Choosing the neighbourhood that's right for you.  

When buying a home, the neighbourhood you select will not only play a pivotal role in your family's life, but in the resale value of the property.

One person's ideal neighbourhood however may vary greatly from another's. But, regardless, there are some needs and wants that generally do not change. The distance from your new home to schools, churches and shopping, for example, will not only affect how you and your family settle into your new home, it will also draw or turn off a perspective buyer.

A good first step is to enlist the services of a REALTOR® who works in the area you are thinking of moving. REALTORS® are very familiar with the communities in which they work and can answer many of the questions you will develop during your search.

Check the lifestyle
A home is a part of a larger community. And some are more desirable than others. Some communities are geared more to young families, others to older adults and still others to singles or an eclectic mix of residents.

Never buy in an unfamiliar community or neighbourhood unless you have spent some time there both during the week and on weekends, day and night. Drive and walk around. Talk to store owners and people you meet on the street. Ask what they think of the neighbourhood.

If there are vacant tracts of land where you plan to buy, check with local authorities to see what the proposed land use might be. The last thing most homeowners want is the development of a mall or a high-rise office building across the road from their newly-purchased property.

Don't let particular things in a home that appeal to you override its location and potential subsequent resale value. When analyzing a potential property, ask yourself if you can imagine living -- not just in this home -- but in this neighbourhood for quite a long time.

Remember that someday you may have to sell your home to someone else and things that may not be important to you -- such as distance to schools, shopping, doctors and work -- may be important to other buyers.

Location, location
In addition to finding the right neighbourhood, consider the immediate homes around the particular property you want to buy. Are they well maintained and worth the same or more than the home you are considering?

Is the location a quiet area or a major traffic thoroughfare? What kind of privacy does the backyard provide? Does it get the morning or afternoon sun? If there is no house behind you, who owns the property and how will it be developed?

Homes located further away from the centre of an urban area are generally cheaper. Are you prepared to invest the time and money it takes to commute and how long of a commute are you prepared to commit to? Is there public transit and good access to major highways nearby?

If you have kids in school, what kinds of schools and services are available? Will your kids have to be bused to their school? If a school is close by, will they have to cross any major intersections?

Being close to a school, on the other hand, may have some drawbacks -- few owners want the noise and disturbance of being located right next door.

Finding malls, grocery and specialty stores in urban, residential areas is rarely a problem. But in neighbourhoods further away from urban areas, you may need to drive to the nearest convenience store. And getting to the local grocery store, pharmacy and other support services may require an even longer trek.

It's great to be located near parks and recreational facilities, but few homeowners appreciate the high cast of tennis court lights beaming into their back yard. If the home you are considering backs onto such property, drive around the area and see how often the baseball diamonds, soccer fields, swimming pools and skating rinks are being used and when.

More serious concerns are having such things as gas stations, airports, railway tracks, commercial developments, major highways and cemeteries very close by.

Finally, if your heart is set on finding that one-of-a-kind 150-year old Georgian home, you're not going to find it in a newer development. If you want large bedrooms and bathrooms, narrowing your search to an older part of town where homes are generally smaller, may prove disappointing.

Before making any decisions, think of your lifestyle and how a particular location would enhance or detract from it.

*** Know your price range
*** Get pre-approved
*** Know your basic needs
*** Do your research
*** Keep track of homes you visit
*** Make a list of questions

Before you begin your real estate house-hunting expeditoin, it is helpful to understand the terminology used in describing different types of homes. Here's a quick overview:
Single Family detached. As its name implies, the home is not attached to the home next door. Detached homes come in three basic styles: bungalow, or one-storey; two-storey, where the entire homes is two stories high; and split level, where one proportion of the house in one level and another is two levels.
   **Semi-detached or linked. Two houses with a common wall between them (or sometimes between garages or basements).
   **Duplex. A two-family dwelling or house.
   **Townhouse. Also known as terrace or row housing, these comprise several homes sharing the same style, usually joined together by common walls, although townhomes can be detached. In some townhome developements the owner owns the land as well as the home on it.
   **Condominium. A condiminium is not really a type of home, but rather a legal term referring to a form of collective owndership. Each home "unit" is owned individually, while common areas including the land are owned jointly.

Mortgages for First Time Buyers
What are Insured Mortgages?
There are a number of programs available to first time homebuyers that enable them to access mortgage financing with as little as 5% down payment or in some instances, with No Money Down. Both these programs are made available thru offering lenders mortgage insurance. Mortgage insurance protects the lender against payment default by the homebuyer. Most lenders require it where the homebuyer has less than 25 percent of the purchase price as a down payment These programs give people incentive to purchase by creating an opportunity to own their own home without having to accumulate a large down payment. Another mortgage program is the Cash Back mortgage which gives the borrower(s) a percentage of the mortgage back in cash to apply towards the costs associated with the closing of their property. There are special terms and conditions attached to many of these programs including mortgage insurance fees.

What is the Home Buyer's Plan?
The Home Buyer's Plan (HBP) is a federally instituted government program that allows you to withdraw up to $20,000 from RRSPs to buy or build a "qualifying home" (as a first time home buyer) or for someone who is related to you and is disabled. You may still be able to be considered a first time home buyer if you own a rental property or you have not recently owned a home. Only the individual who is entitled to receive payments from the RRSP can withdraw funds from an RRSP. The only restriction is for locked-in RRSPs that you are un-able to withdraw funds from.

You do not have to include eligible withdrawals in your income, and your RRSP issuer will not withhold tax on these amounts. You can withdraw a single amount or make a series of withdrawals throughout the same year, provided the total of your withdrawals is not more than $20,000. If you buy the qualifying home together with your spouse or common-law partner, or other individuals, each of you can withdraw up to $20,000.

You have to repay all withdrawals to your RRSPs within a period of no more than 15 years. Generally, you will have to repay an amount to your RRSPs each year until you have repaid the entire amount you withdrew. If you do not repay the amount due for a year, it will be included in your income for that year.

Qualifying Home
For the purposes of the Home Buyer's Plan, a qualifying home for sale is a housing unit located in Canada. This includes existing homes and those being constructed. Single-family homes, semi-detached homes, townhouses, mobile homes, condominium units, and apartments in duplexes, triplexes, fourplexes, or apartment buildings, all qualify. A share in a co-operative housing corporation that entitles you to possess, and gives you an equity interest in, a housing unit located in Canada also qualifies. However, a share that only provides you with a right to tenancy in the housing unit does not qualify.

Locked-in RRSPs
In most cases, you will not be able to withdraw funds from a locked-in RRSP. Locked-in refers to the restrictions and limitations that are imposed by the Pension Benefit Act for each province and territory. The locked-in RRSP is designed to preserve pension assets for your retirement. Money put into your locked-in RRSP usually is the transfer value of pension benefits you have built up in your former employer's pension plan, which you asked to be moved when you terminate employment or plan membership. If you are unsure if your RRSPs are locked in, contact your issuer.

Benefits
The utilization of your RRSP's within the guidelines of the HBP results in benefits that are quantifiable immediately and extend over the long-term:

Increased down payment
Decreased principal owing
Avoidance of substantial interest costs that accrue over long periods

Establishing an RRSP with borrowed funds
The "HBP" permits an individual to establish an RRSP with borrowed funds, and then use the resultant tax refund for a down payment. After a 90-day period, the RRSP is collapsed to repay the loan. You will then receive a tax refund that can be applied to the purchase of a home. These funds are considered an acceptable form of payment provide that the refund is received at the time of closing and the lender can verify that the borrower has proven liquidable assets equal to a minimum equity of 5% of the purchase price. The client must supply their most recent Notice of Assessment and their last pay stub for the previous year showing year-to-date earnings and taxes paid.

Managing Tax Refunds
The government does not monitor the funds that are withdrawn from RRSP's for the purposes of the HBP. Therefore, providing that an individual has qualified as a buyer and has purchased a qualifying home, they may do whatever they desire with the money. Furthermore, the income tax refund received may be used in whatever manner decided, such as:

Clearing the balance on credit cards
Reducing, or retiring, personal loans
Making lump sum payments on a mortgage
Purchasing household necessities — appliances, furniture, accessories etc.
Increasing the down payment to reduce/avoid default insurance premiums
Paying for legal fees and or tax adjustments
The more debt you are able to pay off, the less in monthly expense obligations you will have. This will ultimately put you in a much better financial position.

What else should you know?
The Home Buyers' Plan enables you to borrow money to top up your RRSP plan using accumulated RRSP eligibility limits. If your tax assessment notice indicates you are eligible for $18,000 in contributions in the current year, and you already have $4,000 in a self-directed plan, you are allowed to borrow — subject to credit approval — the $16,000 to buy the RRSP required to bring you up to the $20,000 Home Buyers' Plan limit.

Then you can claim the eligible deduction against your current year's income in order to get a large tax rebate. You can use the rebate to pay down the loan or apply it to the cost of buying the home. Here, of course, the amount of tax you're paying each year is an important factor. If the $16,000 deduction in this example results in a $5,000 tax rebate, it can be used as you see fit. If, on the other hand two partners each earning $80,000 per year takes their maximum RRSP of $20,000 each in the current year, they could net a total of $15,000 or more in a tax rebate.

You are then allowed to withdraw up to the $20,000 maximum from the RRSP 90 days after topping up or creating the plan, subject to the re-deposit requirements described above.

NOTE: If you're planning to borrow the money for the maximum RRSP, you could end up disqualifying yourself for a mortgage because your monthly payments will be too high. Your "total debt servicing ratio" — the proportion of your gross income required to service both the home related costs and other monthly obligations — may exceed the usually acceptable monthly maximum of 42%. Another $600 per month could well make the difference in whether or not you'll qualify for a mortgage.

For more information please visit the Revenue Canada website.

February 15, 2006 in Arranging Mortgage Financing

When you require a mortgage for more than 80% of the purchase price of a property, that mortgage must be insured by Canada Mortgage and Housing (CMHC) or GE Mortgage insurance. The premium charged by these company`s decreases as the down payment increases. When you finance your property at 95%, a premium of 3.75% is added to the mortgage. By increasing the down payment to 10% of the purchase price the premium can be reduced to 2.5%. If you can put down 20%, you can avoid any additional insurance fee. Depending on your situation there are ways that you can structure this financing to avoid the CMHC or GE insurance premium.

Buying a home can be an emotional, time-consuming, and complex process. There are a few things that you can do to help make the process go as smooth as possible:

1.) Check your credit.
Before you apply for a home loan, regardless of your credit, it's a smart idea to obtain a copy of your credit report from the two major credit bureaus (Equifax and Trans Union) and review the information. If there are errors or things that need to be addressed, it's easier to address them before you have found a house, than after you have found a house and are trying to close your loan.

If you know that there are a few blemishes on your credit, let your lender know what they are, why they are there, and why you are still a good credit risk. Lenders look at your credit to determine how likely you will pay back the loan. If you had extenuating circumstances - like a loss of a job or medical bills - let them know.

2.) Get approved before you buy.
An approval means that a lender has reviewed your credit history, verified your assets and employment, and has approved your loan before you have found a home to purchase. As long as the home appraises for at least the purchase price, the loan should close.

Getting approved also gives you an advantage over other buyers. Your firm approval makes it easier for you to negotiate on the price of a home, than a person who is not approved or is pre-qualified.

While getting pre-qualified may sound official, it is really just getting an idea of what you can afford. It’s having a person plug in a few numbers that you give them - your monthly income and your monthly debt - and getting an approximate payment calculated. From the payment, the calculator can approximate the house price range that you can afford. No information is verified. Because your assets, income or credit is not verified, a pre-qualification has little value when purchasing a home.

3.) Find a great buyer's agent.
Traditionally real estate agents represent the sellers in a transaction. When you are not working with a buyer's agent, they are less likely to negotiate the best price or contingencies for you.

A buyer's agent's job and fiduciary responsibility (meaning legal duty) is to you, the buyer.

Before working with an agent, establish if they are a buyer's agent or a seller's agent. After spending a lot of time with a Realtor, it's natural to feel like you're a team. But if they are not negotiating for you, then they are not on your team.

4.) Learn about the neighborhood.
Often times the house you find may be in a neighborhood that you're not familiar with, which is ok. It just means that you'll have to do a little more research. If you find a house that you like, ask for a list of the neighborhood properties that sold in the last year. How does your home rank? Is it at the top of the price range? If so, it might be hard to resell. Is it average or on the low end? If so, great - as the other home prices go up in value, they will pull your home's value up as well.

Check out the schools - are they sought after? A good school district means your neighborhood will always be valued by families, which is a great reassurance to purchasers, not to mention the value-added if you have school-age children.

Next, contact the police station and obtain crime statistics? Are they acceptable to you?

Sometimes, if they won't give them to you, it could be a cause for alarm. Talk to the neighbors. The more people you talk to, the better sense you will get of who makes up the neighborhood and how they will effect your time spent in it.

Check out the location of the shopping, police and fire stations, schools, and air traffic overhead. These are all things that might affect your property value or quality of your life.

5.) Protect Yourself.
Ask your Realtor for a copy of the documents you will be asked to sign if you decide to buy the house. Read them ahead of time so that you'll understand the questions that you will be asked, the things you need to know, and the decisions you will need to make.

6.) Have reasonable expectations.
There is a lot of money at stake. No house is perfect. Understanding and remembering these two statements will help diffuse the negotiation stage, the inspection stage and the closing stage.

Emotions are high for both buyers and sellers. - The seller may have loving memories and years of sweat equity in the house. Maybe they are being relocated and don't want to go.

Understanding their motivations for selling will help you appreciate their situation and predicament during these emotional times.

There is a lot of money at stake for all the parties involved (and that includes the realtors) - Just remember that market value (the value of a home) is the price that a willing buyer and a willing seller can agree to. If you can not agree on a price, ask yourself: Is there something you missed? Are there comparables that support the price that they want? Are there motivations that might factor into the price they are demanding? In the end, does it matter?

What is the house worth to you today and what do you think you can reasonably sell it for based on the amount of time you plan to spend in it? Think about the answers to those questions before you make your move.

No house is perfect - Always get an inspection. It might be a few hundred dollars, but it's worth it. It's the inspector's job to find any problems with the house that could cost you thousands to repair down the road. Some inspectors have a tendency to over play the importance of their role and the items that they find. Get objective opinions that you trust before making a decision on an inspection report. Likewise, if an inspector says a foundation is cracked but its nothing to worry about - get a second opinion. Ask a handyman for an idea of how much repairs will cost and how complicated they are. The home buying process is an emotional, complex and time-consuming process, but it is worth it. Nothing compares to owning your own home in a neighborhood that you choose.

     When the demand for houses in a sizzling marketplace outweighs the supply of houses for sale, many consumers think the highest offer is a sure-fire way to claim ownership of their dream home. In today's fast-paced market, real estate professionals know that bidding for a house doesn't always require upping the stakes.
     **Accommodate the seller. As a buyer, you have to be flexible and willing to sacrifice a bit. Whether it's being willing to close one month earlier or later, do your best to meet the seller's desired closing time.
     **Additionally, be willing to overlook the more minor and less-than-pefect characteristics of a given home because other prospective buyers may not be able or willing to do so. If the seller is under pressure and wants the house sold quickly, they'll generally prefer to work with the buyer that can accommodate them best.
     **Prepare. If you're willing to make the investment, then you must be a qualified, solid, desirable buyer. Get a copy of your credit report and stelle any debts that may be outstanding. You'd be surprised how many people get turned down for a loan because of an old debt they had forgotten all about. Get pre-approved for loans and mortgages. The seller wants and needs an ideal buyer, someone is stable and ready to make a commitment to the property. Going into the negotiation process as a pre-approved buyer puts you at a major advantage.
     **Connect with the seller. Eliminating as many contingencies as possible will give you an advantage when involved in a bidding war. If you have a home to sell before purchasing, sell it first. Reducing uncertainty makes the buyer more appealing to the seller and will create leverage for the buyer.
     **Show them the money. Be willing to increase the size of your down payment or make an all cash offer. "Sometimes the best way to win a bidding war and avoid payment. Sellers favour strong buyers. If you can afford to make an all cash offer, do so - that's almost always a definate way to slamdunk a sale."
     **Work with the best in the biz. Be sure to choose a sales professioanl who has an excellent reputation within the industry.

     Looking for your new home can be a wonderful and exciting experience as you explore the combination of location, price, style, features and more that will add up to the right home for you.
New home builders offer a number of suggestions to make your search as productive and effective as possible:

     ** Know the price range you would be considering. Early in your search, sit down with your lender to determine how much you can comfortably afford to spend. Visit sales offices and show homes and talk with builders or salespeople to get a sense of prices, what builders typically include in the best price of a home and what might cost extra. You can then focus your search on homes within your price range;

     **Get a pre-approval for your mortgage. Knowing in advance how much you can borrow and securing your lender's approval for that amount makes it easier to explore your options with confidence. It also makes it easier to say "Yes" when you find the right builder and the right home;

     **Decide on your basic requirements. What type of community appeals to you? Do you need to be close to transportation, shopping and other amenities? Do you want a bungalow or a two-storey house? How many bedrooms do you need? Will you be working out of your home? The more realistic and detailed picture you can create in your mind, the easier it will be to find the right home;

     **Be open to discussions with the builder or salesperson. Today's builders are committed to customer satisfaction. They and their salespeople are there to listen, to work with you and to offer the assistance you need to make informed decisions;

     **Keep track of the homes you have visited. Most home buyers visit a number of builders, sales offices and model homes before making a final decision. Keep a list of the advantages, disadvantages and general impressions of each company and home you visit;

     **Make a list of questions. Asking the same questions of everyone lets you compare builders, their homes and their services accurately and fairly. For instance, Price- What is the base price versus the price of the model home? What is included in the standard house and what's not? Upgrades- What is the extra cost for each upgrade? Changes- What is possible and what is not? Start and completion dates- When? After sales-service- What can I expect?

     **Set aside enough money to cover all costs of buying and moving. To avoid last-minute surprises, make sure you include all related costs in your calculations. Again, talk to your lender and your builder- they can advise you on costs associated with buying a home from fees for lawyers and mortgage insurance to land transfer taxes;

     **And finally, don't be afraid to say "Yes". No doubt, taking the final plunge can be a little scary. But if you have taken all the appropiate steps you will know when you have found the right builder and the right home. Before you sign, ask your lawyer to review the contract. Then you are ready to celebrate the achievement of an important goal- your new home!

Short Term Rates vs. Long Term Rates  

The options for mortgages available can be very confusing for most mortgage shoppers. Terms for mortgages vary between variable and fixed rate, 6-month terms to 10 year terms. Taking a variable or floating rate mortgage can have savings. Typically the shorter the term or guarantee of the rate, the lower the rate will be. This does not always happen, depending on the market place and the economy, but history has shown that short-term rates tend to be lower than long-term rates. The up side of variable rate is the strong potential for interest rate savings. The down side is the fact that you are accepting the interest rate risk without a guarantee. If you are considering a variable rate mortgage you need to look at your own risk tolerance, and your cash flow available to deal with potential increased payment. Considering projections of rates and where we see interest rates heading can also be important in this decision. Make sure you talk to an expert when you are making this decision.

  
  

  
  

Paying extra amounts on your mortgage can make a big interest saving over time. When we select a mortgage company, privilege payments options are something that we look for. A 20% privilege payment will allow you to pay off up to $20,000 per year on a $100 000 mortgage. It is important that the privilege payment also be flexible to allow you to pay smaller payments on the mortgage and as often as you wish. An extra $1000 periodically paid on a mortgage can help you become mortgage free faster.

Most real estate mortgages have the option to allow payments to be made on a weekly or bi-weekly basis. This option may be desirable for two reasons. The first is it can save you money as you can expect to pay off your mortgage about 4 years sooner. This can save you dramatically over the life of your mortgage. The other reason why these options are so popular is that if your employer pays you on a weekly or bi-weekly basis, you can simplify your budgeting by making the payment line up with the way you paid.

As mentioned above, when you put a 25% down payment on your purchase you can avoid the CMHC premium. More importantly the larger the down payment, the lower the amount of interest you will pay over the life of your mortgage. It is important to note that it may not be wise to stretch yourself to increase your down payment and end up borrowing on credit cards or a line of credit at a higher rate.

Home Buying: Resale vs. New
It can be a difficult decision whether to purchase a resale home or a new home from a builder

Although new homes typically have a higher sales price than comparable existing homes, buyers are willing to spend more up-front with an understanding that part of what they are paying for is assured low maintenance costs.  A builder's warranty, along with brand-new roof, appliances, furnace, and other operating systems that make major repairs unnecessary, work together to counteract possible slower appreciation initially.

Buying New Versus Resale
In today's highly competitive market there is a vast array of choices to be made when deciding on the type of dwelling you wish to reside in.  Below is a comparison of the advantages and disadvantages of buying a new home versus a resale home.

Advantages of a New Home
One of the primary advantages of buying a new home is the ability to decorate your home from the beginning exactly the way you want.  You can pick all the colors, which range from paint to carpet.  You can also make the tile and cabinetry selection for the kitchen and bathrooms.

Often, new homes will have more modern conveniences, better insulation and can be more energy efficient.

Disadvantages of a New Home
Unfortunately, with a new home purchase you should be prepared for the on-going construction you will find around you.  Chances are that your grass and lawn will not be in, your driveway will be gravel and your street will turn into a sea of mud whenever it rains or snows.  If things are going to go wrong with a newly constructed house, they will appear in the first one to two years.  As the house settles you may find cracks appearing in the walls of the basement, especially near any windows in the basement, make sure you get them fixed right away.  Also, you should not finish your basement in a new home for at least a couple of years, just in case cracks and leaks develop.

There are additional expenses associated with new homes that you will not typically find in a resale home.  For example, you may have to spend additional money for appliances, curtains, drapes, central vacuum, humidifiers, decks, fencing, electric garage door openers, finishing the basement, walkways, outdoor lighting, indoor light fixtures, trees, shrubs, gardens and landscaping, children's play sets, swimming pool, air conditioning, etc.

Closing costs are typically higher for new homes.  The purchaser will pay for such additional costs as the New Home Warranty Program, tree planting, utility hook ups and paving of the driveway.

Usually, when you buy a new home, you don't have an opportunity to see the actual layout.  All that is provided is a blueprint and in many cases the end product may be a disappointment to the purchaser because of changes that the builder or sub-contractor does not follow or does themselves.  Additionally, there is the uncertainty as to who will be your neighbours.

Advantages of a Resale Home
The major advantage of buying a resale home is that you are moving into an established neighborhood.  Your lawn is green, your shrubs are growing, your driveway is paved and your trees are well enough established to give your street a feeling of permanence.  Often, most extras are already present, such as appliances, curtains, drapes, central vacuum, humidifiers, decks, fencing, electric garage door openers, finishing the basement, walkways, outdoor lighting, indoor light fixtures, trees, shrubs, gardens and landscaping, children's play sets, swimming pool, air conditioning, etc.

In terms of investment, a resale home will often give you far more value than a brand new home.  Many owners put tens of thousands of dollars into home improvements ranging from small items, such as landscaping, to major projects, such as a finished basement or any of the items above.  Although these improvements will make the home more attractive to potential buyers, they may not increase the market value of the home.  A $35,000 swimming pool or a $15,000 finished basement or even $5,000 worth of landscaping may make the home very attractive.  However these additional costs incurred may not necessarily increase the market value of a home, especially if you have to sell it at a time of year where these major items add little or no perceived value.  The buyer gets the home at its real fair market value, which is based on comparable homes for sale or sold in the neighborhood.  All those expensive extras may be included in the home with benefit to the buyer at little or no extra cost.  This can be a substantial savings over buying a new home.

With a resale, the vendor's asking price is almost always negotiable downwards unlike the builders list price which is usually firm.  Any extras or changes are added to the list price of a new home and add up quickly.

Disadvantages of a Resale Home
A small percentage of homes in the marketplace are not considered to be in move-in condition.  If both live-in partners happen to be working at full time jobs, a move-in condition home is by far the best alternative.  If the property is being under "power of sale" or the property has been rented for many years the home may require a lot of work.  If the buyer is not handy or does not have the additional up front capital then the purchaser would be better off buying a home in move-in condition or a brand new home.  Additionally, as a home gets on in age certain systems such as heating, cooling, roofing, and/or windows need to be upgraded.

Although some perceive the paragraph above as a disadvantage, some consider it as an advantage.  A home that needs some fixing up can in fact present some clear cost advantage to a buyer.  Usually, it can be purchased below the going market value, while at the same time providing an opportunity to have it decorated to suite your specific tastes.

Neighbourhood: Known or Unknown Factor
When you buy a resale home, you can find out a lot more about the property and the neighbourhood before you buy than when you buy a new home.   Land to support new-home developments usually is located on the outskirts of town.    Potential buyers should ask the developer about future access to public transit, entertainment activities, shopping centers, churches, and schools.    Local zoning ordinances also should be reviewed.   A rather remote area can turn into a fast-food-chain haven within a couple of years.   Try to ensure that the neighbourhood, if not strictly residential, will not begin sprawling out of control.  

Buying into a new-home community may seem riskier than purchasing a house in an established neighbourhood, but any increase in home value depends upon the same factors: quality of the neighbourhood, growth in the local housing market and the state of the overall economy.  One survey by the National Association of Realtors shows that resale homes do have an edge over new homes when it comes to appreciate.  The trade group's figures show the median price of resale homes increased 3 percent between 1994 and 1995, compared to 0.8 percent for new homes in the same period.  

More Questions and Items to Consider
There is a major decision early in the process of purchasing a new home and that is whether to build a new home or purchase a resale home already on the market.  The following provides some considerations that may help you make an informed decision.  

Location, location, location.  Are new homes being built in the area you desire?  Do you know the surrounding zoning and what will be constructed in the area?  How far away are services (schools, stores, hospital, doctors, etc.) that you need? How long is the commute to work?

Investment.  Typically, due to the continual addition of features, rising labor and material costs, new homes cost more than similar resale homes.  Are you having to pay significant impact or lot levies or taxes and fees that are imposed on the builder?  Are the taxes on the new home much higher than a comparable resale home?  Will you be in the new home until the area is built out so you will not be competing with the builders should you need to sell the home?  Is the home going to be high priced compared to other homes built or going to be built in the area?

Features.  Are the style and features that you desire only available in a new home?  Can you find a resale home with most of the features and amenities you desire?  Can you add the features you desire to a resale home?  Are newer resale homes available that meet your needs?

Risk.  Is the new home builder or developer financially stable?  Is the builder a large well known company with a good reputation?  Is the builder asking for significant down payments or advance payments?  Are there complaints lodged against the builder for shoddy work or not making repairs?   Has the builder been delivering homes when promised?  Check with your Better Business Bureau, the town or the city and talk to homeowners that have purchased a home from the builder.  

In summary, a resale home can cost less, be more conveniently located, you know the area and amenities and have less risk involved.  A new home can be constructed to have the exact style and features you desire, but usually with much higher costs, limited locations, and more risk.

The following table summarizes the important features of New and Resale Homes:

Feature New Home Resale Home
New Yes No
Lot and Floorplan Can Change Can not change
Basic Features Can change Can change
Warranties Yes No
Initial Cost Higher Lower
Value Worse Better
Risk Higher Lower
Immediate Area Unknown Known
Neighbourhood Schools Usually Unknown Known
Amenities Usually Unknown Known
Conveniences Usually better Not as modern
Investment Usually better after 2 to 4 years Often Higher over long term
Energy efficiency Higher Lower
Maintenance Less More
Mortgage interest rate Unknown until completion Known before contract
Moving-in time Unknown (depends on construction) Known and Fixed
After-closing expenses Highest Lowest

  



Conclusion
In today's market place both new and resale homes are selling briskly.  Once you've evaluated the pros and cons of each alternative, you can make an intelligent, educated decision as to which option is best suited for your particular needs.

Ultimately, the decision should be based on your needs and wants, your family and/or children, your tolerance for risk and the unknown and ultimately your budget.  

December 9, 2005 in Buying Toronto Real Estate