, I have lenders that will go up to 85% of the value of the property. This means you need at least 15% as a down payment for a new home purchase. The rates are higher, but the only requirement is that you have proof of a bankruptcy release.

If you are thinking of declaring bankruptcy, look at all your options first. Do you have family/friends that can help bail you out? Most people don’t see the stigma and effects of a bankruptcy until afterwards. They are in a very vulnerable time and their bankruptcy trustee may not be giving them honest advice on what effects the bankruptcy will have. It is important to do your research and find a trustee that will explain the process to you, and may even suggest some alternatives. 

I work with a trustee that has an excellent reputation, so if you need any advice on this topic, please let me know and I would be happy to help.

Avoid being haunted by bad mortgage decisions!

Don’t get spooked, but making mortgage/financing mistakes will cost you more than your weight in candy!

People often look at me with fright when I tell them about some of the difficult financings I have handled in the past. I’ve dealt with people who have had bankruptcies, consumer proposals, non-payments of municipal taxes, non-payments of government taxes, days or months being evicted out of their own home! Although there are exceptions to every rule, these horrors usually happen to good people who get involved with bad partners, or people who give them bad advice.

Just to give a few examples of the nightmares I have experienced with clients: I recently advised a woman who had a home free and clear with no mortgage on it whatsoever. She was working but could not afford to put money away for a rainy day. She was 24 hours away from the city repossessing her home for non-payment of her municipal taxes. Her bank was not helping her out with the $4,000 owing, despite the equity in her home, showing once again that your bank isn’t your business partner or your friend when times are tough. I see many people learning that your own bank can sometimes wear a mask and, before you know it, the mask comes off and you see their true colours.

I recently dealt with a gentleman who went through the misfortune of losing a close family member. Around the same time, he was also released from a bankruptcy and was with a lender that stopped lending in Quebec. When he approached his TD branch for a lifeline, requesting some help in his time of need, they showed him the door. I managed to get him approved with another lender and, had I not managed to do so, the current lender would have exercised a judgement to get its money back via judicial sale, thus removing him from his home.

If all of this is not a living nightmare, I don’t know what is.

It is important to get solid financial advice when the decision can affect your long-term financial future. If not, you can find yourself the victim of a trick, rather than a treat!!