The timing has never been better. Today’s real estate prices are rising, interest rates are low, and high rents provide an opportunity to make money in real estate. With increasing construction activity in Toronto there is a great selection of income properties available in prime locations and at very attractive prices.

At Baker Real Estate, we pride ourselves on being in tune with the real estate market. We will help you build a real estate.

Peace of Mind

Unlike some stocks, your investment will never go to zero.

Appreciation

1. Buying pre-construction provides one type of appreciation. Usually, from the time you buy pre-construction to when the property is complete, its value has appreciated and you have only put down a small down payment of, say 20%, of the purchase price. You have then made a substantial return on your investment of a down payment should you decide to sell immediately.
2. Improving the condition of the actual property can create immediate appreciation.
3. Buying a property in an up-and-coming area can create more than average appreciation over time.

Leverage

1. With a certain down payment, the bank will finance the balance allowing you to leverage your investment (the down payment). The mortgage can be supported by the income generated.
2. Paying down the principal. By using the income from the property to pay down the mortgage, you ultimately, at the end of the amortization period, will have a property that is 100% owned by you and in which you have only put a nominal down payment.

Income

1. With the right amount of equity in a property, it can begin to generate a positive cash flow immediately.
2. When the mortgage has been paid off, the property can generate income indefinitely.

Buying your first home is one of the biggest decisions you will ever have to make.

The first question most people ask is “How much can I afford to pay for a house/condo?” The standard answer is that the price of your home should not exceed 32% of your annual income. If you have a partner their income is added. It’s recommended that if you’re new in your career you stay on the low side of this estimate. However, if your job prospects are good, you could apply the upper level.

Pre-qualification for a mortgage is the best way to tell how much you can afford to spend on your home.

Simply call your financial institution and book an appointment to meet with the mortgage loan officer. This meeting will determine the amount of mortgage you can comfortably afford before you start to shop.

The mortgage amount, plus whatever down payment you have saved, will clarify how much you can spend on your first home. It will also give you the confidence to make an offer when you find the right property. Ultimately, the bank will need to approve the actual property you are buying.

This is the amount of “cash” you can put towards your purchase price. Naturally the more “cash” you can gather the less mortgage money you need – the less your monthly payments are.

This down payment can be as little as 5% if you qualify for a 95% mortgage. This type of mortgage is known as a hi-ratio mortgage and requires loan insurance from Canada Mortgage & Housing Corporation (C.M.H.C.) or GE Capital Mortgage Insurance Canada.

Mortgage insurance premium is steep – up to 3.85% (depending on the loan to value ratio) of the mortgage amount plus Ontario’s 8% insurance tax.

1st time home buyers with only 5% down payment available to them must have a minimum of financial assets equal to 5% of the price of a home from their own resources.

Maximum Gross Debt Service (GDS) Ratio, including heat is 32%. This is annual principal, interest, taxes, heat, plus 50% of any condominium fees, divided by annual income.

Maximum Total Debt Service (TDS) Ratio is 40%. This is GDS plus other annualized debt payments (car loans, credit cards etc) divided by annual income.

The mandatory minimum Mortgage/Loan term is 3 years with Loan qualification based on the higher of the 3-5 year rate (normally the 5 year rate but not necessarily).

At the time of application, borrowers are required to demonstrate their ability to cover closing costs equal to at least 1.5% of the purchase price.

When the minimum equity requirement is being met by way of a non-repayable financial gift, the funds must be in possession of the borrower before making an offer to purchase.

First-time buyers (plus non-home-owners in the previous 5 years) can withdraw up to $25,000 tax free from their R.R.S.P toward their down payment. A spouse can also withdraw up to $25,000 for a total of $50,000 under this Government Home Buyers Plan. These funds may be used to buy or build your principal residence. Once all HBP conditions are met the funds can be used as down payment, legal fees, Land Transfer Tax or home improvements.

If you don’t have $25,000 in your R.R.S.P’s you may be able to arrange a “catch-up” loan from your bank. You may have unused RRSP contribution room if you have not contributed the maximum in past years. This loan money is deposited in your R.R.S.P. account, which will result in a significant tax refund to you at tax time. Use this refund to pay down the loan and you have just arranged a more substantial down payment for yourself. Tax refunds generated by these loans can only be added to the borrower’s 5% saved funds.

Naturally there are rules:
Only funds in an R.R.S.P for at least 90 days are accessible, also money withdrawn from your R.R.S.P must be repaid over a period of not more than 15 years. Your payments of 1/15 per year begin the second year in which you make the withdrawal. If you do not repay this annual amount, whatever portion is left unpaid will be taken into income for that year and taxed accordingly.

There are two types of mortgages:

Conventional Mortgages: The Lender provides up to 80% of the appraised value or purchase price, whichever is less. This means you must be able to finance at least 20% of the cost of the property on your own.

High Ratio or Insured Mortgage: This applies to any mortgage which finances between 80% to 95% of the appraised value or purchase price of the property, whichever is less. By law, this type of mortgage must be insured against nonpayment by either Canada Mortgage and Housing Corporation (C.M.H.C) or Mortgage Insurance Company of Canada (M.I.C.C). This insurance protects the lender if the borrower fails to pay.

Depending on the % down payment you have, the following premiums are added to the mortgage amount by C.M.H.C:
5% downpayment – 3.60 – 3.85% premium
10% down payment – 2.40% premium
15% down payment – 1.80% premium

Mortgage payments

You can choose to make monthly, bi-weekly or weekly payments. The more frequent your payments, the sooner you pay off your mortgage, and the less interest you pay.

Arranging your payments to coincide with pay cheques is a popular choice. Other options would include a shorter amortization period or taking advantage of prepayment privileges usually once per year on the anniversary date. Prepayment privileges are voluntary payments you make in addition to your regular payments. The prepayment is applied directly against the principal owing, so you pay down your mortgage faster. This also significantly reduces your interest paid.

The most common amortization period is 25 years. The longer the amortization the higher the amount of interest you will pay. There are tremendous savings to be had in the amount of interest paid by shortening the amortization period.

This is the length of time the interest rate is fixed for. Most financial institutions offer terms ranging from 6 months to 7 years. Some are offering 10 year terms.

Interest rates tend to rise with the length of the term. A longer term is recommended if you have limited income or if you want to keep your mortgage payments stable for a period of time. If interest rates are falling, a shorter term might be indicated, but if rates are rising, locking in for 3-5 years may be the most sensible route to take.

Pre-approved mortgages usually guarantee their rate for 90-120 days. If interest rates rise you are protected; if they fall you get the benefit.

Closing Costs – those hidden extras that you need to provide for:

Legal Fees: Your lawyer is an essential part of your closing, and there is a fee for this work. i.e. searching title and registering it in your name.

Home Inspection: A qualified home inspector can set your mind at ease as to the structural and mechanical soundness of the house you are buying and possible future costs you may have to face.

Ontario Land Transfer Tax: Applies to anyone buying property in Ontario. The following formula applies:
Up to $55,000 x .5% of total property value
From $55,000 to $250,000 x 1% of total property value less $275
From $250,000 to $400,000 x 1.5% of total property value less $1,525
From $400,000 and up x 2% of total property value less $3,525
A Land Transfer Tax rebate currently applies for first time buyers of brand new houses or condos. 
First time buyers in this case means just that – people who never owned a home anywhere.
Brand-new is limited to properties, which qualify for Ontario New Home Warranty Program coverage.
You can save up to $2000 in L.T.T. Qualified buyers get the refund on closing simply by signing a one page affidavit.

City of Toronto Land Transfer Tax:
Up to $55,000 x .5% of total property value
$55,000 to $400,000 x 1% of total property value
From $400,000 and up x 2% of total property value First time buyers of new or resale homes receive rebates of up to $3,725 meaning those buying homes worth up to $400,000 pay nothing.

Property Insurance: This insurance covers the replacement value of your home and contents. Your mortgage lender will require proof that you have insurance before processing a mortgage.

Property Taxes: You will have to budget for annual municipal property taxes which are based on the assessed value of your home. New construction is currently assessed at approximately 1% of the purchase price. In some cases your lender may include property taxes with your monthly mortgage payment.

Survey Fee: Your lender will require an up to date survey. The Vendor may be able to provide one or agree to pay to have one done, or you may have to pay for one yourself- approximately $800.

Service Charges: There will be service charges to set up new service and utilities at your new home i.e. telephone, cable, hydro etc.

Maintenance Fees: If you are purchasing a condominium, you will be charged monthly maintenance fees that cover the upkeep of the building, concierge salary, and any necessary repairs. These fees often include your utilities. Be very clear on what is included in your maintenance fee.

Moving Costs: Movers cost money and need to be booked in advance of moving day.
General rule of thumb is to have 1.5% of your purchase price set aside to cover all of the above costs.

For further inquiries about mortgages or get in touch with one of our agents, please e-mail sales@baker-re.com or call 416-923-4621 to have one of our agents assist you. Click here for full contact information.

home ownership programs

Government aid
There are three types of government assistance:

• Tax incentives (i.e. HBP, tax credits);
• Financial assistance to reduce the purchase price;
• Reductions in premiums for home or mortgage insurance.

Home Buyers’ Plan (HBP)
For several years now, the federal government has been facilitating property ownership through the HBP, a plan which allows every taxpayer to withdraw up to $25,000 from their registered retirement savings plan (RRSP) for the purpose of acquiring a property. However, this program is subject to repayment obligations which buyers must begin to repay in the second year following their RRSP withdrawals. A buyer has 15 years to reinvest all of the funds withdrawn from an RRSP, without interest.

First-time Home Buyers’ Tax Credit (HBTC)
The federal government offers a tax credit for the purchase of a first home. The amount for a qualifying home is $5,000 and the credit is applicable to single-family homes, townhouses, semi-detached houses, mobile homes, condos and apartments in a duplex, triplex, quadruplex or building. A share in a housing co-op is also eligible, provided that it gives you the right to own housing in the country. A disabled person who qualifies for the disability tax credit may also access the HBTC.

Green Home
A person who acquires an energy-efficient unit (a home, a unit in a small residential complex or a condo in a high-rise building) will receive a 15% or 25% reimbursement of mortgage insurance premiums as part of a program administered by CMHC. The 15% premium refund applies to homes built to the standards of Novoclimat, LEED Canada, Energy Star, Built Green Canada and certain other provincial standards outside of Quebec. The 25% rebate applies to homes built in accordance with R-2000 standards. Energy-efficient homes not built under those standards may also be eligible, however they must be assessed by an energy advisor accredited by Natural Resources Canada. These homes must achieve an EnerGuide rating of between 82 and 85 to receive a 15% premium refund, and a rating of 86 to 100 for a 25% refund. Similar standards are required for a condo acquired in a residential tower. Premium refund applications must be submitted by the borrower within two years of the closing date of the mortgage.

Canada Mortgage and Housing Corporation (CMHC) Mortgage Loan Insurance
This program allows homebuyers to purchase a property with as little as 5% down.
For more information, contact: Canada Mortgage and Housing Corporation 416-221-2642
www.cmhc.ca

Home Land Transfer Tax Refund | First Time Home Buyers Only
A Land Transfer Tax refund currently applies to first time buyers of brand new houses or condos up to $2,000.
For more information, contact The Ontario Ministry of Finance 1-800-263-7965 http://www.trd.fin.gov.on.ca

New Home RRSP Plan
First Time Home Buyers Only First-time buyers can withdraw up to $25,000 tax free from their RRSP toward their down payment. For more information, contact Canada Customs and Revenue Agency 1-800-959-8281
http://www.ccra.ca
THIS SUMMARY IS INTENDED AS A GENERAL GUIDE ONLY AND REFLECTS PROGRAMS AND PRACTICES IN EFFECT AT THE TIME OF PUBLICATION. BAKER REAL ESTATE CORPORATION MAKES NO GUARANTEES AS TO THE ACCURACY OF THE INFORMATION CONTAINED IN THIS BROCHURE.

Montreal’s Home Ownership Program applies to both new and existing properties. In respect to new properties, if it is also a first-time acquisition, a buyer is entitled to a refund of the transfer tax (also known as a ‘welcome’ tax). A lump sum of between $2,250 and $6,250 will also be awarded to future occupants, with the amount varying according to the value of the acquired property and the nature of the occupants. Example: A person living alone who buys a residence up to a maximum value of $200,000 will be entitled to an amount of $2,250. A family with at least one child under the age of 18 will be entitled to the maximum amount of $6,250, provided that the family acquires a property up to a maximum value of $360,000, with at least 1,000 square feet of interior space. The same family can also benefit from six months of free public transit with the purchase of an annual OPUS card and two Accès Montréal cards.

The Société d’habitation et de développement de Montréal (SHDM) also offers a program called Accès Condos. This program offers a purchase credit for accredited Accès Condo projects, amounting to 10% of the sale price of a divided co-ownership. A down payment of $1,000 is required to access this credit. For example, if you purchase a $200,000 Accès Condos accredited unit, with a minimum down payment of $1,000, you will be entitled to a purchase credit of $20,000 (10%), which will reduce your mortgage to $179,000. However, when reselling the condominium, you will have to reimburse the $20,000 to the SDHM, plus 10% of the value added associated with the sale. In other words, if the value added is $40,000, the amount to be reimbursed will be $4,000.

Agreement of Purchase and Sale
A binding contract that contains all of the terms, conditions and obligations involved in purchasing a condominium suite.

Common Elements
Property areas in a condominium, except the units, that can be used by all unit owners. This may include lobbies, parking areas, recreational facilities, elevators, roofs, etc.

Condominium Corporation
A corporation without share capital, created under the Condominium Act, responsible for the ongoing administration of the property including maintenance and operation of the common elements and property. Most day-to-day supervision is typically delegated to a qualified property manager.

Condominium Declaration
The constitution of the condominium that effectively creates the condominium corporation and sets out the responsibilities of the owners and the corporation. It defines the boundaries of maintenance and details each owner’s percentage share of the overall common expenses.

Condominium Ownership
Ownership of a condominium consists of separate ownership of a specified amount of space (the suite) in a multiple dwelling environment plus tenancy-in-common ownership of the portions used jointly with other owners (the common elements).

Disclosure Statement
A narrative description of the relevant aspects of the Condominium project. The Statement will contain the proposed Declaration, By-laws, Rules, Management Agreement and Budget Statement. An Agreement of Purchase and Sale is not binding on the purchaser until the copy of the Disclosure Statement is received.

Exclusive Use Elements
Areas in a condominium that you have exclusive use of but are maintained by the Condominium Corporation with your maintenance fees.

Interim Occupancy
The period of time from the occupancy date to the date of title transfer.

Maintenance Fees
This a monthly charge relating to your share for the maintenance upkeep, administration and insurance for the common element areas. This fee may or may not include additional costs such as heat, hydro and air-conditioning depending on the individual building. Your percentage portion of these expenses is set out in the budget statement usually within your Disclosure Statement.

Occupancy Date
The date established by the Developer upon which you must take occupancy of your home.

Occupancy Fee
The monthly payment, payable by you, for living in your home prior to registration. This consists of your maintenance fees, taxes and monthly interest component.

Realty Taxes
Each suite, including parking and locker units, is separately assessed annually by the City based on current property value. Realty Taxes are the responsibility of each individual owner.

Registration
When the condominium’s declaration and description are ultimately registered in the land titles office, following their approval by governmental authorities.

Reserve Fund
A fund used solely for major repair and replacement of common elements and corporation assets.

Title Transfer/Final Closing
Refers to the date after the condominium is registered and upon which you receive title to your home.

Unit
The exclusive portion of your property that is considered your home, as specified in the declaration.

Why Buy New?

Buying pre-construction during the planning stage gives you several advantages:

• Wider selection of floor plans and locations within the building.
• “Brand new” means substantial savings: less maintenance, less repairs, therefore less expenses.
• You can choose and personalize your decor and finishes.
• Historically values increase between pre-construction & occupancy.
• Tarion Warranty Protection (see Special Programs and Incentives)

Things to Consider During Your Search:

How much can you afford?
The best way to tell how much you can afford to spend on your home is to determine how much of an initial investment or down payment you have, and then get pre-qualified for a mortgage. You will be responsible for monthly maintenance fee, taxes and your mortgage. At some Developments, first time homebuyers can pre-qualify for as little as 5% down payment. For more information on qualifying as a first time homebuyer, down payment and mortgage details, please speak to one of our Sales Representatives.

What should you buy?
There are numerous things to consider when looking at the investment aspect of the home you are buying:

• Location: Make sure that you buy in an established residential area, or one that is up and coming, which will allow for future appreciation.
• Developer: Make sure you are dealing with a respectable builder with a good track record. See www.tarion.com for quality ratings.
• Suite Design or Floor Plan: Make sure that it’s easy to furnish. Keep it resalable: for example don’t change a big suite from a 2 bedroom plus den to a 1 bedroom with 1 bathroom. There will be less interest when you want to sell and most buyers won’t want to renovate it back to its original state.
• Lobby and Common Areas: This is the front door and the image of your investment to the outside world. A great lobby, not necessarily a large one, but a nice one, can make or break a long-term condominium investment. When buying a used home or a resale, you may renovate the suite, but you must live with the outdated lobby and hallways.
• Amenities: Features such as: Concierge Service, Parking, Fitness Centres, Lounges, and Rooftop Terraces add value to your investment.

Things to Consider Once You’ve Made a Decision:

Signing an Agreement of Purchase and Sale:
This Agreement will take the home off the market and guarantee you the price and terms agreed upon at the time of Purchase. A deposit cheque will be required at this time.

10 Day Cooling Off Period
Within 10 days after you receive both the Agreement of Purchase and Sale signed by both you and the Developer and the Disclosure Statement, you have the right to change your mind. This is called your ‘Right of Rescission’. During this 10-day period, make sure that you check your financing options. A lot of new condominium sites offer capped rate programs that are well worth considering. Most purchasers take their Agreement and Disclosure Statement to a lawyer so that they fully understand their legal obligations. Lawyers generally won’t charge an additional fee for this service if you’re using them for the final closing.

Choosing Your Colours and Finishes
When buying pre-construction, colour selection begins shortly after the commencement of construction. You will be contacted by the Developer’s consultant to arrange for an appointment. At this time you will select colours and finishes (carpet, tiles, cabinets, countertops, etc.) and may also arrange for any upgrades or specialty items.

Things to Consider on Occupancy:

How is Occupancy Established?
Your occupancy date is when the Developer estimates to have your home completed so that you can move in and live there. You will be kept up-to-date on the progress of the development, and will receive a revised occupancy date once the actual date has been established. Even though you will be moving into your new home on occupancy, you will not be getting title to it until registration of the building and title transfer.

What is Interim Occupancy?
Interim occupancy is the period of time from the occupancy date to the date of title transfer. Generally speaking this time period can range from one to four months. During this time you pay an occupancy fee to the Developer that consists of the following:

• your maintenance fee
• estimated property tax
• interest on the outstanding amount of the purchase price

When is Registration and Final Closing?
Registration is when the condominium’s declaration and description are ultimately registered in the land titles office, following their approval by governmental authorities. The entire process may take approximately one to four months following your occupancy date.

On title transfer, the purchase transaction will be completed in accordance with the statement of adjustments within your Agreement. These closing adjustments include occupancy fees, realty taxes, common expenses, etc. General rule of thumb is to have 1.5% of your purchase price set aside to cover all of these costs. At this time, your lawyer will receive a transfer of title to your home, in exchange for your payment of the outstanding balance of the purchase price.