10 Common Canadian Real Estate Questions and Answers

Navigating the Canadian real estate market can be tough, but you don’t have to do it alone. REMAX is here to answer some of the most common questions about buying and selling a home, and when you’re ready to make your move – or if you have any follow-up questions – an experienced real estate agent will be your most-valuable resource. So, read on, take notes and don’t be shy. REMAX is here to help.

1. I’m thinking about buying my first home. Where do I start?

Step 1 is to get pre-approved for a mortgage. A pre-approval lets you know how much you can spend and locks you in at the current interest rate for up to 120 days, allowing you to shop with peace of mind. This is especially important with recent interest rate fluctuations, which may impact your mortgage rate and ultimately, your home-buying budget. Read more here.

2. Is there a “best” time of year to buy a home?

There really isn’t. Prices in the Canadian real estate market are dictated by a number of factors including supply, demand and more. Prices can vary greatly from city to city, and from one neighbourhood to the next. Rather than season, the number of days on market is a better indicator of your negotiating power. If the home was recently listed, the seller will have had less time to test the market and gauge buyers’ response to the price, and will be less likely to negotiate

3. Can I buy a home with no down payment?

The down payment is an essential part of your purchase. There are private lenders who offer mortgages with zero down, but the interest rate will likely be much higher and the cost to you will be much greater in the long run. Buying a home with zero down is generally not recommended. Save up at least five per cent of the purchase price, and consider reducing your home-buying budget to make it more affordable.

Apart from old-fashioned scrimping and saving, you can also take advantage of federal savings programs to help you get into the Canadian real estate market. The first-time Home Buyers Plan lets you borrow from your RRSPs – tax free! Then there’s the First Home Savings Account, which combines the elements of a Tax-Free Savings Account (TFSA) and a Registered Retirement Savings Plan (RRSP), to give Canadian residents the benefit of tax-free withdrawals and tax-deductible contributions. However, the money can only be withdrawn tax-free when purchasing a home.

4. How does mortgage loan insurance work?

There is a common misconception that mortgage loan insurance protects the borrower. This is not the case. Mortgage loan insurance is there to protect the lender against default in payments by the homebuyer. If the buyer has a down payment that’s less than 20 per cent of the purchase price of the home, the lender will purchase default insurance and pass that cost on to the borrower. This can be paid up front or tacked on to the mortgage loan and paid out over time. Mortgage loan insurance is offered by companies like Canada Mortgage and Housing Corp., Genworth Financial Canada, Canada Guaranty, or another approved private insurer.

5. How much will I need for closing costs?

Closing costs in the Canadian real estate market will typically range from 1.5 to four per cent of the home’s purchase price. These include things like legal and administrative fees and are payable on closing. You can expect to pay for your home inspection, mortgage default insurance if you down payment is less than 20 per cent of the purchase price, the Land Transfer Taxes, lawyer fees, appraisal fee and property taxes, among other things. Make sure you budget for this! On a $500,000 home, closing costs can range from $7,500 to $20,000

6. Should I lower the list price, or offer an incentive to sell my home faster?

Reducing the listing price is often the way to go. It’s critical that you list your home for the right price, in order to attract interest from buyers and generate serious interest in your listing. Your REMAX agent will help you determine a pricing strategy that is competitive yet comparable to similar homes in your area.

7. What colour of houses sell fastest?

The easy answer is, it depends on where you are! The colour is important, but having a colour that is prevalent in a community and keeping that colour complimentary to the vintage of the home is likely best.

8. What should I look for in a lucrative investment property?

Location is everything when it comes to finding a great investment property in the Canadian real estate market, influencing everything from vacancy rates and how in-demand your rental unit will be, to its resale value when you’re ready to cash it in one day. Vancouver-based real estate research and consulting firm Cutting Edge Research Inc. says you should ask yourself the following questions, to help you identify a solid investment property:

• Is the area experiencing population, income and employment growth?
• Will the area benefit from an economic or real estate ripple effect?
• Can the local infrastructure support the expected growth?
• Are there any major transportation improvements in the works?
• Is the area attractive to Baby Boomers’ lifestyle?
• Is there a short-term problem occurring that is likely to disappear in the future?

9. Does a higher credit score mean a better mortgage rate?

Your credit score is a measure of your financial health. According to the Government of Canada, your rating “indicates the risk you represent for lenders, compared with other consumers . . . The credit-reporting agencies Equifax and TransUnion use a scale from 300 to 900. High scores on this scale are good. The higher your score, the lower the risk for the lender.” Thus, a higher rating will typically secure a better mortgage rate, since you’re considered to be more likely to make your scheduled payments. If you have a poor rating, do some damage control before you apply for your mortgage.

10. What does the new mortgage stress test mean?

The mortgage stress test is a mortgage qualifier tool used to determine if the borrower would still be able to continue making mortgage payments, should they lose their job, undergo some other type of financial strain, or if interest rates were to rise.

Have more questions? Connect with a REMAX agent to get the answers you want and the confidence you need.