Tag Archives: first time home buyers
For more and more Torontonians, the words “Family Home” no longer conjure up images of a house in the suburbs.
Nowadays, young couples with children are increasingly choosing to live in condo communities closer to the downtown core, instead of dealing with the hassle of house maintenance, mowing and weeding, and long commutes.
The last census in 2011 showed that 32% of Toronto households with children live in Condos, and that figure is expected to go up in the next census.
But why have so many young couples opted to raise their children in condos?
Condo communities offer more
When raising children in a condo, it is important to look beyond the limited space of one’s own condo unit.
That is because the real benefit to the condo lifestyle comes from the extensive amenities and the community that one shares the building with.
In lieu of a backyard, most condos have open grassy spaces and/or playgrounds for children to enjoy.
Some new developments have kid-friendly facilities, like play rooms, libraries, kiddie swimming pools, and video game rooms.
And, with dozens (or maybe even hundreds!) of other households in the same community, children can easily find new friends and playmates, and enjoy activities in a more social setting.
For parents too, it can be easier to organize group events, such as parties or field trips, thanks to living in such close proximity to other parents.
All of these benefits can make Condo living a very attractive proposition for couples with young children.
Plenty to do closer to downtown
For parents who explore beyond the condo community itself, living closer to downtown Toronto offers its own set of benefits.
For one, there is never a dearth of nearby activities to keep children excited! The Harbourfront, Union Station, and Ripley’s Aquarium are all short walks or commutes away, and can offer hours of spontaneous distraction.
There is also no shortage of shopping, dining and entertainment opportunities to keep children happy, be it at Eaton Center or at St. Lawrence Market.
Less strenuous on the bank account
Perhaps the biggest benefit of living in a condo: it’s one of the few remaining affordable options for many young families in Toronto.
With average prices for detached houses hovering close to the $1,000,000 mark, many couples who are looking to buy their first home and start a family are realizing that buying a detached house is not in the realm of feasibility.
Condos, on the other hand, can start from the mid-400’s, and are a much more palatable option for many young middle-class families, especially for first-time home buyers looking to take advantage of government incentives.
Raising a family in a condo is not only possible, but even has many benefits.
If you’re in the market for a new condo to call home, check out our listings for preconstruction condos in Toronto, or drop us a line and we’ll find the perfect new home for you.
As housing prices creep ever higher, and with serious supply constraints across the GTA, it is no surprise that prospective home-buyers are increasingly considering Pre-construction condos.
Pre-construction condos are units in projects that are yet to be built, as opposed to “ready” condos that are already built but have never been sold before. “Resale condominiums” are units that have been lived in already, typically in older buildings, and are up for sale by a current owner.
Due to the promissory nature of pre-construction projects, the fee structures can be a bit more complicated compared to resale condos.
This article will shed light on the most common deposits and fees buyers need to be aware of when buying a pre-construction condo.
Down-payment & Deposits
Generally, pre-construction condos require a higher down payment than resale condos. Whereas a 5% down payment is the norm on resale units, pre-construction units usually require 20% or more in down payments.
At first glance, this may seem prohibitive for many buyers. That is why developers offer what is known as a “deposit structure”, which is basically an installment plan for the down payment.
A typical deposit structure for a 20% down payment would look like this:
- $5,000 with the offer
- Balance of 5% due in 30 days
- Next 5% in 90 days
- Next 5% in 180 days
- Final 5% at occupancy
This makes it much easier for a buyer to arrange and afford the down payment, since its broken up over many months.
Many developers even offer limited-time, pre-launch deposit structures that are even more buyer-friendly e.g. split over 365 days instead of 180 days.
(Competition for these pre-launch “VIP” incentives can get pretty intense, so signing up for a program like our Insider’s Club is always a great idea!)
Deposits tend to be higher at the beginning of a project, as banks and lenders that finance these buildings usually set that out as a requirement. Closer to completion, deposit structures tend to be more flexible, and it is usually possible to negotiate a fee structure with the builder to extend or even reduce your payments.
After putting down a deposit on a pre-construction condo, buyers are entitled to a “cooling off period” – a short period of time to reevaluate their purchase decision. In Ontario, the cooling off period is 10 days.
This is when buyers should get their finances in order and make sure they are ready to go ahead with the purchase.
They should also have their Agreement of Purchase and Sale reviewed by a real estate lawyer, so that they are not caught by surprise by builder-specific clauses.
If a Buyer changes his/her mind (for any reason) during the 10-day cooling off period, he/she can back out of the contract and have the deposit returned without deduction.
Closing costs are additional expenses that buyers need to pay for, which are levied between the time that they make the offer and the day that they close.
These costs include home inspection fees, legal fees, land transfer taxes etc.
It is suggested that buyers budget and save an additional 1.5% – 4% of the purchase price of their homes, in order to cover these closing costs. For pre-construction condo units, that number can be even higher.
When you buy a new condo, you may be subject to additional fees, including:
- Development and educational levies ($200-$4,000)
- New Home Warranty Plan enrolment fee ($900-$1,200)
- Utility hook-up fees ($50-$500)
- Assignment fees (if you sell before final closing, or flip your unit) ($3,000)
- Occupancy fees
These additional costs are project- and builder-specific, and some may even be included in the sale price of the unit (e.g. see HST below).
During the cooling off period, buyers should have their lawyer review the Agreement of Purchase and Sale to determine which additional closing costs will be incurred.
It is recommended to use a real estate lawyer who has dealt with the same project developer in the past, since they would be able to better anticipate any issues that they have had in the past while closing other client’s deals with that developer.
Condo Reserve Fund
When buying pre-construction, buyers will need to contribute at least two months of condo fees to the condo’s reserve/emergency fund. This is usually levied at the time of closing.
Again, read (or have your lawyer read) the Agreement of Purchase and Sale carefully!
When the condo is built and a buyer’s unit becomes ready to be moved into, there is a period of ‘interim occupancy’, where the Buyer can “take possession” i.e. move into the unit, but not yet own the unit.
This is because titles cannot be transferred until the WHOLE building is complete. Only after completion will the unit ownerships be handed over to buyers. Buyers can start making mortgage payments after that.
During the period of interim occupancy, the Buyer does not yet own the condo; they simply pay the builder an amount roughly equal to what their mortgage payment + condo fees + taxes will equal.
Many buyers choose to take advantage of the occupancy period and move into the units, especially if at the time they are renting a place where the rent is higher than the occupancy fee for their new unit.
However, the drawbacks should be noted: most of the building’s amenities will not be open for use, and there will likely be a lot of noise in and around the building, as the builder finishes other units and general sections of the building.
Buyers can elect to avoid occupancy fees by paying the entire purchase price with cash at the occupancy date. However, these terms must have already been put into the Agreement of Purchase and Sale before the end of the cooling off period.
Unlike resale condos, pre-construction condos are subject to HST, which builders generally factor into the purchase price of the unit and pay on behalf of the buyer.
However, if a buyer will be living in the unit themselves, they will likely qualify for an HST rebate. Note that most builder prices assume this, and so this rebate is often already factored in as well.
For investors, there is also a rebate opportunity, but to be eligible they need to rent the condo out for at least a year, with adequate proof of doing so
It is highly recommended to get professional legal advice about potential HST rebate qualifications beforehand.
The Final Word
With so many fees and closing costs, it is no surprise that many pre-construction condo buyers find themselves facing larger than expected bills around closing time.
However, with due diligence and legal advice, any buyer can confidently navigate these waters and land their brand-new, dream condo home.
If you’re a prospective first-time homebuyer on the fence about making the leap in 2019, consider that mortgage rates are in a great place right now, and that the Canadian government has made it a bit easier to afford a home in 2019.
With house prices being what they are today, most people can only afford to buy a home with the help of a mortgage. Because of this, home buyers often start searching for suitable mortgage brokers or lenders right around the time they decide to buy a new home.
But before making a decision, be sure to ask the following questions to the lenders you’re considering, so that you’re fully aware about what you’re getting into and can get the best solution for your needs.
1. What is the best type of loan for me?
Mortgage loans can come in many variations: fixed-rate loans, variable-rate loans, conventional mortgages, high-ratio mortgages, open or closed mortgage etc.
The one you select will depend on factors such as your borrowing history, financial status, long-term plans, and of course what the lenders can offer you (some lenders may specialize in certain types).
Be sure to ask your lender what options they offer, and have them explain the drawbacks and benefits of each option.
2. What interest rate will I get?
Interest rates vary greatly, and are heavily dependent on factors such as the Bank of Canada’s prime rate and the yield on government bonds.
(Side note: interests rates are looking quite good right now.)
However, lenders still have quite a bit of leeway on the rates they can offer, and it never hurts to shop around. Conventional mortgage lenders generally offer the lowest rates, but private lenders can sometimes make up for that through other perks or services.
It’s also important to note that your credit score will significantly affect the interest rate that you’ll get. A history of solid credit repayment will get you savings in the long run!
Don’t hesitate to directly ask the lender what interest rate you will qualify for.
3. Are there prepayment fees I need to worry about?
Mortgages – like most loans – have specific maturity dates, which is the date by which the entire loan amount (principal + interest) must be repaid.
However, many people opt to pay back the loan earlier, in the hopes of saving a bit on the interest payments. This can make sense if you suddenly have access to more money – through a promotion, inheritance, or work bonus, for example.
However, prepayments are a loss to the lender, and so they usually impose penalties and fees on prepayments.
Even if you don’t anticipate prepayment, ask your lender about any prepayment penalties and terms, so that you don’t get a nasty surprise in case it ever happens.
4. What does the timeline for getting my mortgage look like?
Ideally, you’ll want to sign with a mortgage lender who can close your mortgage within 30 days, though this figure could vary depending on market conditions.
Having said that, there are some types of home loans that can take longer to process, due to parameters such as your financial health, the type of home you’re buying etc.
5. What are the documentation requirements?
Mortgage lenders require a plethora of documents to be able to process your application.
This includes things such as proof of income, letter(s) of employment, statements of assets and liabilities, personal ID, and any valid documentation to show a good credit history.
Ask your lender about the full suite of documents that may be required, including potential substitutes in case you are missing a few.
6. Can I get any down payment assistance?
Given how high home prices are, it can be difficult to afford a large down payment if that’s required.
The good news: there could be some government or other assistance programs that you could take advantage of.
One good example is the Home Buyers Plan (HBP), which lets you borrow against your RRSP savings. This program has been enhanced in Budget 2019, giving buyers an even higher limit to use from their RRSP.
If you’re a new immigrant, or a first time home buyer, there may be assistance available for you as well.
Ask your lenders if they can help you find and take advantage of any programs that can reduce your down payment burden.
7. Can I lock in the interest rate?
Considering how mortgage rates are pretty low right now, you may consider locking in your rates as early as possible.
Your lender would basically be committing to providing you a specific interest rate, as long as the house closes within a specific cutoff date. That way, even if the interest rates go up in the interim, you won’t be forced to pay a higher interest rate on your mortgage.
Some lenders offer this facility free of charge, but others do charge a fee. Ask your lender what their policy is, and if they do charge, what the fee would be exactly.
The Final Word
Finding a suitable mortgage lender can be just as daunting as shopping for your home itself. However, armed with the right questions, you can definitely make the process easier for yourself.
If you happen to be in the market for a new house right now, whether for investment or for your own use, consider Pre-Construction Condos. With many new projects coming online in the coming months, Pre-construction Condos are definitely worth a look!
For the first access to the most competitive new listings and the best VIP incentives, sign up to our Insider’s Club!
Everyone knows that house prices across Canada have been a little crazy in the last few years. With supply tight and ever-increasing demand, prospective buyers are often finding themselves priced out of the market.
This has especially taken its toll on Young Couples, Millennials, and other first-time middle-class buyers. Many of them have opted to continue renting or living with family, instead of fulfilling their dreams of buying their first home.
Well, if you’ve been holding off on your first home too, do we have some great news for you!
In the recently announced Budget 2019, the Canadian government has made provisions for some much-needed relief to first-time home buyers under two programs – the brand new CMHC First-Time Home Buyer Incentive, and the updated Home Buyers Plan.
CMHC First-Time Home Buyer Incentive
Under this program, the Canada Mortgage and Housing Corporation will step in with up to $1.25 billion over three years to help lower mortgage costs for eligible Canadians.
The money will go to first-time home buyers applying for insured mortgages. The government is planning to have the program up and running by September 2019.
Here’s how it’s going to work
- You will have to make a minimum 5% down payment.
- CMHC will step in with an incentive equaling 10% of the house price.
- Since you’d now only have to borrow for 85% of the house price, your monthly mortgage payments will drop substantially – for a $400,000 home, that’s amounts to a monthly saving of over $200!
While this is great news for anybody in the market for their first home, there are some important caveats:
- Not all houses are eligible. The incentive will be 10% for newly built homes, but only 5% for existing homes. While this limits the overall usefulness of the program, it definitely helps anyone looking to buy a brand new unit, such as a pre-construction condo.
- Not everyone can apply. Only households with an annual income under $120,000 would be eligible to participate in the program.
- This isn’t free money. Home owners would eventually have to repay the incentive, possibly at re-sale, though how exactly that would work has not been clarified yet.
- You still have to qualify for a mortgage. Applicants for mortgages will still be assessed under the federal stress test. The test ensures that borrowers will be able to keep up with their debt repayments even at higher interest rates. However, the incentive would make it easier to qualify, since applicants would have to qualify for a lower mortgage than they would have had to without the incentive.
- The house price must be below $500,000. The amount of the insured mortgage plus the CMHC incentive would be capped at four times the home buyers’ annual incomes, or up to $480,000. With the 5% minimum down payment mentioned earlier, that means that houses must be priced below $500,000 to be eligible.
Home Buyer’s Plan (HBP) 2019
Another measure to help first time home-buyers in the new budget is an enhancement to the existing Home Buyer’s Plan.
Right now, first-time buyers are allowed to take up to $25,000 out from their Registered Retirement Savings Plans (RRSP) to finance the purchase of a home, without having to pay tax on the withdrawal.
Budget 2019 is proposing to raise that cap to $35,000. The new limit would apply to HBP withdrawals made after March 19, 2019.
However, home buyers will have to put the money back into their RRSP over a period of 15 years, otherwise HBP withdrawal will be added to their taxable income.
The Final Word
If you were on the fence about becoming a home-owner for the first time, these changes proposed in Budget 2019 are welcome news!
However, with home prices being what they are, you will be hard pressed to find houses under the $500,000 limit in most major cities.
The good news: you can find some great Pre-Construction Condos at that price, right here on our website!
As Condos become more affordable thanks to the Government’s new incentives, expect more competition for the best units. To stay ahead of the curve and land your dream home, join the Condosky Insiders’ Club – you’ll get first access to pricing, floor plans, and VIP incentives!
For any questions, don’t hesitate to contact us.