Crossing the Moat to Your New Home

Congratulations! You have just finalized the offer to purchase the home of your dreams. Now what? As the adrenaline rush subsides from your negotiations for the purchase, it is now time for some careful planning. The emotional part is done . . . time to put on your logical hat. There are a lot of details that need to be attended to so you can safely lower the drawbridge to your dream castle. There are a great number of individuals and professionals who can assist you in your home purchase. While you may choose to not engage the full range of professional assistance that is available, please try to keep in perspective the fact that this is most likely going to be the largest investment of your lifetime. Do you really want to be cutting corners? Ask any seasoned home purchaser for their opinion; most will tell you that their move was indeed a positive, unproblematic experience. Unfortunately there are always exceptions to the general rule. The lawyer If you have not already done so, it is time to retain this key player on your home purchasing team. The lawyer will ensure that all aspects of your title acquisition are handled properly. As part of the transaction the lawyer will provide you with a final report which verifies that there are no outstanding claims on the property and that you have received title free of anything other than what is supposed to be there (such as your mortgage registration and any registered rights of way that go with the property). How do you choose a lawyer? One of the best methods is to ask the people you know and trust for referrals. Don't be afraid to shop around and ask the lawyer a number of questions. Do they have the time to answer your questions? Can they explain the things you don't understand? What services are provided with the fee? Is the lawyer readily accessible or will you be dealing with an assistant? As with any professional service, the fee charged should NOT be your only consideration in the selection process. Once the offer to purchase has been accepted, the REALTOR will normally deliver a copy of the offer to your lawyer. DO NOT DELAY in your selection of legal counsel. You will not do yourself or your lawyer any favours if you limit the time they have for a thorough investigation of the transaction before the possession date. Meet with your lawyer as soon as possible so that you fully understand ALL of your financial requirements to close the deal. There is no joy for any of the parties involved when purchasers realize they don't quite have the cash to close the day before possession. Have the lawyer explain all of the entries on the Statement of Adjustments (the transaction's "balance sheet"). You should understand that you will need to come up with extra money as part of the possession of the property to cover interest payable to the seller because they will not get your mortgage "proceeds" until completion of registration at the land titles office. You will also need to understand the concept of the property tax adjustment as this can have a significant effect on the funds required to close the transaction. Arranging your mortgage The best plan is to have a "pre-approved" mortgage. If you haven't already done so, then immediately after signing on the dotted line begin your enquiries with your financial institution. Don't be bashful. Contact a number of institutions or consider retaining a "mortgage broker" to assist in your search. While there may not be a great variance in terms of the interest rates being charged, there may indeed be differences in the "extras" - for instance, what prepayment options exist? what penalties exist for early prepayment? Note that there is no consistent method amongst financial institutions for the calculation or disclosure of prepayment penalties (something that REALTORS are currently lobbying for). Have your mortgage lender explain to you ALL the costs associated with borrowing. Do they charge an administrative fee? Do you need mortgage life or disability insurance? How do the products being offered compare, both in terms of premiums and coverage, to other plans that you may obtain elsewhere? You should very quickly learn the significance of terms like "amortization", "term" and "prepayment privileges". A little knowledge may save you thousands of dollars over the life of your mortgage. There are also other alternative methods to finance your purchase, such as a vendor take back mortgage, the assumption of the vendor's existing mortgage or the transfer of your present mortgage from one home to another. Mortgage Insurance Products There are other products available through financial institutions which provide for joint-life insurance (if one of two joint tenant/mortgage holders dies, then the life insurance proceeds will pay off the mortgage in its entirety). Financial institutions also offer disability insurance. If you are purchasing a home listed by a member of the Manitoba Real Estate Association, you may qualify to purchase job loss mortgage insurance. The Always Home Job Loss Mortgage Insurance Program can give you the peace of mind to proceed with your house purchase in the face of our uncertain economic times. Ask your REALTOR or local real estate board office for more details. Additional Costs Make sure you fully understand all the costs associated in the purchase of your new home. Here are the standard costs (but this list is not exhaustive): land transfer tax payable to the Province of Manitoba (based on a formula which increases with the fair market value of the property being transferred); goods and services tax (GST) payable to the Government of Canada on the purchase of a newly constructed home, condominium or townhome (with some rebates allowed); GST on professional services (e.g. if you have retained a REALTOR in a buyer brokerage contract, an appraiser, land surveyor or lawyer). (Note that the proposal to harmonize the provincial and federal sales taxes, if implemented, will extend the PST to services not previously taxed, dramatically increasing the cost of obtaining housing); mortgage application fee (charged by most financial institutions); appraisal fee associated with the mortgage (may be included in the mortgage application fee); mortgage broker's fee (if you retain the services of a mortgage broker); cost of obtaining a land survey and building location certificate (financial institutions will normally require some assurance that the building complies with any legal restrictions); any fees charged by a building inspector you retain; home insurance; legal fees and disbursements; property tax adjustment to reimburse the seller on a per diem basis for any prepaid property taxes (or alternatively to provide you with a credit for unpaid taxes); moving expenses; and utility adjustments. Moving Checklist You will no doubt find it very useful to follow a general moving check-list as a countdown to moving day and beyond. Speak to your REALTOR or contact your local real estate board for a sample "checklist" There are hundreds of little details to tend to, such as rummaging for boxes; notifications of change of address; meter reading; site condition inspection; flowers for your stressed out moving mate and feeding your volunteer moving crew. The Big Day Arrives With some careful planning and investigation, you should be able to lower the drawbridge to your new castle without having to worry about any unexpected interruptions by the moving day dragon. REALTOR is a registered trademark of the Canadian Real Estate Association and identifies a real estate practitioner who is a member of the Association.