What is a Status Certificate and why is it important?

A Status Certificate is a report on the current status of a condominium corporation. If you are buying a resale condominium, it is important that your agreement of purchase and sale is conditional, upon review of the Status Certificate by your lawyer.

The Status Certificate provides valuable information directly from the condominium corporation, examples of such information include, Arrears or increases in common expenses; Whether any major work needs to be done to the building; The amount of the reserve fund and whether the reserve fund is sufficient for any major work.

The Status Certificate also provides information about any claims against the corporation and whether the corporation is involved in any proceedings. This is important because if there are high value claims against the corporation and the corporation’s insurance does not provide coverage; the corporation can either increase the common expenses or levy a special assessment against the unit owners. If you are buying a condominium, you need to know of any potential significant increase in your monthly common expenses. .

The Status Certificate package includes the corporation’s financial statements, declaration and by-laws. The Financial statements are a good indication of a corporation’s financial stability.

So, it is imperative to have a qualified lawyer to review the status certificate carefully before buying a condominium.

Be an informed buyer

For more information contact your Toronto Mortgage Broker 

at 416-920-9931

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What are Closing Costs?

Closing costs are a list of charges that your lawyer presents to you on the closing date which unfortunately surprises many people. According to CMHC and Genworth, one should have, in addition to the down payment, at least 1.5% of the purchase price for closing costs (we say 2-2.5%, just to be on the safe side). The costs vary among provinces, and for that matter, among cities.

Below you will find a brief explanation of these costs. Please note that not all of them may apply to your specific situation, and there may be more that apply in your circumstance. Use this is a  guideline, and then talk with your lawyer who can provide a more realistic estimate for your situation, since he or she is the best resource for your closing costs.

Appraisal Fee: The appraisal provides the lenders with a professional opinion of the market value of the property. This cost is normally the borrower's responsibility and it ranges as low as $70 for a drive-by appraisal to as much as $350 for a full appraisal, and the average being $250, plus H.S.T. Occasionally, the costs could be slightly higher for larger, custom-built homes, or homes in remote parts.

Home Inspection Fee: A professional inspection of the home, top to bottom, is for the benefit of the buyer, therefore, that's who absorbs the cost. A typical home inspection can cost anywhere from $300-$400, but our opinion is that they are well worth the investment. New home buyers may not worry about it, but a definite must for buyers purchasing properties older than 5 years. When hiring a home inspector, make sure the inspector has liability insurance, just in case a mistake is made.

Fire Insurance: All mortgage lenders will require a certificate of fire insurance to be in place from the time you take possession of the home. The amount required is generally at least the amount of the mortgage or the replacement cost of the home. This cost can vary on the property size and extras being insured, as well as the insurance company and the municipality. The cost can vary anywhere from $250-$600 for most properties.

Provincial Sales Tax of 8% (P.S.T.): If your mortgage is CMHC or Genworth insured (less than 20% down payment), there is P.S.T. of 8% in Ontario, payable at closing, on the CMHC or Genworth fee. While the insurance premium can be added to the mortgage amount, the P.S.T. must be paid at closing. For example, a mortgage that results in a $1,000 insurance fee, will have to pay $80 in PST upon closing.

Land Survey Fee Or Title Insurance Fee: A recent Survey of the property is usually required by the lender, and if one is not available, it normally costs anywhere from $600-$900 for a new survey. In lieu of the Survey, most lenders today will accept Title Insurance, at a much lower price of approximately $225.

Legal Costs and Disbursements: A lawyer or notary will charge a fee for their professional services involved in drafting the title deed, preparing the mortgage, and conducting the various searches. The disbursements, on the other hand, are out-of-pocket expenses incurred, such as registrations, searches, supplies, etc., plus H.S.T.

Land Transfer Tax: Most provinces charge a land transfer tax, payable by the purchaser, and the amount varies from province to province. This tax is based on the purchase price. In Ontario, first time home buyers who purchase a new home get a refund up to $2000.

New Home Warranty: In many provinces, new homes are covered by a new home warranty program. The cost to the purchaser for this warranty is approximately $600 and should the builder default or fail to build to an agreed-upon standard, the fund will finish or repair the deficiencies.

Closing Adjustments: An estimate should be made for closing adjustments for bills that the seller has prepaid such as property taxes, utility bills, and other charges. Any bills after the closing date are the purchaser's responsibility. Your lawyer/notary will let you know what they are exactly once the various searches have been completed.

HST: On the purchase of a newly constructed home, HST is payable, but make sure you know who pays this, you or the builder. Therefore, on the offer, the purchase price will say "Plus HST" or "HST Included", and who gets the HST new home rebate. A lot of builders have included this cost into the purchase price so that the buyer does not have to come up with that at closing. (As well, this tax is also charged on all professional fees).

Always be an informed client.

For more information contact your Toronto Mortgage Broker 

at 416-920-9931

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What is Equifax and Transunion?

Equifax and Transunion are consumer credit reporting agencies.

The Equifax and Transunion credit report offers vital information about your credit history. The information in your credit report serves as a reference point for banks considering your creditworthiness.

Your credit report will contain information on whether or not you have missed, or have been late on your payments in the past and how late you were. It will also provide details such as your current and previous addresses, social security number, any credit card accounts and current balances you may have, as well as past credit card accounts  even if those accounts have been closed or canceled.

This report also lists any auto loans and mortgages along with balances and how diligent you are about making the payments.

All banks will use Equifax and or Transunion. So it is important to check both agencies at least once a year to thoroughly review your credit history, and to check for errors or signs of identity theft in your credit report. .

Be an informed client.

For more information contact your Toronto Mortgage Broker 

at 416-920-9931

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What is a conditional offer?

When you buy a house, there is usually a clause based on the following:

1. A home inspection
2. Selling your house
3. And most often, arranging mortgage financing.

There is a 5 day clause where you will need to arrange the mortgage. However when there are bidding wars, at times, you are advised to go with a firm offer so that the vendor can accept your offer compared to others.

But that can be dangerous because:

• If you are putting down less than 20% as a down payment, it is the Insurance (through CMHC/Genworth or Canada Guaranty) that has the power to approve your deal or not.
• The bank may require an appraisal and if the house is in bad repair the bank will not finance it. At times, if the appraisal is less than what you bought for, you will need to put more money down as a down payment.
• If it was a “grow-op” the bank will not finance it

As strategy it may be best to reduce the days on financing from 5 days to 2 or one day.

So if someone tells you to go firm on an offer, they better have the entire money to lend you. Otherwise, you must and should always place a conditional offer on what you buy. 

Always be informed

For more information contact your Toronto Mortgage Broker 

at 416-920-9931

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