Are you planning to move into your very first home soon, or are you buying a new house? Buying a house is an important decision. It s something we do

Transcription

1 HOMEBUYERS GUIDE

2 Home sweet home Are you planning to move into your very first home soon, or are you buying a new house? Buying a house is an important decision. It s something we do only a few times in our lifetime. And it has many daily and long-term effects on our life, which is why it s important to prepare carefully. At Desjardins, we understand that. Take the time to read through this simple and easyto-use guide and, if you like, talk to your Desjardins advisor. Hold on to this guide. It s your key to all the essential information you need to take you to the front door of your new home in five simple steps.

3 Step 1] Step 2] Step 3] Step 4] Step 5] Appendix 1] Appendix 2] The budget and Calculation tools 2 Choosing your home 11 Your allies 15 The Mortgage loan 18 The purchase offer 24 Addresses 27 Future homeowners checklist 28 Index At the time of printing, all of the following information was correct. Certain conditions apply. Product features are subject to change without prior notice. Ask your Desjardins advisor for details. HOMEBUYERS GUIDE 1

4 STEP 1 THE BUDGET

5 THE BUDGET The budget is a crucial step towards establishing the limits for your home purchasing project. A careful evaluation of your current finances, short-term and long-term financial capability, needs and priorities will save you a lot of stress and give you the peace of mind to contemplate your purchase. The first section will give you a clear picture of all the financial aspects related to the purchase of a property: downpayments, start-up costs and budget calculation. We encourage you to fill in the calculation charts at the end of this section (pages 7 to 10) in order to determine the overall budget for your project. Don t hesitate to ask your Desjardins advisor for help, because that is the key person to guide you through the entire process. Once you finish your calculations, your Desjardins advisor can sit down with you, analyze the results and perhaps grant you a preauthorized mortgage loan an evaluation that determines the maximum financing amount you re eligible for according to your financial situation. This can speed up and facilitate negotiations with the seller or real estate broker. THE DOWNPAYMENT: INVESTING IN YOUR PROJECT When you get a mortgage loan, you are obligated under the Bank Act to invest a sum of money from your personal assets. This is called the downpayment. The downpayment can come from liquid assets taken from your savings accounts, deposit certificates, savings bonds, mutual funds or RRSPs. Cash donations, cashback incentives from lenders and personal loans are also eligible under certain conditions. Moreover, if you own the land on which you d like to build a home, its value can be used as downpayment. Lastly, if you re building your own home with the help of family and friends, your caisse could use part of the value of this labour, called sweat equity, to reduce the amount needed for your downpayment. HOW MUCH TO INVEST? The bigger your downpayment, the less you ll need to borrow. And the less interest you ll pay! Generally, the minimum required downpayment is 20%* of the property s cost or market value, whichever is lower. You can borrow even if you don t have the minimum downpayment. If you need a mortgage worth more than 80% of your property s purchase price, you are legally required to have your loan insured by the Canadian Mortgage and Housing Corporation (CMHC) or Genworth Financial Canada (GFC). In this case, your downpayment could be 5 to 10% of your property s value. The mortgage insurance premium varies in relation to the downpayment and must be either paid at the time of purchase or added to the loan amount. It represents from 0.5% to 2.9% of the amount of the mortgage loan depending on the size of your downpayment is nonrefundable and is usually included in your mortgage payments to the caisse. To find out more about the conditions specific to your mortgage insurance, consult your Desjardins advisor. * for secondary residences that are inhabitable and accessible only 3 seasons per year, the minimum required is 20% of the value for a traditional loan (amortized over a maximum of 15 years). HOMEBUYERS GUIDE 3

6 LEVERAGING YOUR RRSP TO BUY A HOME Thanks to the government Homebuyers Plan (HBP), you can use your RRSP (Registered Retirement Savings Plan) as a downpayment, reducing your mortgage payments, and mortgage insurance if any. The HBP allows you to withdraw up to $25,000 from your RRSP that s $50,000 per couple for the purchase of a new or existing residence. You won t pay any taxes on the amount 1, and you ll have 15 years to pay it back, interest-free. To be eligible for the HBP, neither you nor your spouse can have been the owner of a residence during the year in which you withdraw funds from your RRSP or over the four previous calendar years. Also, to take advantage of the HBP more than once, you must have fully reimbursed the previous HBP within the agreed time limit. USING THE HBP WITHOUT RRSPs Even if you don t have an RRSP, you can take advantage of the HBP. Here s how: Borrow the amount corresponding to your maximum RRSP contribution from your Desjardins caisse Deposit it into an RRSP for at least 90 days Withdraw that non-taxable amount from your RRSP and apply it against the reimbursement of your Desjardins loan Use your income tax refund as a downpayment for the acquisition of a residence Then take up to 15 years to re-deposit the funds in your RRSP SYSTEMATIC SAVING to ACCUMULATE MONEY Is the purchase of a home a long or medium-term project for you? Desjardins Systematic Savings is an excellent way to save up for a downpayment. At the intervals you request, a given amount is withdrawn from your Personal Chequing Account and deposited into your Systematic Savings Account. This way, you get the gain without the pain! 1 If the minimum annual payments are not made, the difference between the amount paid and the minimum amount required is taxable. 4 HOMEBUYERS GUIDE

7 ANTICIPATE START-UP COSTS You need to put aside the initial downpayment and at least $5,000 (this amount varies according to the value of your property) to cover certain start-up costs. See below for examples. INSPECTION FEES Before buying an existing home, have it inspected by a specialist. A detailed report will tell you whether the house requires repairs in the short or long term, and inform you about the existence of any detectable hidden defects. APPRAISAL FEES Your Desjardins caisse will need to know the market value of the property you wish to acquire. An expert usually a chartered appraiser will perform an appraisal and issue report of your property s market value. Notary s fees 1 The preparation, signing and registering of various legal documents related to the purchase of your property calls for the expertise of a notary, whose fees are your responsibility. It s a good idea to ask for several estimates before making a decision, because fees vary considerably from one notary to another. Your caisse can refer you to a notary, if you wish. Furthermore, upon closing the sale at the notary s office, you ll have to pay additional fees and adjustment costs. These include property and school taxes, hydro and natural gas bills, and condominium charges (if applicable). The notary is responsible for making these calculations based on the date of closing. TRANSFER TAX 2 OR WELCOME TAX When you take possession of your property, you are subject to a transfer tax, which is a sales tax based on a given percentage of your property s purchase price. This tax, which applies to all new owners and is payable to the municipality, is based on the purchase price or municipal assessment. Here are the rates to calculate the welcome tax or transfer tax. Québec fees 0.5% 1% 1.5% of the first $50,000 $50,001 up to and including $250,000 of the dollar amount exceeding $250,001 Ontario fees 0.5% 1% 1.5% 2% Amount up to Amount exceeding $55,000 Amount exceeding $250,000 Amount exceeding $400,000; and including $55,000 up to and including $250,000 up to and including $400,000 when the property in question comprises one or two single-family units 1 A lawyer for Ontario residents 2 Land transfer tax for Ontario residents HOMEBUYERS GUIDE 5

8 OTHER FEES Home insurance premium for a new property (usually higher than when you re renting) Mortgage insurance premiums Property survey fees (if required) The sales tax (for new homes) Don t forget you ll have moving and public utility hook-up costs. You also may want to decorate, buy new appliances and furnish your house, patio or garden. It s always better to look ahead, and perhaps consult with your advisor at the caisse as to whether a line of credit would be a good idea. GET OUT THE CALCULATOR Over the next few pages, you ll be able to complete a useful exercise that will help you make the appropriate choices that balance your desires and ability to pay. THE TWO GOLDEN RULES OF BORROWING No more than 32%* of the gross household revenue should go to cover housing costs No more than 40%* of the gross household revenue should go to paying off your debts Once you ve finished your calculations, your Desjardins advisor may grant you a preauthorized mortgage loan your passport to a new home. With this loan, your advisor may also provide a guaranteed interest rate for a minimum of 90 days, as well as rapid service upon loan approval. That way, sellers know you re serious, and you can negotiate a price that fits your budget. *Percentage recommended by mortgage insurers. 6 HOMEBUYERS GUIDE

9 CRAZY FOR CALCULATIONS? Visit desjardins.com/home and calculate with our simulators. You ll be impressed by how easy and clear it is! How much can you afford to spend on a house? How much will your mortgage payments be? Start-up costs for a house. 1. Calculate your gross monthly income Your gross annual salary $45,000 $ Your spouse s gross salary + $30,000 $ Total gross income = $75,000 = $ Number of months 12 months 12 months Gross monthly income $6,250/month $ /month 2. Estimate the maximum amount you should put towards housing costs per month Maximum recommended percentage 32% Monthly gross income (Item 1) $6,250 $ Total amount dedicated to housing $2,000 $ 3. Indicate the purchase price of your future home Example: The price of your future home $180,000* $ 4. Establish the amount available for your downpayment Liquid assets (see list, page 3) $41,000 $ Start-up costs (see pages 5 and 6) $5,000 $ Downpayment $36,000 $ *To calculate the value of your home, visit desjardins.com/home. HOMEBUYERS GUIDE 7

10 5. Find the percentage your downpayment represents Downpayment available (Item 4) $36,000 $ Maximum purchase price (Item 3) $180,000 $ x 100 x 100 Downpayment percentage 20%* % 6. Determine the amount of your mortgage loan Maximum purchase price (Item 3) $180,000 $ Downpayment available (Item 4) $36,000 $ Mortgage loan amount $144,000 $ We ve added an extra column in the following charts so you can do two calculation scenarios.7. Estimez vos 7. Estimate your monthly mortgage payments Amortization 25 years years years Interest rate % % % Corresponding amortization coefficient (following table) $ /m. $ /m. $ /m. Mortgage loan amount (Item 6) x $144,000/m. x $ /m. x $ /m. Monthly mortgage payments $858.10/m. $ /m. $ /m. 8. Calculate your financial leeway Maximum amount per month (Item 2) $2,000/m. $ /m. $ /m. Monthly mortgage payments (Item 7) $ /m. $ /m. $ /m. Financial leeway $1,141.90/m. $ /m. $ /m.* *Remember: If the downpayment is less than 20%, take into account the cost of mortgage insurance (see page 3). 1 The annual percentage rate (APR) is equal to the posted interest rate, assuming that there are no additional charges applicable to the loan. Should there be such charges, the APR might be different. 8 HOMEBUYERS GUIDE

11 Monthly mortgage payment table Amortization coefficient of $1 Rate* 10 years 15 years 20 years 25 years 30 years 2.00% % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % *Nominal rate capitalized twice-yearly. The annual percentage rate (APR) is equal to the posted interest rate, assuming that there are no additional charges applicable to the loan. Should there be such charges, the APR might be different. HOMEBUYERS GUIDE 9

12 Calculate your total monthly expenses 9. Monthly housing expenses Monthly mortgage payments (Item 7) $858.10/m. $ /m. $ /m. Monthly estimate of municipal + $250/m. + $ /m. + $ /m. and school taxes Monthly estimate of heating costs + $100/m. + $ /m. + $ /m. Monthly estimate of electricity costs + $40/m. + $ /m. + $ /m. Other + $ /m. + $ /m. Total monthly housing expenses $1,248.10/m. $ /m. $ /m. Debt ratio calculation: $1,248.10/$6,250 (Item 1) = 20% of gross revenue Monthly expenses for other commitments Auto loan $390/m. $ /m. $ /m. Auto and home insurance + $90/m. + $ /m. + $ /m. Student loan + $100/m. + $ /m. + $ /m. Line of credit + $50/m. + $ /m. + $ /m. Other + $/m. + $ /m. Total expenses for all commitments $630/m. $ /m. $ /m. Debt ratio calculation: $630/$6,250 (Item 1) = 10% of gross revenue 11. Total monthly living expenses and other commitments Housing expenses (Item 9) $1,248,10/m. $ /m. $ /m. Other living expenses (Item 10) + $630/m. + $ /m. + $ /m. Total monthly living expenses $1,878.10/m. $ /m. $ /m. and other commitments Debt ratio calculation: $1,878.10/$6,250 (Item 1) = 30% of gross revenue 2 1 Since 21.7% is less than the maximum debt ratio of 32% of gross household revenue that should cover housing costs, this example complies with golden rule number 2. 2 Since 31.7% is less than the maximum debt ratio of 40% of gross household revenue that should cover servicing all your debts, this example complies with golden rule number HOMEBUYERS GUIDE

13 Step 2 CHOOSING YOUR HOME

14 CHOOSING YOUR HOME Now that you have made your calculations, you are finally at one of the most exciting stages of your home purchasing plan: finding the dream home that matches your budget! Before taking on this adventure, make sure to establish your priorities and be as precise as possible in determining your selection criteria. Buying a home is always a question of choice. It s up to you to identify which criteria are most important to you and which you re willing to sacrifice. At this stage, you should have an idea of how much you can spend on a home. Now, there are two other criteria to consider: location and type of home. LOCATION The location of your future residence is a factor that requires particular attention, especially in the big city. Certain choices could considerably change your budget planning, habits and quality of life. There s a big difference between the city and the suburbs. The city offers a vast range of housing styles, developed public transit and nearby entertainment such as cinemas, restaurants and theatres. The suburbs, on the other hand, offer bigger properties and homes that are often newer and more affordable than in the city, but the higher cost of transportation and its inherent impact on the environment must be considered. Perhaps the best way to understand this would be to walk around the neighbourhood you re considering, and make a return trip from the area to your workplace during rush hour. SIX QUESTIONS TO FIND THE IDEAL LOCATION How long does it take you to get to work? How do you get to work? What are the local services (daycares, schools, hospital, stores, parks)? How much are the neighbouring homes worth? Has their value gone up or down? Is the area safe and quiet? TYPE OF HOME Take the time to choose the home that best meets your taste and needs. There are many different types of homes, each with different advantages and appropriate for different lifestyles. For example: Single-family home (bungalow, 2-storey) - Privacy and freedom - Proven investment - Generally more expensive 12 HOMEBUYERS GUIDE

15 Semi-detached - Less expensive than a single-family home (purchase, upkeep, energy, taxes) - Slightly less private than a single-family home - Popular with young families Duplexes - Greater cost and downpayment than a single-family home - Rental income (tax implications) - More time and resources needed for upkeep - Rental unit expenses deductible - Lease management Townhouses - Less expensive than a single-family home (purchase, upkeep, energy, taxes) - Slightly less private than a single-family home or semi-detached - Popular with young families Condominiums - A property wherein each unit belongs to a different owner - Involves written agreements to manage common areas and for upkeep - Condo fees - Less privacy - Lower taxes Undivided co-ownership - A property wherein each owner owns an amount corresponding to a percentage of the entire property - Not covered by mortgage insurers - Condo fees - Less privacy - Lower taxes N.B. There are also relocatable and factory-built homes. SIX QUESTIONS TO FIND THE TYPE OF HOME FOR YOU Do you need a lot of privacy? Do you mind sharing space with neighbours or renters? are energy efficiency and quality of the environment (insulation, heating, air quality, ventilation, types of material, lighting etc.) important to you? How much time will you have to keep up your home? Do you need large rooms? Do you want a large property? HOMEBUYERS GUIDE 13

16 A NEW OR EXISTING HOME? COMPARE THE ADVANTAGES New home - Possibility to improve or choose the following: exterior siding, flooring, plumbing and electrical accessories - Built according to recent standards (building, electricity, energy efficiency) - Builder s guarantee Existing home - Established area - Landscaped and fenced yard - Can include certain additions (in-ground pool, basement, etc.) - In case of major renovations, can be considered as a new home and GST applies Want to build your own home? You d like to build your own home to your taste in your dream location. You have the time and energy, you re organized, knowledgeable, have experience and contacts in residential construction, and have friends and family who can help out. Inherently, building your own home is a huge project that demands careful planning. Below are the nine basic things to do before starting to build: Spell out your needs in terms of your preferences, lifestyle and financial capability Get plans and specifications that meet building regulations drawn up by specialists Get a construction permit from the city Get an accident insurance policy Draw up a detailed estimate of direct and indirect costs Take the plans, specifications and construction permit to your caisse to obtain financing Make a critical path schedule from the plans and specifications Research and plan the main construction-inspection steps Get written contracts with deadlines from material suppliers and subcontractors *Available only in Québec. 14 HOMEBUYERS GUIDE

17 Step 3 YOUR ALLIES

18 YOUR ALLIES Early on in your property search, it will become obvious that you can t do everything yourself, even with the help of your loved ones. With each and every step, make sure you have the competent support of a team of professionals. They are indispensable! Just look for the list of addresses in the appendix, as it will be of great use to you during your search. YOUR DESJARDINS personal FINANCe ADVISOR This person is the pillar of your team! In addition to helping you choose the mortgage loan that best suits your borrowing profile, needs and situation, your advisor acts in your best interests and will guide and advise you throughout the entire property acquisition process. A Desjardins mortgage representative can meet you at your home, any day of the week. THE BUILDING INSPECTOR Before buying your home, make sure it passes the final test: the inspection. An engineer, building technician, architect or chartered appraiser can do the job and provide a written inspection report, evaluating the foundations, roof, structural elements, windows, insulation and plumbing, as well as the electrical, heating and ventilation systems, etc. A professional inspection provides the following: An expert opinion confirming that the asking price is reasonable with respect to the quality and value of the property An evaluation of the cost of repairs The detection of any hidden defects THE land SURVEYOR If you buy an existing home, the seller must provide the certificate of location. In the case of a new construction, the land surveyor will prepare this certificate. The certificate of location is required by most mortgage lenders and contains the following information: A description of the lot and building Identification of illegalities and irregularities (e.g. a fence encroaching on a neighbour s property) A list of any easements (e.g. rights-of-way) A list of specific bylaws or regulations that may restrict a property owner s rights 16 HOMEBUYERS GUIDE

19 THE NOTARY 1 The role of the notary is to ensure the transaction is carried out according to the rules. To this end, the notary draws up the mortgage deed and deed of conveyance. The mortgage deed is an official document that specifies the mortgage loan conditions, along with the rights and obligations of the borrower and the financial institution. The deed of conveyance is an official document drafted from the purchase offer by which the seller transfers the property title to the buyer. What s more, the notary performs a title search and examines documents published by the Bureau de la publicité et des droits 2, and scrutinizes the documents supplied by the seller (tax receipts, location certificate, marriage contracts or divorce papers). These procedures are intended to ensure that no one other than the seller has rights to the property, and that there is nothing that could compromise the seller s title to the property (e.g. previous mortgages, easements, pending probate settlements). The notary has the mortgage deed signed by the buyer and the mortgage lender (financial institution) and publishes it at the Bureau de la publicité et des droits 2. Lastly, the notary convenes the seller and buyer (and spouses if necessary) and has the deed of conveyance signed. THE REAL ESTATE BROKER The real estate broker is a housing specialist who s there to help you find the home that s right for you. To be really effective, your broker will need to know your budget and lifestyle, as well as the type of area you re looking for. Before your first meeting, you might want to set up a preauthorized mortgage loan to find out exactly how much you can borrow, based on your financial situation and your budget (ask your financial advisor at your caisse). With this information the broker can quickly help you thanks to a familiarity with the market find the home that meets your needs. The real estate broker will arrange appointments and accompany you on your visits. This reassuring step will help you save a lot of time! Finally, your broker will advise you during negotiations and help you draft the purchase offer. THE CONTRACTOR When buying or building a new home, ask for the contractor s references to assure you of their credibility and competence. You might also want to see if the contractor offers new home guarantees. You can also ask to visit homes built by the contractor of your choice. If you re having a home built, the services of an architect can also be very useful. 1 A lawyer for Ontario residents. 2 Registry office, in Ontario. HOMEBUYERS GUIDE 17

20 step 4 MORTGAGE LOANs

21 MORTGAGE LOANS Now you ve arrived at the crucial stage: choosing a mortgage loan. Not all borrowers are in the same financial situation. They are not all looking for the same type of loan. Some focus on interest savings and prefer variable rates, while others are primarily interested in rate and payment stability. The following section will help you make the right choice and discover the advantages of Desjardins mortgage loans. KEY TERMS PRINCIPAL: This is the sum you borrow. This amount is the difference between the purchase price of your property and your downpayment. INTEREST: The cost of your loan, paid regularly and expressed as a percentage, for as long as funds are advanced by your caisse. PAYMENTS: The amounts you must regularly pay against your loan. They consist of a portion of your principal and some of the interest on your loan. AMORTIZATION PERIOD: The number of years over which you have chosen to repay your loan. It is possible to take out a maximum of 25-year mortgage. The longer the amortization period, the lower your payments, but the more interest you pay. TERM: The period during which your interest rate and regular loan payment remain unchanged if you have chosen a fixed-rate loan. In the case of a variable-rate loan, the regular payment may remain unchanged, but the interest rate varies according to market fluctuations. At the end of the term, a new term is negotiated with your caisse and new conditions apply for its duration. PRIME RATE: Annual interest rate periodically announced by the Bank of Canada as a reference point for determining applicable interest rates for commercial loans, in Canadian dollars. This rate, which is granted by financial institutions to their best clients, benefits those with the highest credit ratings. FIXED RATE: Stays the same until the end of the term; can apply to an open or closed loan. VARIABLE RATE: An interest rate that s lower than the fixed rate, but varies according to the prime rate. OPEN MORTGAGE: Pay it back anytime, in full or in part, without penalty. CLOSED MORTGAGE: Cannot be repaid in full before maturity. It s possible to make accelerated payments of up to 15% of the initial mortgage loan amount. Penalty: Amount required by the lender for a partial or full repayment of the loan before maturity. HOMEBUYERS GUIDE 19

22 BUILD YOUR FUTURE ACCORDING TO YOUR BORROWING PROFILE You are now ready to choose a mortgage loan that will enable you to finance your property. You have several options! After asking you a few questions, our Desjardins advisors will be able to suggest the solution(s) that best fit your situation. OUR MORTGAGE SOLUTIONS: Fixed-rate loans: closed: This loan, which usually has a 5-year term (but can vary from 6 months to 10 years), protects you from interest rate hikes. The payments are generally higher. Open: Ideal if your property is currently for sale or if you are waiting for an inflow of funds in the short term and are able to use those funds to make payments on your mortgage loan. It allows you to avoid paying a penalty. Its interest rate is higher than for the closed fixed-rate mortgage loan. The terms are 6 months or 1 year. Yearly rate resetter mortgage loan: 5-in-1 : This very popular loan gives you the benefit of one of the best fixed rates on the market. The term is for 5 years, revised annually, and you benefit from a pre-arranged rate discount. Variable-rate mortgage loans: protected: Combines the advantages of a variable rate with those of a fixed rate and fixed payments. You benefit from rate decreases, while being protected from major rate increases throughout the loan s 5-year term. reduced: The best interest rate guaranteed. The rate follows the rise and fall of the prime rate. Can be converted into a fixed rate at any time, without penalty. You also get a pre-arranged rate discount. regular: Guarantees very competitive interest rates. The rate follows the rise and fall of the prime rate. This open loan with a 1- or 2-year term is flexible too: it s refundable at any time in whole or in part without penalty. NEW: Hybrid mortgages A fixed rate or a variable rate? Not sure which one is right for you? Desjardins can help! If you combine different types of mortgages and diversify their payment terms, you ll have a solution that suits your borrowing needs. Here s an example: amount Value of property $210,000 Downpayment $20,000 Amount of loan $190,000 Hybrid mortgages amount INTEREST RATE 1 Amount of loan $190,000 5-year fixed-rate loan (50%) $95, % Mortgage rate revised annually (50%) $95, % Average rate 3.69% Advantages : You benefit from the rate stability provided by a fixed-rate loan. You enjoy the low interest rates of a variable-rate loan. You get a combined rate that matches your profile and needs. 1 Rates for illustration purposes only. These rates do not necessarily reflect promotions in effect. In the case of loans for a fixed amount, the annual percentage rate (APR) is equal to the posted interest rate, assuming that there are no additional charges applicable to the loan. Should there be such charges, the APR may differ. 20 HOMEBUYERS GUIDE

23 THE VERSATILE LINE OF CREDIT: A SENSIBLE CHOICE The Versatile Line of Credit is a line of credit with a mortgage guarantee for owner-occupants of properties of up to four dwellings. It allows you to leverage up to 80% 1 of the current value of your home, at very competitive rates. You can convert the balance of your Versatile Line of Credit, in whole or in part, to a mortgage or personal loan at any time to benefit from rate and payment stability. You can also combine several mortgage loans to diversify maturity dates, rates and settlement options according to your needs. NICE AND EASY Once the overall amount of your line of credit is established, you ll be able to take out cash advances at your convenience, whenever you need them without having to request any kind of authorization. CASH ADVANCES WHEN YOU NEED them Cash advances are always available. You can get the money from an ATM, by writing a cheque, via direct payment or from a teller at your caisse. AN EXTRA-FLEXIBLE FINANCING TOOL You can convert your cash advances, in whole or in part, into one or more loans. That way you can vary the rates, terms and due dates. LESS INTEREST TO PAY By taking advantage of very attractive interest rates and combining various types of loans and maturity dates, you ll save on interest charges on your cash advances. Before BALANCE INTEREST RATE 2 Without Versatile Line of Credit Mortgage $200, % Car loan $20, % Personal loan $15, % Credit card $2, % Personal line of credit $10, % TOTAL + average interest rate $247, % After BALANCE INTEREST RATE 2 With Versatile Line of Credit Mortgage 5-year rate $100, % If you group all your loans under your Versatile Line of Credit, you could enjoy substantial savings, thanks to much lower interest rates. Mortgage Yearly rate resetter $100, % Car loan $20, % Consumer loan $15, % Line of credit $12, % TOTAL + average interest rate $247, % Savings in interest charges at 48 months $9, Monthly savings on overall payment $ You can obtain a line of credit of up to 65% of the value of your home, with up to 15% of the remainder as a loan with regular payments of capital and interest. 2 Rates for illustration purposes only. These rates do not necessarily reflect promotions in effect. In the case of loans for a fixed amount, the annual percentage rate (APR) is equal to the posted interest rate, assuming that there are no additional charges applicable to the loan. Should there be such charges, the APR may differ. HOMEBUYERS GUIDE 21

24 DESJARDINS MORTGAGE LOANS: ADVANTAGEOUS OPTIONS AND COVERAGE The Multiproject Option allows you to re-borrow funds you have already paid on your mortgage loan as often as you like, without legal or other fees 1. In addition to being advantageous for home upkeep or renovations, the Multiproject Option can also be used to purchase a car, pay tuition fees, go on a trip, take advantage of unused RRSP room, and more. The Advance Payment allows you to repay up to 15% of your initial loan amount every year in one or more instalments, as an early payment and without penalty. The Homeowner s Protection 2 a Desjardins exclusive limits the amount your mortgage payment can increase to the inflation rate, protecting you from major interest rate fluctuations. Available to members renewing their Desjardins mortgage loans. Life insurance and disability coverage Many consumers believe that if they already have salary insurance, they don t have to worry about protecting their loans. However, it s important to mention that in most cases, salary insurance covers only two-thirds of your current salary. When deciding whether or not to get disability coverage, consider your ability to maintain your mortgage payments if an accident or illness stopped you from working for a while. To see whether you have the financial leeway to continue paying for your house, take into consideration all your other financial obligations, such as groceries, clothing, taxes, hydro, your children s education, getting back and forth from hospital, medicine, and other loans. Depending on the type of financing you chose, Loan Insurance or Loan Insurance - Versatile Line of Credit could help you maintain your wiggle room by offering you life insurance and disability insurance coverage. Life Insurance will pay off the insured balance of your loan in the event of your death. Your loved ones won t be saddled with debt in the event of your death. Disability insurance lets you maintain your standard of living in the event of an accident or illness by helping you pay back your loan, based on the percentage of insurance selected. Home insurance When it s time for home insurance 2, the choices aren t always obvious. Selecting insurance that adequately protects your home and property and also includes public liability coverage is an important decision. Desjardins Insurance 3 is different from other insurance companies because it offers you made-to-measure protection that lets you adapt your home insurance* to your reality. Our basic home insurance covers risks like civil liability and losses due to fire, theft, or vandalism, damage caused by wind or ice storms, and most accidental events that could damage your home or possessions, such as a vehicle hitting your house. Depending on your situation, you can also add optional insurance such as aboveground pool insurance, earthquake insurance, or even special insurance for specific property for professional use, for instance. In addition, with Desjardins home insurance, you enjoy our Identity Theft Assistance free. A FEW TIPS FOR SAVING ON INTEREST PAYMENTS To find out more, consult the Desjardins Insurance agent at your caisse, call MADE-TO-MEASURE ( ), or visit desjardins.com/home. 1 Possibility of fees in Ontario depending on situation. 2 Available only in Québec. 3 Desjardins Insurance refers to Desjardins General Insurance Inc. 22 HOMEBUYERS GUIDE

25 PAYING YOUR LOAN QUICKLY Choose the weekly payment option and pay a little more each week. You will enjoy substantial long-term savings and reduce the amortization period. Look at the following example: A $150,000 loan (25 years, 5-year term, at 5.29% 1 ) Payment Method Amount Amortization Interest Charges Monthly $ years $119, Standard weekly $ years $118, Accelerated weekly (monthly divided by 4) $ years $98, Conclusion: By choosing the accelerated weekly payment method instead of the monthly payment method, you reduce your amortization period by 3.7 years and save $21, Increase your regular payments up to double the initial payment, once a year (or once a term if the term is less than one year). If possible, pay up to 15% of the initial loan every year (or once a term if the term is less than one year). Combine several mortgage loans and enjoy the best of both worlds. In addition, since interest rates on variable-rate products are very low, by adjusting your payments to match fixed-rate payment levels, you ll pay down your mortgage even faster. THE DESJARDINS DIFFERENCE: THE MEMBER DIVIDEND Desjardins is more than a bank, and the Desjardins member dividend is the perfect example of how much more. Your caisse may pay you a member dividend at the end of its fiscal year, depending on your cooperative s financial results. In a way, it s an additional rate discount that no other financial institution offers you! 1 The annual percentage rate (APR) is equal to the posted interest rate, assuming that there are no additional charges applicable to the loan. Should there be such charges, the APR might be different. Rate in effect as at January 17, HOMEBUYERS GUIDE 23

26 step 5 The PURCHASE OFFER

27 THE PURCHASE OFFER You ve just found the home of your dreams. It s perfect. It is exactly what you were looking for and is within your budget. So now you re at the final, crucial stage the purchase offer. Remember that the legal implications of buying a home are significant. This section should help simplify the process. Before making your offer, make sure that you fully understand all your commitments. BE AWARE OF THE COMMITMENT INVOLVED The purchase offer is a highly important document that is legally binding on the parties. It is a contract in which one person offers to buy a property from another under certain conditions. Consequently, you should never sign a purchase offer hastily. The purchase offer includes all the details needed to identify the property, along with the conditions for the transaction. For example: address and lot number amount of the deposit date of possession distribution of taxes length of time that the offer is valid (generally between 24 and 48 hours) what is included in or excluded from the sales price (e.g. light fixtures, curtains, carpeting, household appliances) approval of mortgage loan (amount, rate, term) satisfactory inspection of premises by an expert sale of your current house any other condition(s) deemed appropriate Forms for presenting a purchase offer are available at bookstores or from your real estate agent. KNOW WHEN AND HOW TO ACT What happens once the offer is made? The seller can either accept or turn down your purchase offer. If turned down, the seller can then make a counter-offer (on the date of occupancy, price etc.), which you can either accept or refuse. If you refuse the counter-offer, you may make another counter-offer. When an offer is accepted by the seller, it constitutes an agreement to sell. Once a purchase offer has been accepted, neither party can refuse to carry it out. Otherwise, the seller or buyer can be sued for damages caused to the other party. The buyer could even lose the deposit. HOMEBUYERS GUIDE 25

28 THE BIG DAY: SIGNING THE CONTRACT Upon concluding the sale, make sure that your notary or lawyer has all the necessary documents on hand (mortgage deed, tax receipts, location certificate/building location survey). With your legal representative, go over the adjustment statement that details the amount that has to be signed over to the seller in order to conclude the sale. Your notary will pay the seller on your behalf with your funds, which you have arranged to make available through your Desjardins advisor. The appended homeowner s checklist will give you a list of things to do before you move. YOUR QUESTIONS DESERVE ANSWERS Congratulations! You have just aced the five steps of the Desjardins Homebuyers Guide that will enable you to be a homeowner. To find out more about Desjardins mortgage loans, speak to an advisor at your caisse, dial or visit desjardins.com/home. To take out a mortgage, make an appointment with your Desjardins advisor or to make an appointment with a Desjardins mortgage representative, who can meet you at the time and place most convenient for you, any day of the week. In the years ahead, you may have other projects in mind, such as going back to school, taking a vacation or buying a new vehicle. Whatever you have in mind, your advisor would be pleased to help you turn those dreams into reality. 26 HOMEBUYERS GUIDE

29 Appendix 1 AdDRESSES Agence de l efficacité énergétique or Association de la construction du Québec (ACQ) or Association provinciale des constructeurs d habitations de Québec inc. (APCHQ) or and Canada Mortgage and Housing Corporation (CMHC) or Canadian Home Builders Association Canadian Real Estate Association Genworth Financial Canada (GFC) Insurance Bureau of Canada (IBC) In the Montréal area Elsewhere in Québec Ontario or Maîtres Bâtisseurs or Tarion - Protecting Ontario s New Homebuyers TARION HOMEBUYERS GUIDE 27

30 Appendix 2 FUTURE HOMEOWNER S CHECKLIST 1. As soon as possible, reserve a moving company, or a moving van if you re doing the move yourself. 2. Give a notice of departure to your current landlord before the deadline. 3. Clean-up time! Sell everything you don t need, or donate it to charitable organizations. 4. Start packing your boxes as soon as possible and make sure to list the contents on each one. 5. Confirm the moving details with your mover. 6. Go over a list of your valuables with your insurer. 7. Photocopy your medical, dental and school certificates if you re changing neighbourhoods. 8. Notify Canada Post of your address change, as well as all your friends, family and service providers. 9. Go over any final details with your moving company a few days prior to the big move. 10. Return your keys to your landlord, check each room and take one last look. Welcome home 28 HOMEBUYERS GUIDE

31 Index Additional fees and adjustment costs... 6 Advance payment Amortization (period)... 19, 23 Amortization coefficient Appraisal fees... 6 Borrow , 6, 19, 23 Builder Building inspector... 16, 26 Closed mortgage loan Contractor Counter-offer Debt ratio Disability insurance Downpayment , 7-8, 19 Duplex Financial advisor Financial leeway... 8, 22 Hybrid Mortgages Homebuyers Plan (HBP)... 4 Home insurance... 6, 10, 14, 22 Homeowner s Protection Household costs... 8, 10 Inspection fees... 5 Inspector s report Interest , 7-8, 19-21, 23 Loan insurance Life insurance Lawyer... 5, 17, 26 Land surveyor Location certificate (building location survey)... 16, 26 Market fluctuations Monthly mortgage payments Mortgage deed , 19 Mortgage insurance... 3, 5 Mortgage loan... 3, 7-8, 16-17, 19-21, 23, 25 Mortgage loan: key terms Mortgage payment Multiproject Option Notary... 5, 17, 26 Open fixed-rate mortgage loan Patronage Allocation Penalty Pre-arranged mortgage loan... 3, 6 Prime rate Principal Property market value... 3 Protected variable-rate mortgage loan Purchase offer... 17, Purchase price , 19 Real estate broker Reduced variable-rate mortgage loan Registry office Regular variable-rate mortgage loan Renewal before term Returns RRSP , 21 Self-builders Start-up costs... 3, 5, 7 Survey fees... 5 Systematic savings... 3 Sales tax... 5 Sales contract , 26 Term , 23, 25 Transfer tax... 5 Types of homes Variable-rate mortgage loan Versatile Line of Credit Welcome tax in-1 yearly fixed-rate resetter mortgage loan... 20

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