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Buying Process

At Rennie & Associates Realty we strive to make the buying process as enjoyable and stress-free as possible, from our first consultation with you, to negotiating the purchase on your behalf.

We have the expertise to handle all of the details while securing you the best home available, from initial search, to viewing homes, realistic overview of the marketplace, making an offer and closing the deal.

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2 Defining a Target

Setting your target as a potential home buyer, including defining your desired lifestyle, neighborhood attributes and home type, is an important step in finding the right home for you.

• Owning a home
  It’s the most important purchase of your life offering financial security, flexibility, and pride of ownership.
• Ownership types
  Freehold, leasehold, cooperative.
• Affordability
  Find out what you can afford to pay, before you narrow in.
• Mortgages
  There are mortgages to suit almost every financial circumstance.

Owning a home

Buying a home is one of the most important purchases of your life and your timing in entering the housing market for the first time or as an investor is equally important. There are many reasons to buy a home. Weigh these variables carefully when deciding whether buying a home at this time, is the best option for you.

Main advantages of owning a home:

• Financial security
  If housing prices rise, your home can act as an investment due to increased house value over time. Owning a home allows you to create valuable equity and often qualifies you for tax breaks.
• Flexibility
  Unlike renting, as an owner, you can make your home your own, to meet your personal taste and needs. You have creative control over decorating and renovating.
• Stability
  Owning a home allows you to settle in one place and may enhance your sense of personal security and community.
• Pride of ownership
  Owning a home is a major achievement and you can take pride in your accomplishment.

Main disadvantages of owning a home:

• Financial stress
  There are many costs, from the down payment to mortgage payments and insurance that will tie up your money when you own a home.
• Maintenance
  Keeping your home in good shape requires energy, time and money.
• Higher costs
  Your monthly mortgage payments may be more than you would pay for rent. Plus there are extra costs for maintenance and property taxes.
• More responsibility
  As the owner, you are responsible for payments, repairs and maintenance. There is no landlord to call when something goes wrong.

Ownership types

There are various types of ownership opportunities including freehold, leasehold and cooperative:

• Freehold
  With regards to right to the land, this is the highest form of ownership and the most common type of ownership in Vancouver. Owners are free to make changes to their home or land as long as it complies with the local bylaws and building codes.
  
  Detached homes are the most common type of freehold property, but many condominiums are also sold as freehold property. Owners are allowed to renovate or change the interior of their suite; however, they are restricted from making changes to the exterior or common areas of their building. A monthly condo fee, also known as a strata fee, is charged to individual owners to maintain common areas.
• Leasehold
  This type of property means that a buyer agrees to purchase the right to occupy the land or building for a specific length of time. Terms of the agreement are contained in a lease, which includes the lease period. Leasehold properties are commonly located in areas near Granville Island or University of British Columbia (UBC), Simons Fraser University (SFU) lands, or on land owned by the Musqueam First Nation or other First Nations bands.
• Cooperative
  A cooperative is a legal entity that owns property which consists of one to four residential buildings. A resident (owner) becomes a member of the co-op and becomes entitled to occupancy rights to a specific unit. Co-op buildings are typically found in areas such as UBC.

Affordability

If you are interested in buying a home, do you know what you can afford? Consult with your lender or a financial expert on affordability rules as you decide on your financial appetite and mortgage threshold for buying a home.

Mortgages

Most people will require a loan from a lender in order to purchase a home. This type of loan is called a mortgage.

A mortgage is a loan used to finance the purchase of real estate. The lender uses your home as collateral for the loan. Payments are repaid monthly during a specified term.

Mortgage payments are almost always blended. This means the payments include the principal (amount borrowed) plus the interest (the cost for borrowing the money). Mortgage payments may also include pro-rated property taxes.

• A conventional mortgage is put into place when your down payment is at least 20% of the purchase price or market value.
• A high-ratio mortgage is required when your down payment is less than 20% of the purchase price or market value. This type of mortgage usually requires mortgage loan insurance.
• Mortgage loan insurance is designed to protect the lender and by law, most Canadian lending institutions require you to carry it, especially if your down payment is low. When a mortgage is insured, if the borrower fails to pay the mortgage, the lender is paid back by the insurer. The cost for this type of insurance is in the form of a premium and can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments.

Types of mortgages based on payments:

• Open mortgages are flexible, meaning that you can repay in part or in full at any time without penalty, but interest rates are higher.
• Closed mortgages offer the lowest interest rates and fixed payments, but they are inflexible. Prepayments and lump sum payments are not usually allowed without stiff penalty.
• Split or multi-rate mortgages allow you to arrange part of your mortgage at one rate and term; and another part at a different rate and term.

Types of mortgages based on interest rates:

• Fixed rate mortgages offer a locked-in interest rate that does not change during the life of the loan.
• Variable rate means that the interest rate changes as the prevailing market rate changes. While monthly payments stay the same, the ratio of the payment that goes to the principal and interest rate will change.
• Protected (or capped) variable rate sets a limit on how high your interest rate will rise. Usually a premium is charged for this type of mortgage.
• Adjustable means that both the interest rate and the mortgage payment vary based on market conditions.

Tip: There are ways to reduce your mortgage: Make a larger down payment, make lump sum principle payments or pre-payments, select a shorter amortization period, increase your regular monthly payment.

Mortgage approval
If you are ready to search for a home and need a mortgage, you should select a lender in advance and arrange for pre-approval. Your lender will evaluate your financial situation and establish the amount of mortgage you can afford ahead of time, making the buying process more expedient.

Bank, lender or broker?
There are many sources for mortgage loans, such as banks, trust companies, credit unions, pension funds, insurance companies and finance companies. Investigate all institutional options because terms and rates will vary.

You may also wish to contact a mortgage broker to do this on your behalf. Mortgage brokers don’t work for any specific lending institution. Rather, they shop around for a mortgage that best suits you. Your Rennie Sales Associate can assist you in reaching a reputable lender and/or a mortgage broker. Referrals

A second mortgage is a loan against an existing property that you own. This mortgage will be held in addition to the principal and interest owed under the first mortgage. A second mortgage will usually have a higher interest rate and shorter amortization.

To apply for pre-approval with your lender you will need:

• Personal information, including identification and details of your job (confirmation of salary in the form of a letter from you employer).
• Source of income
  Information and details on all your bank accounts, loans and other financial information.
• Proof of financial assets
  Source and amount of applicable down payment and deposits plus proof of source of funds for the closing costs.

Once you are pre-approved for a mortgage, the lender will give you a written confirmation or certificate for a fixed interest rate, valid for a specific period of time, often up to 60 days or more. A pre-approved mortgage amount makes the search for your new home easier and less time consuming because you have a realistic price range in mind.

Please note that a pre-approved mortgage certificate is not a guarantee of being approved for the mortgage loan. Even if you have a pre-approved mortgage certificate, you must still meet your lender during the conditional offer period to get final mortgage approval. When you meet with your lender for final approval, be sure to bring a copy of the property listing and signed Offer of Purchase and Sale for reference.

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