Complete Home Buyers Guide for Canadians

COMPLETE HOME-BUYER’S GUIDEFOR CANADIANS

Geraldine Santiago, BA

WithAlma Pasic,

Frank Dodich, andHilde Deprez

Self-Counsel Press(a division of)

International Self-Counsel Press Ltd.Canada USA

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CONTENTS

NOTICE TO READERS ix

ACKNOWLEDGEMENTS xi

FOREWORD xiii

1 GETTING FINANCING 1What Is a Mortgage? 1

What are the types of mortgage loans? 3Amortization Period 5

Term 6A Pre-Approved Mortgage and Its Advantages 6

What documents do I need to provide to a lender? 7Understanding Where You Stand with the Lender 8

Criteria for the self-employed or those earning commissions 8 Changing jobs 8History of bankruptcy 8Credit Report 8Acquiring a co-signer or guarantor 9Minimum age to purchase a home 9Calculating affordable mortgage payments 9

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Correlation between interest rates and borrowing capacity 9Lenders might not look at your income and other financial obligations 10

Where Do I Get a Mortgage? 10The Difference between a Bank’s Mortgage Specialist and an Independent Mortgage Broker 10Letter of commitment 11Down Payment 12

How much of a down payment do I need to buy a home? 12Can I use the money in my RRSP to make a down payment? 13Can I take out a loan to cover the down payment? 13Purchasing property with only a small down payment 13

What Do I Need to Know about the Housing Market? 14

2 SEARCHING FOR A HOME 17What Types of Housing Structures Are Available? 18Factors to Consider When Looking for a New Home 19

Community 19Neighbourhood 19Transportation 20Dwelling 21Schools 21

New Home Warranties 21Resale homes and new home warranties 22

Pros and Cons of Resale or Older Homes 23The Difference between Freehold and Leasehold Interests in Land 23Co-ownership 24What Is the Best Time of Year to Buy a Home? 24

How long does it take to find a house? 25Real Estate Agents 25

Responsibilities of the realtor 25What is my relationship with a real estate agent? 26The exclusive buyer’s agent contract 28What time-saving technological services are available from a realtor? 28Can I “switch” real estate agents? 30

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Contents v

Homes for Sale by Owner 30Landlord and Tenants 31

Purchasing a home with a tenant in an unauthorized accommodation 31Your landlord offered to sell you the property you are renting 32

Choosing Your Team of Professionals 33Do realtors provide referrals to other professionals? 34

A Realtor’s Commission and Allowable Bonuses 34Who pays for the realtor’s commission? 34What do realtors do to earn their commission? 35Are realtors allowed to receive bonuses or other gifts from financial institutions? 35

Where Do I Start Looking for Properties? 37What is a hot sheet? 37

Pricing the Property 38What is a fair price when I’m placing an offer? 38Pricing properties per square foot 39How sellers price their homes 39

What to Look for When Viewing Properties 39Seller’s motivation 40Prior offers 40Property condition 40Moving dates 40Restrictions 41Health, safety, and environmental concerns 42Zoning 45Land title search 46City assessment 46Fixtures and chattels 46Area 46

Documentation to Review before Purchasing a Condominium 47Protecting Your Legal Interests 48

3 MAKING AN OFFER 51What Should the Offer to Purchase Include? 51

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After the Offer Has Been Presented, What Are the Seller’s Options? 56Competing or Multiple Offers 57What Is an “All Cash Offer”? 59What Happens When Identical Offers Are Made? 60What Is a Back-Up Offer? 60Can I Place Offers on Two Different Properties? 61Contract 61

Can I back out of a signed contract at any time? 61In what circumstance should I not go ahead with the contract? 61

What do I do once the contract has been signed by both parties? 62

4 REMOVING SUBJECTS 67Subject Clauses 68

Why do I include subject clauses in the contract? 68The most common subject clauses 68

Removing Subjects 68What does it mean to remove subjects? 68How long do I have to remove subjects? 70

Building Inspection 70What should a building inspection include? 70Condominium unit inspection 73What areas of a condominium may need repair? 74Single-detached home inspection 74What should I look for when purchasing a single-detached home? 75What if I don’t want to have a building inspection done? 76Can I get a relative to inspect the building? 76Building inspection for a remodelled property 76Cost of building inspection 76Can the realtor pay for the property building inspection? 77Building inspection failure 77

Protect Yourself from a “Leaky Condo” 78What is a special assessment? 78

Buying a Former “Grow House” 79Oil Tanks Can Cause a Potential Problem 80

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Contents vii

How can I know whether a home’s underground oil tank is leaking? 80Provincial standards for oil tanks 80

Items to Watch out for in a Land Title Search 81Removal of All Subjects before the Subject Removal Date 82The Deposit 82

Can I make the down payment in two equal payments at different dates? 82What if the deposit cheque is an NSF? 82Where does my deposit go? 83

5 CLOSING AND COMPLETION DATE 85What Happens at Completion? 86Lawyers or Notaries Public at the Closing Stage 89

The role of the lawyer or notary public 89Choosing a lawyer or notary public 90The difference between a lawyer and a notary public 90

Adjustment Date 91Additional Costs You May Incur on Closing 91

Property transfer tax or land transfer tax 91Transaction levy 93Property taxes 93Utilities 94Maintenance fees 94Condominium surcharges 94Forms 94Confirmation 94Appraisal fee 95Survey certificate 95Mortgage application fee 95Mortgage default insurance 95Fire and liability insurance 96New home fees 96Legal fees 96Title insurance 97Interest adjustment 98

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Are any of these fees negotiable? 98Tax Exemptions and Financial Grants Available to Home Buyers 99

GST on new housing rebates 99Home Owner Grant 99Tax deferral 100Home ownership assistance programs 100Mobile Home Ownership Program 101Mobile Home Upgrade Program 102

What Is the Possession Date, and When Does It Occur? 102The Previous Tenants or Owners Left the Property in a Mess 102What If There Is a Flood in the Apartment or the Appliances Do Not Work on Possession Date? 103Summary 103

APPENDIX 1 105

APPENDIX 2 115

APPENDIX 3 119

GLOSSARY 123

SAMPLES

1 Mortgage Application Form 22 Commission Agreement 293 Buyer-Agent Fee Agreement 364 Property Condition Disclosure Form 435 Agreement Of Purchase and sale 526 Addendum 557 Summary Appraisal Report 638 Abbreviated Building Inspection Report 719 Buyer’s Statement Of adjustments 87

CHECKLISTS

1 The Contract 652 Subject Removal 843 Service Arrangements 88

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Getting financing to pay for the purchase of a new home is on themind of every home buyer. Before searching for properties, youshould see how much you can afford to spend. Going through a fi-nancial institution’s pre-approval process is a good way to deter-mine your buying power. You will need to gather financialinformation about yourself, which will be detailed in an applica-tion. The financial institution will assess your income (employ-ment income and earnings from assets, stocks, bonds, and so on)and assess your debts and expenses (car loans, credit card loans,student loans, rent, living expenses for yourself and your family).It will also assess your credit history and verify the amount of thedown payment you can make. After making all these assessments,it will determine the amount of the loan for which you qualify.

What Is a Mortgage?Obtaining a loan to finance the purchase of your new home willprobably mean that you must fill out a document called a mort-gage application (see Sample 1). Your mortgage will set out theterms and conditions for the loan and its repayment. Mortgage

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2 Complete home-buyer’s guide for Canadians

Sample 1MORTGAGE APPLICATION FORM

MORTGAGE APPLICATION FORMApplicant SIN DOB Work Home

m/d/yCo-Applicant SIN DOB Work Home

m/d/yApplicant E-mail Marital Status FaxCo-Applicant E-mail S/M/C/D/SEPCurrent Address (3 year history required) City Postal Code Referred By

Applicant’s Employment & Address (3 year history required) How long? Position Gross Annual Income

City Postal Code$

Co-Applicant’s Employment & Address (3 year history required) How long? Position Gross Annual Income

City Postal Code

$

FINANCIAL STATEMENT:Assets: Description Value Liabilities: Total Debt MonthlyCash in Bank $ Bank/Credit Union Loan $ $

Real Estate - Residence $ Mortgages $ $

Auto (yr/make) $ Finance/Lease Payment $ $

RRSP $ Total Credit Card(s) debt $ $

Stocks/Bonds/CBS’s $

Total Assets $ Total Liabilities $ $NET WORTH (ASSETS – LIABILITIES) $

LOAN REQUESTDownpayment Amount $ Purchase Price Range $ Interested in Mortgage Insurance

Type of Loan Fixed / Variable Source of Downpayment Yes / No

By signing below, I/We hereby authorize ____________________________________ hereinafter referred to as “the Broker”, to arrange on my/our behalf the loans described above and certify that the above informa-tion which is furnished with the intent that it be relied upon by the Broker to obtain said credit, is true and correct.

Dated at this day of

Witness Applicant Co-Applicant

F O R O U R O F F I C E O N L YLocation of propertyTotal Mortgage Amount Interest Rate Term of MortgageName of Financial Institution Closing Date Amortization


payments consist of a principal sum (the amount borrowed) andinterest (the cost to you of borrowing money). The best plan forany type of mortgage is to minimize the amount of interest youpay, and lenders offer several ways to help you do this. A largerdown payment means that your home ultimately costs less becausea smaller mortgage means less interest paid in the long term. Also,a mortgage with a shorter term means that although there arehigher monthly payments, less interest will be paid.

What are the types of mortgage loans?Conventional mortgage loanA conventional mortgage loan allows you to borrow up to 75 per-cent of the purchase price or the appraised value of the property,whichever is less.

High-ratio mortgage loanA high-ratio mortgage loan allows you to borrow more than 75percent of the purchase price or the appraised value of the prop-erty, whichever is less. But you must pay a mortgage default in-surance premium to protect the lender if payments are not made.This premium can be as much as 3.75 percent of the loan amount.

Insured mortgageAn insured mortgage allows you to put down as little as 5 percentof the property’s value and obtain a high-ratio mortgage equiva-lent to the remaining 95 percent. You must meet certain qualifi-cations regarding your income and monthly debts.

Vendor take-back (VTB) mortgageA vendor take-back (VTB) mortgage allows you a chance to pur-chase a property with the help of vendors who lend you a portionof the purchase price. Such a loan often comes with favourable orflexible terms, depending on the inclinations of the individual ven-dor. The loan may be open, which means that you can repay it anytime without penalty. The vendor may charge an interest ratelower than the prevailing market rate, or the vendor may negoti-ate the term of the loan with you.

You can avoid a lot of red tape and administrative charges byobtaining a VTB mortgage. In a slow market, a VTB mortgage

Getting financing 3


attracts potential buyers. On the other hand, if the market is hot,you won’t find many vendors who’ll offer to lend you money atfavourable rates, unless their property is poorly located, in badcondition, or otherwise hard to sell. In general, vendors some-times prefer the steady and consistent return of a mortgage se-cured by a familiar property to a riskier investment. They alsoprefer borrowers such as you, whom they know and trust, to face-less and nameless managers who manage many other types of in-vestments.

Assumable mortgageAn assumable mortgage allows buyers to assume the mortgage onthe property they would like to purchase. Typically, a vendor willalready have a mortgage on the home that you want to buy. In-stead of going through the process of obtaining another mortgage,you can sometimes assume the existing mortgage from the vendor.

When you assume the vendor’s mortgage, you continue mak-ing the monthly payments at the same interest rate as the vendorhas, for the remaining term of the mortgage. You will still need thelender’s approval, and you will have to pass a credit check, just asyou would if you applied for a new mortgage.

When interest rates are high, you may assume a mortgagethat the vendor had obtained several years earlier, when interestrates were lower. By assuming the mortgage, you may also behelping the vendor, because he or she can pass the mortgage alongto you instead of repaying the lender. Most lenders charge apenalty if a borrower repays a mortgage before its term expires.Some of the money that the vendor saves by avoiding this penaltycan be deducted from the price of the home.

Condominium mortgageIn a condominium mortgage, the buyer of a condominium unit re-ceives legal title to the unit he or she is purchasing as well as an un-divided interest in the common area. This means that you can sellyour unit and your share of the common area without having to askpermission from everyone else who owns a unit in the building.

Blanket mortgageThe first mortgage registered against the entire condominiumproject is a blanket mortgage. That means that the mortgage is


An assumable mortgage can

benefit both the buyer and the

seller.


registered over the entire property. The blanket mortgage isplaced on the project by the developer, who uses the funds fromthe mortgage to build it. As the developer sells individual units,the lender removes the mortgage from each individual unit.Meanwhile, the buyer can obtain a condominium mortgage to payfor the individual unit, if necessary.

Open mortgageAn open mortgage means that you can repay the loan, in part or infull, at any time without penalty. Interest rates are usually higheron this type of loan. An open mortgage can be a good choice if youplan to sell your home in the near future. Most lenders will allowyou to convert to a closed mortgage at any time. Many experts sug-gest taking an open mortgage for a short term in times of high ratesand converting to a closed mortgage when rates fall.

Closed mortgageA closed mortgage usually offers the lowest interest rate availableat any given time. It’s a good choice if you’d like to have a fixedrate to work your budget around for a few years. However, closedmortgages are not flexible, and there are often penalties or re-strictive conditions attached to prepayments or additional lumpsum payments. It may not be the best choice if you might move be-fore the end of the term.

Portable mortgageA portable mortgage means that the lender will arrange a mort-gage loan that can be transferred to another property if you decideto move. Note that not all lenders offer portable mortgages.

Amortization PeriodTypically, the size of a mortgage loan payment is calculated as if theloan payments were going to be paid over a period of 20 to 25 years.This is called the amortization period. Each payment will repay theinterest due up to the payment date along with some of the princi-pal owed. The longer the amortization period you choose, the lowerthe regular payment will be. Remember, however, that the fasteryou repay any money borrowed by choosing a shorter amortizationperiod, the more you reduce the total cost of borrowing.

Getting financing 5


TermMost mortgage loan contracts permit the regular payments to con-tinue only for a specified term that is shorter than the amortiza-tion period. The term can be as short as six months, or it can be upto five or ten years. The length of the term you choose will dependpartly on whether you think interest rates will go up or down. Atthe end of the term, you may renew your mortgage at that day’srates or repay the full unpaid balance. If you don’t have the cashrequired to pay the balance, it is necessary to refinance the loan.Note that the lender is not obligated to renew your mortgage loanat the end of the term.

A Pre-Approved Mortgage and Its Advantages A pre-approved mortgage is very common. It means that yourlender approves the amount of your mortgage and gives you awritten confirmation or certificate for a fixed time period beforeyou start looking for your home. The pre-approval term, usuallylasting from 60 to 120 days, sets the mortgage rate the lender willoffer you. If rates go down in that period, the lender should offeryou the newer, lower rate. Pre-approval gives you a head start onhouse hunting, but your final approval is still subject to a review ofthe property and a credit review of your finances.

A mortgage approval should take only a few days if you havethe proper documents ready (see the next section for proper doc-uments needed). During this process, the lender will do a creditcheck and spot check other information you have provided. In ad-dition, the lender may ask you to obtain an appraisal of the valueof the home you intend to purchase. It may also ask you to obtainmortgage loan insurance from the Canada Mortgage and HousingCorporation (CMHC) or a private insurer.

Many lending institutions will pre-qualify you for a specificsize and type of mortgage loan before you begin searching foryour new home. Taking the time to apply for a pre-approved mort-gage will give you the security of knowing how much you can af-ford to spend. You will be able to shop confidently for a home inyour price range and avoid any last-minute complications.

When you place an offer on a property, if you need a mortgageto purchase the property, you will need to be approved by the


A pre-approved mortgage can help

you gauge the amount you can

afford to spend on a new home.


lender. Although you have been approved for the price, you mustalso be approved for the property. Your financial institution needsto know that you are paying fair market value for the property inorder for it to lend you the money. If it thinks that you are payingover market value for the property, the institution might not ap-prove your mortgage. The lender will usually ask for an appraisalof the property, and will choose its own appraiser to do the job.

What documents do I need to provide to a lender?Lenders want plenty of financial information about you and yourco-buyers to assess your ability to repay the loan. This ability isbased on your gross debt service and total debt service ratios andon your assets, liabilities, earnings, employment history, and pastrecord of repaying loans. Specifically, your lender may want thefollowing information:

• Personal information — age, marital status, dependants• Details of employment, including proof of income (T-4

slips, personal income tax returns, a letter from your em-ployer stating your position)

• Other sources of income, such as pensions or rental in-come

• Current banking information• Verification of your down payment• Consent to run a credit investigation• List of liabilities, such as credit card balances and car loans• Total amount owed and monthly payments• Fees for an appraisal or for a copy of a valid appraisal re-

port, if recent• Copy of the property listing• Copy of the agreement of purchase and sale on a resale

home• Plans and cost estimates on a new home• Condominium financial statements, if applicable• Certificate for the well and septic tank, if applicable

Getting financing 7


Understanding Where You Stand with the LenderCriteria for the self-employed or those earningcommissionsThe lender looks at three critical areas when determining a person’smaximum qualifying amount. It considers your gross annual em-ployment income, credit, and the down payment. If you are self-employed or earn commissioned income, your gross earnings will betreated differently if you are requiring high-ratio financing (buyingwith less than 25 percent down). If you are self-employed, CMHC re-stricts lending institutions to using a three-year history, and they areallowed to consider only your net income, not your gross income.This amount is found on your tax notice of assessment. If you earna commission at your work, 80 percent of the commissioned incomeis considered, as well as an average of last year’s income.

Changing jobsIf you have changed jobs, the lender will want to see that you havebeen in your current field for at least one year and that the job po-sition is permanent. If, for example, you have been a desk clerk forthe past ten years and you have simply changed companies, butnot changed careers from a desk clerk to a shoe salesman, then thebank will want a letter from your employer stating that the posi-tion is permanent.

History of bankruptcyIf you have declared bankruptcy in the past, you must wait two tothree years from your discharge date before applying for a loanand have at least one year of re-established satisfactory credit.After suffering a financial crisis, the best thing to do is to apply fora secured credit card.

Credit reportTo obtain a copy of your credit report, contact the automated service of Equifax Canada at 1-800-465-7166 or log on to<www.equifax.ca>. A service fee may be required, and yourcredit report will be mailed to you.



Acquiring a co-signer or guarantorBuyers who do not have stellar credit rating may be able to getrelatives such as parents or grandparents to be guarantors or co-signers on the loan — they are legally guaranteeing the full loanpayments. If the applicant were to miss a payment, the co-signeror guarantor would be responsible for it.

Minimum age to purchase a homeIn order to enter into a legally binding contract, you must meet theage of majority. In Alberta, Saskatchewan, Manitoba, Ontario,Quebec, and Prince Edward Island, the age of majority is 18. InBritish Columbia, New Brunswick, Nova Scotia, Newfoundland,Nunavut, Northwest Territories, and Yukon, it is 19.

Calculating affordable mortgage paymentsThe easiest way to determine how much money you will be able toborrow as a mortgage loan is to consult with one or two lending in-stitutions. These lenders will apply standard tests, based on yourfamily’s current income and debts, in order to determine theamount of money they will lend to you. They will ask for informa-tion about your finances and make a thorough credit check, inorder to be sure you are able to repay a loan.

Lenders look at your income and your other financial obliga-tions when they assess how much you can afford to pay in mort-gage payments. Allow no more than 32 percent of your grossmonthly income (before deductions) to make your monthly hous-ing payments. This test of your ability to repay a mortgage loan isgenerally referred to as the gross debt service ratio.

The Canada Mortgage and Housing Corporation (CMHC)Web site has complete forms to determine your maximum housingpayment, based on your financial obligations <www.cmhc-schl.gc.ca>. Some lending institutions and realtors also providethese forms on their Web sites.

Correlation between interest rates and borrowingcapacityAs interest rates increase, a person’s qualifying mortgage amountdecreases because higher interest rates mean higher monthly

Getting financing 9

If you would like to find out how

interest rates have been changing

in the past ten years, log on to

<www.bankofcanada.ca/en/rates.htm>


payments. Therefore, the lower the interest rate, the more moneyyou can qualify for. The higher the interest rate, the less moneyyou can qualify for.

Lenders might not look at your income and otherfinancial obligations There are lending institutions across Canada that do not require aconfirmation of income if you provide 30 percent to 35 percent ofthe down payment, because of the equity in the property.

Where Do I Get a Mortgage?Many institutions and individuals lend money for mortgages.These institutions include insurance companies, banks, trust com-panies, credit unions, finance companies, and pension funds.Mortgage brokers don’t usually lend money, but they can find alender for you. There are more than 2 500 of them in Canada, pri-marily in British Columbia, Alberta, Ontario, and Quebec.

New house and new condominium builders may also offerlower-than-current market rates by “buying down” the interestrate charged by the lenders so that they can sell their homes faster.A buy-down is usually for a short term and is usually not renew-able at the end of the term.

The Difference between a Bank’s MortgageSpecialist and an Independent Mortgage BrokerShopping in several places for the best mortgage loan can be awaste of time. A good place to start when buying a home is to con-sult a mortgage broker, who can shop a variety of institutions onyour behalf. Mortgage brokers are independent and not affiliatedwith any specific lending institutions. Their role is to find a lenderwith the terms and rates that will best suit you.

Sometimes a mortgage broker will charge you a fee for itsservices. This charge is more likely if you have a poor credit his-tory and will probably be a small percentage of the value of themortgage, for example, 1 percent to 2 percent. But in most in-stances, the broker’s fees are paid for by the lender.



Mortgage brokers can guarantee an interest rate for a clientduring the time you are shopping for a home. This guarantee pro-tects you if interest rates rise because as they rise, the amount ofmortgage financing a borrower qualifies for declines. This reduc-tion may either cause you to lose your dream home or result in alarger down payment being required from you. The length of timea mortgage broker will guarantee an interest rate varies fromlender to lender. Usually the period is from 60 to 120 days.

A mortgage broker can pre-qualify clients by completing amortgage application and gathering the necessary documentation.A mortgage pre-approval is issued once the lender has reviewedand verified the financial information you have submitted on yourmortgage application. The lender assesses your income, expenses,and credit history, and it verifies the down payment amount. Fromthat information, it is able to determine the amount for which youwould qualify. The benefit of having a pre-approval is that you canshop confidently for a home in your price range and avoid last-minute complications or problems.

When buying property, it is in your best interest to knowabout all of the financing options available to you. A mortgage spe-cialist’s focus is on the lending options available, but the decisionis yours. Mortgage specialists work with Canada’s leading finan-cial institutions, and it is usually the lender who pays the fees, notthe client. But always check first.

Lenders have varying loan policies within their institution,and they offer a myriad of products in addition to mortgages. Amortgage specialist’s sole focus, however, is on getting your loanapproved, and it will therefore find the financial program that bestsuits your individual needs.

After seeing a mortgage specialist or banker, you should beable to determine what kind of home you can afford. This willallow the realtor to know which homes you will be pre-qualifiedfor. Most often, realtors will ask to see a letter of commitmentfrom the bank.

Letter of commitmentA letter of commitment is a letter from the lending institutionstating how much it is willing to give you, and at what rate andterms. This letter shows the realtor that you are ready, willing, andable to start searching.

Getting financing 11


Down PaymentHow much of a down payment do I need to buy a home?For most people, the hardest part of buying a home is savingenough for a down payment, especially those who are first-timehome buyers. If you have less than 25 percent of the purchaseprice to put down, you will be required to purchase mortgage in-surance through your lender. Mortgage insurance protects yourlender against payment default.

CMHC mortgage loan insurance has made home ownershippossible for millions of Canadians. By providing mortgage loan insurance, CMHC enables you to finance up to 95 percent of thepurchase price of a home. This means that you can buy a propertywith as little as 5 percent down payment. So, if the home you arepurchasing is $125 000, you would need a down payment of $6 250.(Note: Lending policy may vary from time to time.)

If you are buying a single-family dwelling, you can take ad-vantage of CMHC’s 5 percent down payment. When buying with 5percent down, the following rules apply:

• The home will be your principal residence.• The down payment of 5 percent is from your own re-

sources or a gift from your family.• You are able to cover the closing costs of approximately

1.5 percent of the purchase price.• You have a good credit and a minimum of one year’s em-

ployment with your current employer.• All your housing payments, including mortgage payment,

property taxes, heat allowance, and 50 percent of condomaintenance fees cannot exceed 32 percent of your grosstaxable income.

• All your consumer debt, loans, and housing-related paymentscannot exceed 40 percent of your gross taxable income.

For more information on home buying with a 5 percent down payment or the price ceiling in your area, log on to <www.cmhc-schl.gc.ca>.



Can I use the money in my RRSP to make a downpayment?The Home Buyer’s Plan (HBP) is a program that allows you towithdraw up to $20 000 from your registered retirement savingsplans (RRSP) to buy or build a qualifying home. Withdrawals thatmeet all applicable HBP conditions do not have to be included inyour income, and your RRSP issuer will not withhold tax on theseamounts. If you buy the qualifying home together with yourspouse or common-law partner, or other individuals, each of youcan withdraw up to $20 000.

Under the HBP, you must repay all withdrawals from yourRRSP within 15 years. Generally, you will have to repay a fixedamount to your RRSP each year until you have repaid the entireamount you withdrew. If you do not repay the amount that is duein a certain year, it will be included in your income for that year.For more information on this topic, call toll-free 1-800-959-8281,or visit <www.ccra.gc.ca>.

Can I take out a loan to cover the down payment?A down payment must come from the buyer’s own resources inorder to satisfy CMHC guidelines. The lender needs to ensure thatthe down payment comes from a non-borrowed source, such assavings, an RRSP, or a “gift” or inheritance from your family. Somelenders require a letter from your family confirming that “gift”monies are intended to be used as a down payment.

Purchasing property with only a small down paymentIf you are purchasing on your own and are finding it difficult tosave enough money for a down payment, you might want to ex-plore other alternatives, such as co-ownership — having morethan one person on title. For example, you might purchase a homewith a partner, spouse, or family member. If you choose to pur-chase in this way, you must seek the advice of a lawyer, who willbe able to advise you about the advantages and disadvantages ofthe various types of co-ownership. As mentioned earlier, you maybe able to assume a mortgage or VTB mortgage when purchasing.



What Do I Need to Know about the HousingMarket? Before purchasing your first home, it is important to look at largermarket conditions, such as local and national housing prices,mortgage rate movements, and new home construction. The CMHC

Market Analysis Centre assists home buyers in understanding howthe housing market is evolving. The Market Analysis Centre is agreat source for finding out about the current housing market.Local market analysis reports are published regularly and provideinformation on recent trends in housing market conditions.

Your local CMHC market analyst can tell you if it’s a buyer’s,seller’s, or balanced housing market. In a buyer’s market, the num-ber of homes available for sale exceeds the demand, so prices willeither stabilize or drop. With fewer buyers and more homes, younot only have more options to choose from, you also have greaternegotiating leverage. You have more time to look for the righthome, and you can evaluate the choices without feeling pressureto act too quickly.

In a seller’s market, the seller dictates the price. The numberof buyers exceeds the number of sellers, so relatively few homesare on the market. In this situation of low inventory, the selleroften gets its price (sometimes more than its asking price) becauseof a bidding war, in which there are competing or multiple offers.

In a balanced market, there is an equal number of buyers andsellers. If you are a buyer in this market, you will probably not ex-perience a bidding war because there are enough properties listedon the market.

Another major influence on your decision to buy is the mort-gage interest rate. What rates are available now, and what willthey be in the near future? Will they fall or will they rise, and ifthey rise, by how much? Trying to answer these questions can bedifficult, and CMHC’s Market Analysis Centre can help. The centrecan provide you with both an analysis of the current mortgagemarket and an outlook for future mortgage rates. For those whoneed the big picture of Canadian housing, the Market AnalysisCentre produces a series of national and local subscription reportsto provide a comprehensive view of housing across the country.


Understanding if it is a buyer’s,

seller’s, or balanced market can

give you the advantage of knowing

when to buy a new home.


You can also use CMHC’s “AffordAbility” computer software.It can help home buyers, people renewing their mortgages, andmove-up buyers determine the home price and mortgage they canafford. If you prefer to access the latest housing information di-rectly from the Web, visit <www.cmhc-schl.gc.ca>. You can orderthe most popular reports online, and they can be e-mailed to youin PDF, Lotus, or Excel formats.



Documents

Complete Home Buyers Guide for Canadians