Wednesday, November 28, 2012

Calculate a Workable Home-Buying Budget

About two-thirds of British Columbians own their own homes and every year thousands more buy a home for the first time. It's a similar story across Canada. Home ownership is an essential part of life.

If you are thinking of buying a home, don't start shopping until you know exactly how much home you can afford. Find your price range by calculating three amounts: the amount of cash you can put toward the purchase (down payment), the maximum amount of loan (mortgage) you can comfortably pay back and the costs associated with actually completing a purchase (closing costs).

Down payment
Canada's National Housing Act prohibits lenders from loaning the entire amount of a home's market value so you will need a cash down payment to cover part of the purchase price.

The Act says a lender cannot normally provide more than 75 per cent of a home's market value unless the mortgage is insured by the Canada Mortgage and Housing Corporation (CMHC) or a private insurance company.

With mortgage loan insurance you can borrow up to 95 per cent of a home's value. The loan is known as a "high ratio" mortgage because of the high proportion of borrowed funds to the cash you bring to the table.

Mortgage insurance is available through chartered banks, trust companies, life insurance companies, credit unions and caisses populaires and the costs vary between one-half and two-and-a-half per cent of the total loan amount, depending on how much of the home's value is being borrowed. Mortgage insurance protects lenders against borrower default and remains in force for the life of the mortgage.

The amount and cost of a mortgage is strongly affected by how much of a down payment you make. The bigger the down payment, the smaller the loan you will need and the less you will pay in interest over the years. It makes sense to put down as big a down payment as you can afford, but keep in mind there are other costs involved in buying a home. It is a good idea to have some cash in reserve.

Mortgage Basics
A mortgage is simply a long-term loan secured using real estate as collateral. To get a mortgage, you have to fit the same criteria that lenders apply to any application for a loan - you need a certain income level, employment stability, a low or manageable debt load, a good credit history amongst other things.

Even though qualified borrowers can choose from a number of different mortgage options some things are constant from mortgage to mortgage and lender to lender.

Interest is what you pay for using a lender's money and it is usually a percentage of the amount borrowed, calculated semi-annually. Theoretically, if you borrowed $100 at 10% annual interest, you would pay $10 per year in interest. In real life, payments usually pay the interest first and repay some of the money borrowed(the "principal"), too. This is called a "blended" payment.

Loan payments are made periodically during a set length of time called the amortization period. Common amortizations are 20 or 25 years. The longer the amortization period for a given loan amount, the smaller your monthly payments will be. However, the amount of the interest paid goes up substantially as the amortization period increases.

Most mortgage payments are made once a month, but other options are twice a month, every two weeks or every week. Usually, your principal (the amount still owed) is reduced more quickly if you make more frequent payments and you will end up paying considerably less interest over the full term of the mortgage.

At first, most of each blended payment goes toward paying back interest; the principal is only reduced a little. As the end of the amortization period gets closer, more and more of each payment goes toward paying back the principal.

For example, with a $40,000 mortgage at 10% amortized over 20 years, after five years only about ten per cent of the principal amount has been paid off, after ten years about 26% has been paid, after 15 years a little more than half, with the remaining half paid off in the last five years of the amortization period.

The interest rate, amortization period and other conditions between borrower and lender are specified in a legal document called a mortgage loan agreement. The agreement stays in effect for a time period called the "term" of the mortgage - usually six months to five years, but sometimes longer.

A mortgage loan is due and payable at the end of a term. At that time a borrower may either pay off the amount owed, renew the loan with the same lender or change lenders. If borrowers can't meet their payments, lenders can "foreclose" or take possession of the property before the term is up.

A typical mortgage amortized over 20 years might end up divided into eight terms - say four three-year, a five-year and three one-year terms - each renewed at a different rate of interest set by the lenders and often tied to the government's Bank of Canada rate.

Mortgage Options
A "pre-approved' mortgage can be set up before you shop and guarantees rate, term, payment periods and other conditions for a certain period of time.

"Fixed rate" mortgages are structured so that each loan payment is the same amount, based on an interest rate that doesn't change during the term.

"Variable rate" mortgages also have standardized payments, but the interest rate can fluctuate from month to month as the Bankd of Canada rate varies. When interest rates rise, more of the interest portion of the mortgage is paid off and a smaller proportion of the payment goes toward paying off the principal. In times of falling rates, less interest is paid and more goes to the principal.

"Open" mortgages let you pay off all or part of the principal without penalty before the end of the term, cutting down on your total interest cost. There may or may not be a fee to do this, depending on the mortgage, and the interest rate is usually higher than for a closed mortgage.

"Closed" mortgages allow only regular, agreed-upon mortgage payments to be made but usually carry a lower interest rate.

"Assumable" or transferable mortgages let Buyers take over a Seller's loan, with conditions intact, if the Buyers meet the lender's criteria. Property with an assumable mortgage can be very desirable. For example, buying a home with a ten per cent assumable mortgage and eighteen months left on its term is a real bonus if the current interest rate is two or three points higher.

On the other hand, if you are buying a home and don't intend to live in it for long, you may want a "portable" mortgage. A portable mortgage can be transferred to your next home purchase with the rate, balance and term intact. If you find you will need a larger mortgage, some lenders will blend your portable mortgage with your new one.

To find a competitive interest rate and options that best suit your needs, shop around for a mortgage before shopping for a home. Be sure you look into the administration fees, penalties and other costs that can come with a mortgage too.

Closing Costs
Finalising or "closing" a real estate transaction can involve substantial costs that may come as a surprise if you don't know what to expect. A wide variety of fees, taxes and other expenses require payment before you take possession of your home.

If you are getting a high ratio mortgage, the cost of mortgage insurance can be paid immediately. On the other hand, you might have the option of adding the insurance fee to the loan, but then it will cost more because you will pay interest on it over the total life of your mortgage.

You will probably pay a fee to your lender for having an appraisal done as well, because most lenders will require an appraisal be done on a property before approving a mortgage. They just want to be sure they are lending you no more or less than the home is worth. You will have to arrange for pre-paid home insurance too, since you usually can't get a mortgage without a home-owners' policy to protect your home and the lender's investment.

There will be some delay while mortgage documents are being registered in the government Land Titles Office. When that happens you may not get your loan until after the possession date and you will have to pay interest to the Sellers on money owed to them at the same rate as your mortgage until they receive the full sale price.

No matter where you live, you can't escape property taxes. The tax year is the same as the calendar year, but tax in British Columbia is generally paid in one amount towards the middle of the year. Depending on when you take possession, you may have to reimburse the Seller for part of the year if they have already paid the Property Tax Assessment, or you may find the Seller owing you money if you have to pay after you move in. Either a credit or a debit for taxes will be included in the Statement of Adjustments prepared by your legal professional at the time of the sale. For information about property taxes in a specific area, contact the appropriate municipal or regional government.

You also have to pay a Property Transfer Tax in British Columbia.  This tax is one per cent on the first $450,000 of the purchase price and two percent on the remainder. Buying a $400,000 home would incur a $6000 tax bill.  The only exception is for those individuals who purchase a home whose purhase price is less than $400,000 and who have never owned property before - anywhere. These individuals are eligible for the First Time Homebuyers Grant/Exemption.

Additional Services and Costs
A real estate agent's fee is usually paid by the Seller, but other professional services aren't. Almost all home buyers need a legal professional to provide a title search, title and mortgage registration, zoning memorandum, a tax certificate amongst other things. You might also need a surveyor, engineer, home inspector or appraiser.

Consider your moving costs, too, as well as any repairs, renovations or redecorating you might want to do when moving in. Don't forget the fees for having new telephones, cable TV and other utilities hooked up. The GST must be paid on services, too.

You can see that using all your savings for the downpayment is not a good idea. Plan for closing costs well in advance to avoid financial surprises.

Buying a home isn't just the biggest investment most people make in their lives, it's one of the most complex. It can be one of the most pleasant and rewarding, too, with a little financial planning before you start shopping.

I am the GUY that will make a difference!

I specialize in selling homes in the in the Okanagan Valley including Westbank, West Kelowna, Peachland with a focus on Rose Valley, Lakeview Heights, West Kelowna Estates and Shannon Lake.

Karen Guy, REALTOR® Coldwell Banker Horizon Realty
C 250.878.3605 O 250.768.8001

Tuesday, November 20, 2012

Selling Your Home During The Winter

  • Buyers looking in winter months are serious
  • No need to worry about your yard work. Snow makes it look fresh and white.
  • Less listing inventory on the market, means less competition. Higher selling price.
  • Easier time of year for closing transactions. Lenders, inspectors, lawyers not as busy. Less errors and higher level of service.
  • Buyers begin the search and purchase for spring moves in January, February. Busy move times are March spring break, April Easter, May long weekend.
  • Less choice for buyers means less sellers to play pricing against each other. Buyers willing to make more concessions in their buying decision.
  • Property shows well, almost staged with holiday décor adding to the ambience.
  • Little chance of quick showings and not being prepared to show your home. Easier time of year to make appointments and give sellers advance notice.
  • Everyone lists their home in the spring. Go ahead and beat the rush
  • Good time of year for school, work switches and transfer corporate moves
  • People are in the spending and buying mood in the winter, holiday seasons
  • You might miss that right buyer, right place, right time being off and timing the market
 I am the GUY that will make a difference!

I specialize in selling homes in the in the Okanagan Valley including Westbank, West Kelowna, Peachland with a focus on Rose Valley, Lakeview Heights, West Kelowna Estates and Shannon Lake.

Karen Guy, REALTOR®
Coldwell Banker Horizon Realty
C 250.878.3605 O 250.768.8001

Wednesday, November 14, 2012

A Home Inspection is a Good Investment

Buying a home is a major event in most people's lives. Often, homebuyers are so caught up in the excitement that they can easily overlook any flaws their new home may have. However, a house is also one of the most expensive purchases you are likely to make so it's best to know as much as possible about potential problems before you make a commitment to buy.

The British Columbia Real Estate Association recommends homebuyers hire a professional home inspector to thoroughly check out the property before purchase. A home inspection can give you the peace of mind of knowing what to expect and help you make an informed decision about the value of the home and the future upkeep.

Not only will a home inspection help you determine the condition of the house, its structural soundness, and its mechanical systems but it also brings any issues or problems to the Seller's attention at a time when they can be resolved before closing a sale.

If you are making an offer on a house before it's inspected, talk to your REALTOR® about including a clause that the sale is contingent upon a satisfactory structural inspection and specify when the inspection is to be carried out. That way, you are protected.

What's included in a home inspection?
A home inspector will go through the property and perform a comprehensive visual inspection. A typical inspection includes an examination of the structure from top to bottom, including the heating, air conditioning systems, the interior plumbing and electrical systems, the roof and the visible insulation, walls, ceilings, floors, windows and doors, the foundation, basement and visible structure.

If you can spare the time, it's a good idea to accompany the inspector during this process. This will give you, the potential Purchaser, the opportunity to learn about any problems first-hand and become more familiar with your new house at the same time. The inspector may also be able to share some valuable maintenance tips with you during the inspection.

Following the examination, the inspector will provide a report that not only points out possible defects or areas of concern but also the positive aspects of the structure as well as the type of maintenance that will be necessary to keep the home in good shape. The home inspector should be willing to answer any questions you have as well as clarify any limitations of the inspection to avoid misunderstandings. Avoid firms that issue only a verbal report. The report should be more than a checklist of the items inspected. The home inspector should also issue a written report with accurate cost estimates for any major defects discovered during the inspection.

A professional assessment will provide complete information about the condition of the property you are considering and will help avoid any unpleasant surprises after the sale. In addition, a home inspector can remain totally objective while you, as the prospective homebuyer, may be emotionally involved.

A home inspection usually lasts about three hours. The inspection fee for a typical single-family house can vary depending upon the geographic area. The particular features of the home such as size, age and special structures will also be taken into consideration.

Hiring an Inspector
Inspectors are often professionally licensed in building-related fields; architects, contractors, and structural engineers are good examples. When interviewing a potential home inspection firm, carefully inquire about the specifics of their work and company. Ask how long they have been in business and ask for references from previous customers. Find out what type of insurance they carry and do they guarantee inspections?

The most reliable indication of a home inspector's qualifications is membership in the Canadian Association of Home & Property Inspectors. To become a member of this association, inspectors must meet professional and educational requirements, successfully complete comprehensive exams and practice professionally during a trial period followed by a review. Members must also meet annual education requirements to maintain their membership.

A decision to have a home inspection is a good investment. You could save many times the cost of the inspection by becoming aware of defects, maintenance requirements and potential future upgrade requirements. There are many home inspection companies available and your REALTOR® can probably recommend several to you or you can contact the Canadian Association of Home & Property Inspectors for a list of their local members.

I am the GUY that will make a difference!

I specialize in selling homes in the in the Okanagan Valley including Westbank, West Kelowna, Peachland with a focus on Rose Valley, Lakeview Heights, West Kelowna Estates and Shannon Lake.

Karen Guy, REALTOR® Coldwell Banker Horizon Realty
C 250.878.3605 O 250.768.8001

Wednesday, November 7, 2012

What's Involved in Marketing Your Home

In today's fast-paced, high-stakes marketplace, it takes know-how to sell a home. That's why most sellers enlist the services of a REALTOR® - a professional who has the qualifications, experience, skills, time and knowledge to provide the advice and services needed.

A REALTOR® will market your home to your best advantage. He or she will help you set a price that reflects the true value of your home under the current market conditions. They will also explain the selling process and help you close a deal.

But even before you enlist the help of a REALTOR®, it's a good idea to try to understand the steps involved in making a successful sale.

The Marketing Plan
With your help, and based on the prevailing market conditions, your REALTOR® will develop a marketing plan that may include open houses, advertising and a variety of listing choices.

The marketing plan may also include local newspaper advertising, Internet exposure, direct mail flyers, lawn signs and listing your property through the Multiple Listing Service (MLS®). An MLS® listing gives your property greater exposure to a broader audience of potential buyers and is a valuable tool when you are anxious to sell your home quickly.

The marketing plan starts when you sign a listing agreement with a REALTOR®. He or she will tell you about the option of selling your home through the Multiple Listing Service, or MLS®, which offers maximum exposure of your home to potential buyers and other REALTORS®.

Once you have agreed to work with a particular REALTOR®, it is time to set a realistic asking price. If you ask too much, you could hinder the REALTOR®'s marketing efforts before they even get off the ground. Set the price too low and buyers might wonder what's "wrong" with your home, and the proceeds from the sale will be less than they could have been.

When your home is ready to be sold, the "For Sale" sign - the most direct marketing tool of all - will go up in front of your property to catch the attention of people walking or driving by.

People who enquire about your home after seeing a "For Sale" sign are likely to be interested in your neighbourhood and already like the look of your home. A "For Sale" sign also lets your neighbours know you are selling and they may know someone who is interested in the area. Your neighbours might even be interested in buying themselves; plenty of people move on to bigger and better homes in the area they have lived in for years.

Soon after your house is on the market, an Open House may be organized for REALTORS® who stop by the check out the potential of matching the house to one of their customers. An Open House for everyone else is sometimes held on a weekend when many buyers make a point of walking or driving around neighbourhoods they are interested in.

The REALTOR® you have chosen to work with will set up the open house and you can make plans to be elsewhere for the two or three hours when visitors wander through. This lets people have a good look around without worrying about disturbing you or offending you with questions about the property they feel are pertinent.

The day-to-day contacts REALTORS® make are an extremely useful word-of-mouth type of advertising. A successful REALTOR® is often very involved in his or her community, and gets to know plenty of people. It could be one of them who decides to buy your house.

Preparing Your Home
Whether or not your home shows well to prospective buyers may determine how long it stays on the market and what it sells for. A home that is clean, in good repair, uncluttered, nicely landscaped and welcoming creates a good first impression. Add some fresh paint, flowers, a few new area rugs and you'll improve it's marketability even more. You should also act on any tips your REALTOR® provides on how to "show" your home better or add more curb appeal.

Setting an Asking Price
Deciding what the "asking price" of your home will be is one of your REALTORS® prime tasks. Your home will to be analyzed and compared to similar homes for sale or recently sold in your area.
The price should be one that you and your REALTOR® decide on together, based primarily on your home's fair market value. But you will also have to consider the strength of the real estate market, interest rates and consumer demand for your type of property.

Bringing in the Experts
Once your home has been "listed", it is essential to have a legal professional, a lawyer or notary, standing by to help ensure your rights and interests are fully protected, and to complete the sale successfully once you find a buyer.

Real estate documents, such as the Offer to Purchase, are complex and should be reviewed by a legal professional who specializes in real estate transactions.

A lawyer or notary will also look after the many complicated and time-consuming procedures involved, from the time you sign an agreement with a buyer to the actual closing. For example, if the buyer is going to assume your mortgage, your legal professional will gather all the documents required to complete the transaction and transfer title to the new owner.

I am the GUY that will make a difference!

I specialize in selling homes in the in the Okanagan Valley including Westbank, West Kelowna, Peachland with a focus on Rose Valley, Lakeview Heights, West Kelowna Estates and Shannon Lake.

Karen Guy, REALTOR® Coldwell Banker Horizon Realty

C 250.878.3605 O 250.768.8001

Kelowna Real Estate Agent West Kelowna Karen Guy Realtor