STEPS TO BUYING A HOME IN OTTAWA
The first step to buying a house or condo in Ottawa should be finding out how much your bank is willing to lend. The next step will be to decide how much you are willing to borrow. This step is crucial in deciding most other factors such as desired neighbourhoods, home size and various other factors.
Keep in mind that a pre-approval should not be considered a guarantee that you can purchase any home within the pre-approval amount. The lender will be interested in the details of your intended purchase to ensure the home is worth what you are paying. This review can also include an independent appraisal.
Receiving a pre-approval will provide you with a price range to work from when deciding on what homes you would like to view. It also provides confidence knowing you can submit an offer without fear of losing that perfect home.
This is the length of time which you have to repay the entire mortgage amount. You can choose up to 30 years but typical length is 25 years or less depending on your financial circumstance.
The mortgage term is the length of time that the mortgage contract conditions remain. This can vary between short terms of 1-3 years or the more typical 5 year option. You will need to decide what the best option is for your personal situation.
Fixed-Rate or Variable-Rate Interest
With any mortgage, you will have varying options to choose from when it comes to interest rate. A fixed-rate mortgage is one that remains unchanged/locked in for the entire mortgage term. That is, you pay a locked in amount to principal and interest and it never changes for the duration of your mortgage term.
The Variable Interest Rate is one that fluctuates based on market conditions. The amount paid toward principle and interest can change throughout the life of your mortgage term. If interest rates are low, you will pay more toward principal but if interest rates rise, you will be paying a larger portion toward interest. Variable-rate mortgages tend to have lock in conditions that can be exercised should you decide a fixed-rate mortgage is a better fit for your needs.
Most mortgage payments consist of principal and interest which make up a blended mortgage payment. Depending on the payment options you choose, you could decide to pay off your mortgage much faster than your amortization schedule suggests. Most lenders offer a variety of payment options such as monthly, accelerated bi-weekly and weekly payments. There are also options to pay lump-sums or prepayment options that can significantly reduce the time it will take to pay off the mortgage.
This loan provides for up to 80% of the lending value of the home while you are responsible for providing the remaining 20% in the form of a down payment. Mortgage insurance is not usually required for a conventional mortgage loan.
A second mortgage is an additional loan taken out on a property with an existing mortgage. These loans are considered risky and as such are provided at a higher interest rate
Vendor Take-Back Mortgage
This type of mortgage is when the vendor (seller) finances the mortgage rather than a lending institution. The property title would transfer to the buyer but mortgage payments would be made directly to the seller.
If you are unable to provide at least 20% as a down payment, you can take advantage of a high-ratio mortgage which provides lending of up to 95% of the value of your home. Considering the higher risk associated with high-ratio loans, the government requires that these loans be insured by a mortgage insurer such as CMHC or Genworth. This added premium can add a significant cost to borrowing but is added to the principal amount.
Choosing a Lender
Your Bank – This is likely your first step toward a new mortgage. You likely already have other financial products with your bank and they are often very willing to help you on any mortgage needs you may have. Rates are competitive with other lenders but the mortgage construct can be restrictive. These restrictions may include limitations on prepayment options or future mortgage considerations such as refinancing or bridge financing options. These restrictions can be considered minor to many but depending on your needs and goals, you may opt for a different lender.
Mortgage Broker – A Mortgage Broker will have many lenders to choose from with varying degrees of flexibility. The great thing about a mortgage broker is that they can shop around for the best lender based on your individual needs and provide you with a shortened list of lenders to choose from. They may also have additional discounts that bank may not be able to match.
The House Hunt
The wish list is a vital step at refining your house hunt in Ottawa. Will you want a garage? Single or double or triple? Do you want an ensuite? No rear neighbours? Do you absolutely need to be close to your workplace? There are dozens of questions to ask yourself when putting together your wish list and all will have an impact on what type of home and price range you’ll be looking for while searching for a home in Ottawa.
Needs vs Wants
Tips and Tricks
See passed the current furniture and design. Try to visualize the space with your furniture and design. Try to ignore how the current owners have decorated and picture how you would design the space. Don’t let poor taste in styles and lack of cleanliness dissuade you from finding that perfect home in Ottawa.
Look beyond the house. By this time, you likely have a few target neighbourhoods in mind. Stay focused on those neighbourhoods and pay attention to more than just the house. How’s the traffic? is it family oriented? what about green space? Find out where the schools are located, grocery stores, pubs or coffee shops in the area.
Visit at different times of day and different days of the week. Try and drive around your desired neighbourhoods on the weekend and a weekday. I also recommend driving around at night. This will help you feel out all aspects of that particular neighbourhood in Ottawa.
Take pictures and take detailed notes. Always be read to take photos to help you later when you’ve already seen a dozen homes and can’t remember details about one that you liked. You should also consider taking detailed notes that are not normally captured on the mls listing.
MLS photos can be very different than real life. Stay positive and keep an open mind.
Read between the lines in the listing description. There are often hidden meanings in the way descriptions are written.
Learn how to read MLS and its various acronyms. Ask me about details if you aren’t sure.
Making an Offer
The seller will have several options to consider when reviewing your offer. They can accept, counter or reject. Rarely is an offer exactly what a seller wants so it’s typical for a counter offer to come through and negotiations can take a center role. At this point, we’ll want to review the counter offer and consider comprimising on the little things and countering back with a strong counter offer to close the deal. Effective negotiations will go a long way to smoothing out this process and closing the deal with exactly what you want.
Choose a lawyer that is close enough to your new home! The last thing you want to be doing is waiting in traffic on the west end if you ended up buying a new home in Orleans.
Getting the Keys
The vast majority of real estate transactions in Ottawa close without issue but you will still want to take the time to fully inspect your new home from top to bottom. If appliances were included, were they left behind and are they in working order? Verify that any fixtures and chattels that were to be included were in fact left with the home.