Thank you for considering The Dekker Team for your real estate buying needs. Whether you are purchasing your first home, moving to a new home, or looking to acquire an investment property, The Dekker Team can help you find the perfect house. We offer no charge buyer representation, which means that you gain the experience and knowledge of our entire real estate professional team at no cost to you as a buyer.
For most Canadians, owning a home will be the single biggest investment they make. Choosing the right house is therefore one of the most important decisions that you will make during your lifetime. A real estate professional can make a world of difference through your real estate transaction by sharing their experience and knowledge throughout the process. Some examples of benefits that a real estate professional give you would be to help find your dream home, determine and negotiate fair market prices, and to structure a real estate offer that protects you and your family.
Here is a brief walkthrough on what you can expect when buying through The Dekker Team:
Step 1: Personalized strategy meeting to understand your dreams, wants and needs, and to discuss your home buying criteria.
Step 2: A detailed property search using a number of property listings systems, with a personalized report of properties that match your search criteria.
Step 3: Prioritize and examine your top property picks.
Step 4: Select the home of your choice by viewing properties and systematically narrow down to the right home for you.
Step 5: Prepare proposal of home ownership – “the Offer”
Step 6: Negotiate the best terms, price, and conditions to protect you and your family.
Step 7: Book needed inspections/appraisals to fulfill any conditions in the offer.
Step 8: Recommend and introduce required specialists from our network of partnered specialists
Step 9: Anticipate receiving your keys and moving into your new home!
Contact us today for a no charge, no pressure consultation of your real estate goals. The Dekker Team is ready to help you find your dream home!
- Why buy in the Ottawa area
- Five mistakes to avoid when buying a home
- First Time Homebuyers
- Renting vs Home Ownership
- New home versus resale
- How much can you afford
- Buyer Tips
Why buy in the Ottawa area
In an annual review of the best places to live in Canada, performed by Mcleans magazine, Ottawa has once again placed 1st for 2011. In the past 5 years Ottawa has claimed this distinguishable title 4 times (was placed 2nd in 2009). It is no accident that Ottawa can boast this great track record. Here are a few highlights that make Ottawa such a great place to live.
- Strong economy: During the past couple of years of economic recession, Ottawa weathered the storm better than all other Canadian cities. Largely due to the stability of employment in our large public service workforce, Ottawa had one of the lowest unemployment rates as compared to anywhere in our great nation.
- Transportation system: Ottawa has the highest share of commuters who either choose to take public transit, cycle or walk to work.
- Generous people: As compared to all other Canadian cities, the Ottawa people volunteer more hours per capita. This is a demonstration of the generous hearts and kindness of the people of our fair city.
- Education: Ottawa has many different schools to choose from. The city offers high quality English and French education in public, Catholic and private school systems. Ottawa also boasts two leading Canadian Universities: Carleton University and Ottawa University. In addition Ottawa has two respected colleges including Algonquin College and La Cite collégiale.
- Housing: The housing market in Ottawa has demonstrated steady appreciation in home values. The result is that Ottawa has slightly higher cost of housing than most cities, but we don’t share the same affordability problems of Toronto and Vancouver or the volatility in house prices of those cities.
- Crime rate: Ottawa has low crime rates, making it one of the safest cities in Canada.
- Green space: As our nation’s capital, Ottawa is Canada’s political, cultural and historical showcase. As a result, there are plenty of parks and civic attractions that make up our beautiful city.
For more information for residents or for visitors, you can visit the city of Ottawa website.
Five mistakes to avoid when buying a home
- Failing to have a plan: Deciding to buy a home is probably the biggest financial decision you’ll ever make. It’s an exciting decision, but its serious business too and you deserve serious council.
- Thinking that I can’t afford a home: Many people feel that they can’t afford a home, but affording a home has never been easier. Mortgage rates are more flexible today than ever. Home ownership is a durable (real) investment. Although no one can say if a specific home will appreciate in value, generally speaking, the odds favour the home owner. If you are renting you are paying your landlords mortgage off. As an investment goes, you cannot live in a mutual fund. Ask us about how leverage makes home ownership a fantastic investment. Some think they will wait to save more of a down payment. With an average price increase in Ottawa of over 6% per year the last 50 years, the odds are that if it takes you 1 year to save 5% extra in a down payment the properties are already 6% more expensive.
- Failing to properly screen your Realtor: The quality of your home buying experience is dependent upon your skill at selecting the best qualified person. It’s interesting that in the real estate business, someone with many successfully closed transactions usually costs the same as someone who is inexperienced. An experienced buyer’s agent could mean a lower price at the negotiating table, buying in less time, and with the least amount of hassles. Your agent should be a skilled win-win negotiator!
- Failing to get pre-qualified for a mortgage loan: Don’t waste hours searching for a home that is not in your price range! Save time and money by prequalifying for a loan. This process is simple. A lender will ask you basic questions concerning your history, run a credit report, and determine your buying power. Also, you can lock in a low rate so rising interest rates will not reduce the price of homes you can purchase and if rates go down they will re-lock in at the lower rate at your request.
- Failing to obtain a home inspection from a qualified inspector: The job of a professional home inspector is to look over every major part of a home and write a report that judges the homes quality and condition. A home inspection reports the structural and mechanical condition of the home. After the inspection, you will have the facts you need to make a decision about buying your home. If your home is rural we will explain the importance of a septic inspection and the process and scope.
First Time Homebuyers
Are you buying your first home? Did you know that there are special programs available through the federal government to help you afford your first home?
This program allows you to withdraw up to $25,000 per person from your registered retirement savings plan (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability. If you choose to use your RRSP funds, you will be required to repay your withdrawals to your RRSP within a period of no more than 15 years. If you do not repay the amount due each year, it will have to be included in your taxable income for that year.
For more information, be sure to register for our Home Buyer Workshop by calling 613-860-4663 or click here. You can also visit the Canada Revenue Agency website. There are other incentives that we can explain to you at your home buying session.
Renting vs Home Ownership
When it comes to home living, all Canadian families must face the decision to rent or to buy a home to live in. There are a number of pros and cons to either option, and the decision isn’t always a straight forward one. Here are some things to consider when making your decision.
- Owning real estate can be an excellent way to build up your net worth. You can reasonably expect the equity in your home to increase over time as you pay down your mortgage. In addition, real estate has historically been shown to appreciate consistently over the long term.
- There is a sense of pride in owning your own home.
- You have no landlord to answer to. You are in full control of the use of your own property.
- When the toilet breaks down, it’s your responsibility. An essential part of home ownership is carrying the responsibility to maintain and care for the property. Whereas Renters typically only have basic upkeep responsibilities of a home, a Buyer is responsible for everything from top to bottom of the house.
- Long term financing is typically involved. Most Buyers require funding from lenders in order to finance the purchase of a property. A mortgage by example is a long term debt commitment. Not only must a buyer qualify for the mortgage, but they must also consider the full cost of borrowing over the life of the mortgage.
- Renting often carries less personal risk. Although as a renter you will be liable for various things such as regular rent payments, and possible property damages, you aren’t laden with the risks of home ownership. For example a renter is less concerned about property values as this financial risk rests with the owner.
- Rental terms can be flexible. When you negotiate a rental agreement with a landlord, you can ensure that the terms meet your needs. This may include the length of the term, cancelation clauses, or special provisions. If you are unsure of your life circumstances in the short to mid-term future, renting might provide the preferred interim housing to meet life’s changes.
- Renting is often more expensive in the long term as compared to owning. This makes sense because all landlords would be endeavouring to make a profit off of their rental property. In order for a property to be a successful investment, a landlord would need for the rent payments to cover all of the property expenses including mortgage payments, taxes, and maintenance.
- Rents always increase over time.
- When you rent, there is no equity savings. 100% of the rental payment goes to the landlord and none goes towards building personal wealth.
All in all, the decision to either rent or own comes down to an evaluation of financial and lifestyle goals. If the idea of maintaining a home or if financing is viewed as an obstacle then perhaps renting would be the best for choice. However, if you think you would find pride in owning and maintaining a home, then home ownership can be rewarding experience towards a healthy home and financial wealth. There are also home available where all of the outside maintenance is handled for you.
New home versus resale
When in the market for a new home, a buyer will have many options to choose from. One of the most distinguished is the choice between buying a new home from a builder and buying an existing home on resale. Determining which kind of home will meet your needs best is a very personal and individual decision. The below are some key considerations to help you in your decision making.
New home purchase
- You can personalize your new home with custom upgrades such as flooring, cabinets, plumbing and electrical fixtures.
- Up-to-date with the latest building codes and standards. (can be expensive and usually paid cash when selected.)
- Lower maintenance headaches. New home builds will have many items covered under warranty. In Ontario we also have a new home warranty plan to help protect you against things such as construction defects, delayed closings, or loss of deposit.
- Little to no renovations required. A newly constructed home should be ready for immediate occupancy.
- New homes are often more energy efficient due to improved building materials and better insulating.
- Yards and green spaces around recently developed properties are likely to appear quite sparse.
- Construction in the neighbourhood may continue for many months or years after you take possession. Owners should be prepared for noise, dust and other inconveniences until the neighbourhood gets firmly established.
- HST must be paid on new home purchases although tax rebates may be available. HST is typically hidden in the price.
- Closing date not always on time and may be 6 – 18 months from the purchase date.
- Needs decorating and landscaping.
Resale home purchase
- Existing homes will have more mature landscaping and natural surroundings.
- Communities will be more established with existing services such as schools, shopping malls, and other consumer facilities.
- Landscaping may be in place. (more expensive than you think!)
- Resale homes are tax exempt from HST.
- Buyers can sometimes find better value from a resale home because previous owners may have made property improvements that didn’t translate into a significant increase in price. An example might be the addition of a swimming pool for $30,000 but didn’t affect the fair market value by the same degree.
- Possible renovations and redecorating may be needed. Existing homes may have dated features or parts may simply be worn out and need to be replaced.
- Depending on the age and condition of the home, there will likely be greater maintenance costs on a resale home as compared to a brand new home.
- Immediate possession available.
How much can you afford
Before you place an offer on a home, it’s important to first ensure how much you can really afford. Probably the worst financial mistake you can make is to bite off too much house than you can chew (financial speaking!)
Here’s a quick rule of thumb: Most people can afford a home that costs up to 3 times their annual household income. If you have little other debt and have around 20% down payment then you might be able to get a house as much as 4 times your annual household income.
To more accurately determine how much of a home you can afford to buy we need to take a closer look at the different sources of financing that you will use to purchase the home.
Down Payment + Mortgage = How much home you can afford
The down payment amount should be the easiest figure to determine. This is the amount of cash that you have saved to put towards the purchase of the home. In Canada the minimum down payment requirement is 5% of the purchase price of the house. A house purchase with a down payment between 5% and 20% is considered to be a high ratio mortgage and requires mortgage default insurance for any lender extending the mortgage on the balance of the purchase price. (see CMHC or Genworth for more information.) With a down payment of 20% a buyer can obtain a conventional mortgage.
To determine the maximum mortgage amount that you can obtain is a little more difficult. Lenders evaluate the credit worthiness of an individual by a number of different measurements. These can be called the “5 C’s” of credit:
Credit History: How has the individual performed on their past financial obligations? Have they regularly paid their debts as agreed, or are they historically late with payments or have they defaulted on past debts.
Character: Does the individual have a sense of responsibility for his/her obligations? How has this sense of responsibility been demonstrated? Some example of items that lenders consider would include how long you have lived in your current home, how long have you been in your currently employment, etc.
Collateral: Does the individual have an asset that they can pledge as a promise to repay the debt? In the case of a mortgage, the house itself becomes the collateral. The higher the value of the collateral as compared to the value of the loan, makes the debt more safe for the lender.
Capital:What is the total net worth of the individual? Do they have additional capital that they could use to pay the debt back if necessary? The higher the net worth of the individual, the lower the risk they would default on a debt.
Capacity: Does the individual have sufficient income to afford the regular payments to the loan? Applicants must be able to demonstrate through income verification that have the means to make the required payments. In Canada, lenders use two calculations to determine a person’s capacity to pay.
Gross Debt Service (GDS) Ratio: A lender will only approve a mortgage payment if the resulting payments plus other immediate housing costs (such as taxes and heating) does not exceed 32% of an applicant’s annual household income.
Example: John and Jane have a combined annual income of $84,000 which is equal to $7,000/month. Using the GDS rule, their annual mortgage payments + taxes + heating can not exceed $26,880/year or $2,240/month.
Total Debt Service (TDS) Ratio: Similar to the GDS ratio, the TDS ratio considers an applicant’s housing costs but adds additional debt payments to the formula. Under this calculation an applicant’s housing costs (mortgage payments, taxes, heating) plus all other debt payments must not exceed 40% of their total annual income.
Example: Using the same example as above, John and Jane their annual mortgage payments + taxes + heating + debt payments must not exceed $33,600/year or $2800/month.
In order to determine how much of a home you can afford then, it is necessary to calculate your maximum GDS and TDS and make sure that any new mortgage would not cause you to exceed those ratios. This final step will require the use of a mortgage calculator to determine the size of any regular mortgage payments.
It is imparative to consult your mortgage professional and obtain a mortgage pre-approval before looking at homes to purchase.
- Get “pre-approved” not “pre-qualified.” When you are competing for your dream property, you want your negotiating position to be as strong as possible. Price isn’t the only negotiating tool available to you. A mortgage pre-approval shows a seller that you have already satisfied most lending conditions by a mortgagor. A pre-qualified mortgage by contrast is only an estimate of what you can receive on a mortgage from any given lender. These pre-qualifiers are subject to many conditions and the final mortgage approval could vary significantly than the original estimate depending on the validation of various conditions. Taking the time to get a sold pre-approval gives you the peace of mind knowing that the bank will extend the approved mortgage amount, and could give you the bargaining advantage over a competing offer.
- Sell your property first, then buy the house. There are many reasons why it may take longer for the sale of your existing home. You want to be sure that this home sells first before you lock yourself into an agreement to buy another house, lest you will be stuck with both properties! If you can afford both properties, then maybe this isn’t as big of an issue, but many times a mortgage approval is conditional on the sale of the first house.
- Listing your desired features. Write down a list of the “have to haves,” the “nice to haves” and the “no way” features of a house.
- Consider costs outside of home purchase price. There are many costs associated with buying a home that can be easily forgotten in the excitement of placing an offer on a home. It is important to remember these additional costs when considering your financial capacity to buy the home. There are a number of expenses that must be looked after at the time of closing of a real estate transaction. As a buyer, it is important to know that these costs are present and how they can add up to the amount required to close. Some examples of additional costs could include: land transfer tax, mortgage insurance, appraisal fees, legal fees, property tax adjustments, new furniture, renovations and decorating. The Dekker Team will go over these carefully with you.
- Choose a real estate agent carefully. As a buyer, you typically won’t have to pay anything for the services of a real estate agent, but just because their service is free, doesn’t mean that they are a good deal. Choosing the wrong agent could cost you to miss out on the most suitable property listings, lead you to the wrong house, or even do a poor job in representing you during transaction negotiations. Be sure to ask lots of questions to your real estate agent, and ask for the testimonials of others.