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.
While you’re searching for a lender and your pre-approval, you will want to review all the mortgage details to ensure you are deciding on the right product for your immediate and future needs. Here’s a breakdown of the some of the key details you’ll want to familiarize yourself with and decide on:
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
By the time you’ve received a pre-approval and completed some of your own research, you would have likely chosen the best lender for your needs. Generally, you have one of two options:
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.
After you’ve put together a good idea of your wish list items, you’ll need to determine what neighbourhood you want to live in. Your choice of neighbourhoods in Ottawa will affect many aspects of a home including price, commute, amenities, crime rate, socioeconomic status, available schools and more. My recommendation is to put great thought and research into your desired neighbourhoods to ensure it will meet or exceed your current and future goals and needs.
Needs vs Wants
After you’ve put together a lengthy wish list, you’ll want to revisit it with the intention of identifying what items you must absolutely have vs those you simply wish you could have but are not deal breakers. This is where your logical side comes in to weed out the amenities you wish you could have but may not make sense based on your neighbourhood or budget. Speak to me about this information in detail and I’ll be able to better customize our search toward your needs. My goal is to show you homes that actually fit what you’re looking for.
Tips and Tricks
Condo fees in Ottawa are not created equal. Always find out exactly what the condo fees include/exclude. Make sure to factor the added cost into your budget.
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
You’ve searched high and low and you think you might have just found your next home in Ottawa. Making an offer is very exciting but can also be very stressful. I will start this process by completing the necessary Agreement of Purchase and Sale and discussing expectations with you. This document will include all the offer details including the offer price, specific conditions (financing/home inspection) and a preferred closing date.
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.
Conditions are included in nearly every offer. The most common conditions include the ability the secure satisfactory financing and having a home inspection completed. These conditions are requirements in order to proceed with the agreement and eventually closing the deal. If conditions are not met and removed from the agreement, the deal can’t proceed. Once all conditions have been satisfied, the agreement is considered firm. The next step will be to provide the deposit payment and then anxiously wait for your closing date!
Choosing a Real Estate Lawyer in Ottawa is very important. There will be a mountain of paperwork to complete and sign before you can get the keys to your new home. They will be vital to dealing with important aspects of your new home including title registration, a title search to make sure all legal aspects of your new home look good, title insurance to protect your interests and the remaining balance on your new home.
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
This is definitely the most exciting part of buying real estate. You spent countless hours hunting for that perfect home, you endured the pain-staking efforts of submitting an offer and you’ve spent even more time filling out paperwork and talking with dozens of professionals. Finally, you are ready to get your house keys. The keys are typically provided on the closing date and are provided by your lawyer. Details and timing will vary but you shouldn’t have any issues having access to your new home on the date of closing.
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.