Buying a Brand New Home in Calgary

Buying a new home in Calgary means many different things to you as the buyer – not only is it a dream come true, but it is also affords you the opportunity to get the home you have always wanted, it is an investment that means a lot to your future, and it is an achievement that you should be proud of. Though buying a new home means all of these great things and it is therefore easy to become starry-eyed about the whole occasion, you must remember the reality of the situation. The reality is that buying a new home is a legal transaction and being that it is such, it must never be done in the absence of a detailed contract.

Agreement of Purchase and Sale

If you only bring any one thing to the table at your first new home buying experience, let it be that you want everything in writing! The number of first time homebuyers who forget this simple fact, oftentimes find themselves at a loss when problems present themselves during the closing. An agreement of Purchase and Sale, the contract that should come along with your new home, will point out in writing the terms that exist between the builder and yourself. That is, the ‘who, what, when’ and how much it is going to cost you. Not only that, but such a contract is important in spelling out the rights, obligations and restrictions that each of the parties involved has in the transaction.

The lack of a detailed contract may in some cases amount to costly and unfortunate circumstances as they relate to your new home. We would all like to think that all builders are honest individuals that stand by their word 100 percent, however the reality is that this is not always the case. For that reason, having a written contract will offer a reference point in the instance a disagreement or misunderstanding between the builder and yourself arises. Without such a contract, it might prove impossible to reference what was agreed upon and furthermore enforce any arrangements that were part of the deal.

It is important to understand that there is no standard when it comes to an Agreement of Purchase and Sale for buying a new home. Builders may simply take a model from their local home builders’ association and adapt it to fit the specs of your new home. That being said, you can expect that no two new home building contracts will be alike. Where each will be specific to the buyer, the new home, and the builder; as well as include any disclaimers, limitations or warranty details as they prove applicable.

Signing the Contract for Your New Home

Because a new home contract is in most cases a “living document” of sorts – in that, it will continue to develop with the addition of attachments, schedules, waivers, etc. – it is therefore important that you keep a copy of all updates. Keep track of all meetings and make notes of all changes as they occur. Keeping a good paper trail will help to maintain a professional and friendly relationship with your builder, as well as prevent misunderstandings.

It is important that before you sign the final copy of your Agreement of Purchase and Sale, you ensure that you have a complete understanding of everything that is stated in the contract. Know what is mentioned and what is not, understand your obligations and your builder’s best-practices commitments, and most importantly makes sure that all of your questions are answered in a way that brings you full satisfaction.

Mortgage Questions? Here are the Answers

It’s a new year, which is a time to reflect, renew, and recharge. Perhaps your resolution is to save for your first home, or just become more knowledgeable about buying a home? We’re ringing in the new year with a countdown of 10 frequently asked questions about mortgages.

FAQs About A Mortgages

  1. Can I afford a mortgage?

Assessing whether or not you can afford a down payment and regular payments is an important first step. Have a look at what you qualify for, as well as what you can actually afford.

To determine if you qualify for a mortgage, your gross annual income, credit history, and assets/liabilities are taken into consideration.

Affordability is based on your household income, your personal expenses each month (including any other debt you’re paying off), any home expenses (condo fees, heating costs, taxes), and mortgage insurance (if it’s required). You also need to ensure you have enough money on hand for the down payment, and closing costs associated with making the purchase of a home, like legal fees.

You can plug your financial details into payment and mortgage affordability calculators to paint a picture of your financial situation.

  1. What’s the difference between a mortgage broker and a bank?

According to the Mortgage Professionals Canada’s (formerly CAAMP) fall mortgage report, 45% of borrowers obtained their mortgage from a Canadian bank, 42% from a mortgage broker. So, what’s the difference?

There are a few differences between banks and brokers. A broker is a licensed specialist who is the intermediary between you and the lender, while a bank is the lender that will issue the mortgage directly, and receive your monthly mortgage payments.

RateHub.ca recommends using a broker for a few reasons. Banks will allow you to consolidate all of your services with one provider, which can offer a certain level of trust. They will also provide customer service to you after closing. However, a broker has access to multiple lenders (including the Big Five banks) and rates, they’ll shop around for the best rates to match your financial situation, and can often pass along discounts to you. A bank will only offer their own rates and products, leaving the negotiating up to you.

  1. What’s a variable rate mortgage?

A variable rate mortgage is a type of mortgage where the interest rate can fluctuate due to changes in the prime lending rate. A variable rate will be quoted as prime plus or minus a certain amount, such as prime minus 0.50%. If prime is 2.70%, then your rate will be 2.20%. If your lender’s prime rate goes up or down, your mortgage rate will, too. The prime rate can fluctuate, but your rate’s relationship to prime will remain constant over your term. Variable rate mortgages usually have lower interest rates, but they don’t offer the same stability that a fixed rate mortgage does.

  1. What’s a fixed rate mortgage?

A fixed rate mortgage is a type of mortgage where the interest rate stays the stays the same for the duration of your mortgage term. For example, if you have a five-year fixed rate mortgage at 2.89%, your rate and mortgage payment amount will stay the same for those five years. Fixed rate mortgages are more popular, and offer more stability than variable rate mortgages.

  1. What costs are associated with when buying a home?

There are a number of costs to consider before buying your home, other than your mortgage and you’ll need some cash set aside in addition to your down payment. Your costs will vary depending on what type of home you’re buying (house or condo) and where the home is located. Costs can include the land transfer tax, legal fees, title insurance, home inspection and appraisal fees, and even taxes on CMHC insurance (issued by the Canada Mortgage and Housing Corporation).

  1. What’s an amortization period?

This is the actual length of time it takes you to pay off your mortgage in full. The maximum amortization period in Canada is 25 years for high-ratio mortgages (where the buyer puts down less than a 20% down payment and requires CMHC insurance), and can go up to 35 years for conventional mortgages (those with a down payment of 20% or more). On the other hand, a term is the length of time you commit to one mortgage rate, lender, and associated mortgage terms and conditions.

  1. What’s the difference between a closed, convertible, and open mortgage?

A closed mortgage is a great option for those who are planning to take a little longer to pay off their mortgage, and interest rates are typically lower. You can’t negotiate or refinance throughout the mortgage term, nor prepay (making a lump sum payment toward your mortgage) by more than the limit in your terms and conditions without incurring a prepayment penalty (often, you can prepay a certain amount of the original principal amount, once a year). Closed mortgages can be fixed or variable, and interest rates are lower than rates on an open mortgage.

A convertible mortgage offers similar benefits to a closed mortgage, but it allows you to change the type of mortgage you have – either between fixed and variable rates, or from a shorter term to a longer term – before your term is up, without penalty. Not all lenders offer convertible mortgages.

An open mortgage is great for those who plan to pay off their mortgage in the short term. They can be prepaid, even in full, at any time throughout the mortgage term, without the borrower having to pay a hefty prepayment penalty. However, the flexibility of an open mortgage comes at a cost – typically in the form of higher mortgage rates.

  1. What will my monthly mortgage payments be?

Your monthly mortgage payments correspond to the amount of your down payment, whether or not you have mortgage insurance, your amortization period, the rate and type of your mortgage, and taxes. A mortgage payment calculator will allow you to test scenarios and compare mortgage rates, plus it will calculate CMHC insurance and the land transfer tax. And shop around for the best mortgage rates.

  1. Do I need mortgage default insurance?

Commonly known as CMHC insurance, you’ll require it if your down payment is less than 20% of the purchase price. This protects your lender in case you default on your loan.

  1. What options are there to pay off my mortgage faster?

It’s great to be ambitious about paying off your mortgage, but it’s also important to plan your mortgage around your current financial situation, with a bit of wiggle room or a backup plan in case you run into unforeseen obstacles down the road.

If you already have a mortgage, you should shop around and compare rates again when you’re ready to renew. You may find yourself with some added savings and extra money each month, which you can put toward your mortgage.

You could also consider taking advantage of lower interest rates by refinancing your mortgage. However, refinancing before your term is up will result in a penalty, so it’s important to do the math to determine if this will actually result in extra savings for you. A mortgage refinance calculator can help you determine the costs.

Check if you can make biweekly payments, instead of monthly. This will work out to an extra month’s payment toward your mortgage every year. Bear with us…there are 52 weeks in a year, and 12 months. If you pay half of what the monthly mortgage amount would be, but every two weeks, by the end of the year you’ll have paid the equivalent of 13 months instead of 12.

You can also put money directly to the principal amount – but be careful of those prepayment penalties!

We hope you’ve learned a few things about mortgages that you might not have otherwise known. With this newfound knowledge, you’ll be a more educated home buyer.

RateHub.ca is a website that compares mortgage ratescredit cards and deposit rates with the goal to empower Canadians to search smarter and save money.

Choosing a Home Builder for Your New Home

Purchasing a new home is a big decision. When making a purchase of this magnitude, choosing a home builder for your home is just as important as the home you select to be built. In purchasing a new home, you must keep in mind that you are also “purchasing” the company who is building the home. That being said, the qualifications of the builder that you select will ultimately determine your satisfaction with their quality of work. In the end, it will be their skill set and commitment that will result in optimum gratification. It is imperative that you take the time to research builders and select one that has the credentials necessary to meet your expectations as they relate to the quality of your new home.

When it comes to choosing a home builder for your new home, you will find that there are thousands here in Canada. From builders who are part of a larger scale, building hundreds to thousands of homes a year, to those that operate on a more personal and small scale level, only building a few homes each year. You may also notice that each builder will have their own niche, so to speak. It could be prominent neighbourhoods, adult lifestyle communities, or distinctive focuses such as energy efficient homes, among many others. Knowing what you want in your new home will therefore play a vital role in selecting the best builder for the job.

Choosing a Home Builder for the Job

Remember as you begin your search for the perfect builder of your new home, that each company will do business in their own unique way. That being said, as you look at model homes do not only think about the home that you are viewing, but also the builder that is behind the home. Some important questions to ask yourself about each and every builder that you consider are:

  • Who is this company and what do they specialize in?
  • Are the homes that they build high quality, or do they cut corners?
  • What do previous buyers have to say about buying from this company?
  • What guarantees and other after-sale services do they offer?

About the Builder

When you are purchasing a new home, you want to be sure that you do your due diligence in order to ensure that you get the full worth of your investment. So how do you do this? Easy, you select a reputable builder, one who is established – a company that you can trust, that has a proven track record of successful builds, a professional approach to business, and necessary technical skills.

Here are a few questions that you can inquire about to be certain that a builder is worth consideration for the job.

  • Ask for references and past experience history. How long have they been in the business?
  • Is home building the builders only profession?
  • Is the builder a member of the Canadian Home Builders Association (CHBA)?
  • Does the builder offer home warranties?
  • Will you be able to visit the building site as you please?

Before making your final selection of builder for your new home, carefully consider all building prospects. Think about who the company is, what the company has to offer you and your family, and what they would be like to purchase a new home from. In the end, select the company that has the most to offer you in terms of the best value and overall quality for your investment. The builder that brings you the greatest sense of confidence should be your new home’s builder.

Buying a Brand New Home in Canada

Buying a new home is a process that takes time and research. Purchasing a brand new home is a big investment and an important commitment. It is important when you are buying a brand new home that you are comfortable with your decision, that you feel confident in the builder, and that you are satisfied with the neighbourhood that your new home is in.

Before You Begin Your Search for Buying a Brand New Home

The actual buying process of a buying a brand new home takes place in stages. Before you start looking for the perfect prospects, you will need to prioritize your wants and needs. Take into consideration when drafting your priority list where you want to live, how much you have to spend, how much space that you need (both currently and foreseeable future), and what specifics you are looking for in your new home.

Preplanning before you begin your search for buying a brand new home will save you and your family much time and effort. Discuss with the entire household what they want in their brand new home and what they would appreciate in surrounding areas. Once you have determined what the ‘wants’ of your household are, you can then move forward with prioritizing them into ‘need-to-haves’ and ‘would-be-nice-to-haves’. In making this list, also take the time to consider those things that your family absolutely cannot live with or without. Consider:

  • The home itself
  • Layout – divided or open spaces; informal or formal appeal; privacy; ability to change the space should new needs arise
  • Size – square footage; bedrooms; bathrooms; playrooms; guest rooms; office, etc.
  • Mobility – need for handicap accessibility?
  • Outdoors – room for swing set; pool; fenced in yard; etc.
  • The community
  • Traffic
  • Proximity to public transit
  • Commute time to work
  • Nearby green spaces
  • Finances
  • What funds do you have available?
  • How much are you able to put down for down payment?
  • What would you like your monthly mortgage to be?

Begin Your Search

Once you have prioritized your family’s wants and needs as they pertain to buying a brand new home, you can then begin your search for the right builder. A good starting place is to check ads in your local newspaper, talk to friends, co-workers and even family members who have recently purchased a new home. These word of mouth recommendations are able to help you get a sense of what local builders are offering. You should take the time to discuss with your lender, the mortgage pre-approval process. This way you will have an accurate depiction of what you can look into spending, price-wise.

Home shows are also great places to meet builders and to explore new home finishing options. Drive around and tour model homes, offices and sales centres to discuss offerings. Take notes – this makes comparing and contrasting options easier later on, plus make sure to ask questions and lots of them so later you are not left wondering something you could have asked at the beginning.

Overall, the key to buying a brand new home of your dreams is to take your time, do your research and never settle for less than what you are willing to live with for the rest of your life.