Scarborough Real Estate Real Estate Specialist in Toronto & Vicinity

Home Closing Costs:

Now that you know what you can afford, the next step is to determine the additional costs of the home-buying process. According to CMHC and GE Capital, one should have, in addition to the down payment, at least 1.5% of the purchase price for closing costs (we say 2-2.5%, just to be on the safe side). The costs vary across provinces, and for that matter, cities.

Below you will find a brief explanation of these costs, yet it may not include all items required specific to your property, or the area in which you have purchased. This is a guideline, but your lawyer can provide a fairly close estimate, and is the best resource.

Appraisal Fee:

The appraisal provides the lenders with a professional opinion of the market value of the property. This cost is normally the borrower’s responsibility and it ranges as low as $100 for a drive-by appraisal to as much as $200 for a full appraisal, and the average being $175, plus G.S.T. Occasionally, the costs could be slightly higher for larger, custom-built homes, or homes in remote parts.

Home Inspection Fee:

A professional inspection of the home, top to bottom, is for the benefit of the buyer, therefore, that’s who absorbs the cost. A typical home inspection can cost anywhere from $250-$350, but our opinion is that they are well worth the investment. New home buyers may not worry about it, but a definite must for buyers purchasing properties older than 5 years. When hiring a home inspector, make sure the inspector has liability insurance, just in case a mistake is made.

Fire Insurance:

All mortgage lenders will require a certificate of fire insurance to be in place from the time you take possession of the home. The amount required is generally at least the amount of the mortgage or the replacement cost of the home. This cost can vary on the property size and extras being insured, as well as the insurance company and the municipality. The cost can vary anywhere from $250-$600 for most properties.

Land Survey Fee Or Title Insurance Fee:

A recent Survey of the property is usually required by the lender, and if one is not available, it normally costs anywhere from $600-$900 for a new survey. In lieu of the Survey, most lenders today will accept Title Insurance, at a much lower price of approximately $225.

Legal Costs and Disbursements:

A lawyer or notary will charge a fee for their professional services involved in drafting the title deed, preparing the mortgage, and conducting the various searches. The disbursements, on the other hand, are out-of-pocket expenses incurred, such as registrations, searches, supplies, etc., plus G.S.T.

Land Transfer Tax:

Most provinces charge a land transfer tax, payable by the purchaser, and the amount varies from province to province. This tax is based on the purchase price (refer to mortgage ABC’s for exact calculation).

New Home Warranty:

In many provinces, new homes are covered by a new home warranty program. The cost to the purchaser for this warranty is approximately $600 and should the builder default or fail to build to an agreed-upon standard, the fund will finish or repair the deficiencies.

Mortgage Application and Processing Fee:

On a high-ratio insured mortgage (mortgages above 75% of the purchase price), the mortgage insurer (CMHC or GE Capital) charges a fee of $165-$185 for applying and processing the file, as well as appraising the property. On new homes, this fee drops to $75.

Closing Adjustments:

An estimate should be made for closing adjustments for bills that the seller has prepaid such as property taxes, utility bills, and other charges. Any bills after the closing date are the purchaser’s responsibility. Your lawyer/notary will let you know what they are exactly once the various searches have been completed.

G.S.T.:

On the purchase of a newly constructed home, GST is payable, but make sure you know who pays this, you or the builder. Therefore, on the offer, the purchase price will say “Plus GST” or “GST Included”, and who gets the GST new home rebate. A lot of builders have included this cost into the purchase price so that the buyer does not have to come up with that at closing. (As well, this tax is also charged on all professional fees).

The Insurance Advice

Business Owner’s Policy

A standard business owner’s policy (BOP) provides coverage for property (fire, wind, theft, etc.), liability (injury of someone in your business or by your product), business interruption, and, in some cases, workers’ compensation. The components of each Business Owners Policy are different, so be sure that your policy contains all the components your business requires. Business Owners Policies were originally designed for small businesses, often retail, such as stationery or hardware stores. Today, Business Owners Policies are available for a broad range of businesses covering most major industries and professions. If your business has more than 50 employees, or very high sales volume, you may not be eligible for a Business Owners Policy and will have to purchase a package with the same elements at higher limits.

General Liability Insurance

Liability insurance (also known as casualty insurance) refers to coverage for injury to another person or damage to a person’s property for which you are legally responsible. General liability is a standard element of most business owner’s policies. General liability insurance will cover your business in case of bodily injury to someone or damage to someone’s property that occurs on your premises. For example, this type of insurance would cover you should a client trip over a loose phone cord in your conference room and break an arm. Similarly, if you were to accidentally knock over and break an expensive antique at a client’s premises, your general liability policy would reimburse the client for the damaged property.

Property Insurance

As the name suggests, property insurance provides coverage to your business for loss or damage (such as fire or vandalism) to your property. Most business owner’s policies include property insurance. Business property coverage typically falls into two categories: building and personal property.
Building – This coverage is sometimes referred to as “real” property. It protects you should something happen to your building. Be sure to analyze your policy to see exactly what it includes – these policies typically cover damage caused by fire, lightning, wind, vandalism, or the weight of snow on your roof. Some things such as earthquakes, hurricanes and even general wear and tear are often excluded.
Personal property – This covers a business for loss of, or damage to, the property inside its building, such as files, office furniture, inventory, materials, etc. Check to see if your policy includes your computers and your phone system; your insurer may consider these to be “special” property and require additional coverage.

Commercial Automobile Insurance

If you use your personal car in the course of your business and you infrequently have customers in your car, most insurance companies will let you pay a little more for business use under your personal auto policy. However, if you have cars, vans, or trucks used primarily for business, you will likely have to buy a separate business auto policy. Auto policies cover physical damage to the car, but do not cover the contents of a car, so if you travel outside the office with valuables (such as demo units, computers, samples, etc.), make sure your property policy covers loss outside your business. If other people will be driving your car for the business, put their names on your policy to ensure coverage in the case of an accident. If your employees use their own cars in the course of working for you, you may need to get a non-owned auto insurance policy that provides coverage in case something happens when they are working for you.

Professional Liability (Errors and Omissions) Insurance

Professional liability insurance, also commonly referred to as errors & omissions coverage, is the service equivalent to product liability insurance. It protects you financially in the case of a claim against you for negligence, errors, omissions, or wrongful acts in the performance of your duties. It includes coverage for malpractice, errors, and omissions. A good place to start your search for professional liability coverage is your trade association, since it will be familiar with the requirements for your profession. Often, these industry groups offer specialized liability coverage, or if they don’t, can point you in the direction of a carrier that does. When you are shopping for professional liability insurance, be sure to ask if the coverage includes the cost of legal fees. Some policies are now being written with exclusions and limits on coverage for legal fees and court costs.

Umbrella Insurance

These types of policies offer extra liability coverage that kicks in for losses when the limits of your primary liability policy are reached. Umbrella coverage often applies to either business liability or automobile liability insurance. Using an umbrella policy, you can often purchase several hundred thousand to more than a million dollars worth of extra coverage for as little as a few hundred dollars.

Business Income / Extra Expense Insurance

This is an extremely important add-on to property coverage, and is part of most BOPs. Business income coverage reimburses your business for revenues you lost during downtime caused by damage to or loss of your property. Extra expense insurance reimburses you for expenses incurred to avoid or minimize the suspension of business. Say, for example, your building roof collapses after a heavy thunderstorm. The business income policy pays for the income you lost while you could not occupy the building, while the extra expense policy covers rent for a temporary office space while your building is being repaired.

Product Liability Insurance

Product liability insurance protects you in case a product you produce or provide causes harm to a user or a user’s property. A “product” is anything that is tangibly used, touched, or consumed. This type of insurance is recommended for every business that manufactures a product, but is especially important for companies that produce food, clothing, toys or anything else that could conceivably cause harm to someone. Most business owner’s policies include limited product liability coverage. If, for some reason, you do not have this coverage through a business owner’s policy and your product runs the risk of inflicting harm on other people, you may need to buy product liability separately. Similarly, if your product presents a higher risk of injury (for example, it contains a hazardous material), you may need to purchase additional coverage

Please note:

This article is designed for general information only. Contact a licensed insurance representative before you buy ANY insurance to ensure that you understand what you need, what you are buying and why.

Compiled by:

Lynette Latinsky of DOT Financial. DOT Group of Companies is an independent insurance brokerage firm whose specialists have been assisting clients since 1980.

Contact Lynette at:

(416) 636-4411 x458

or e-mail: lynette@dotben.com

Source:

Small Business Network: Articles and Tools, Law and Insurance

 

The Legal Corner:

There are many different methods of carrying on business. This article will address three: the sole proprietorship, the partnership and the corporation.

In a sole proprietorship, the individual will carry on business on his or her own behalf. He or she is the sole owner of the business and may hire employees. If using a name different than his or her own, he or she is required to register a business name. A business name registration is valid for 5 years and can be renewed. As a sole proprietor, the income and losses of the business are for his or her own account. If creditors wish to sue, they may sue the individual personally and seize his or her personal assets (with certain exemptions) to satisfy any judgment.

A partnership exists where two or more persons, whether individuals or corporations, carry on business together with a view to a profit. The partnership is not, in law, a separate legal entity. Partnerships are governed by the common law and the Partnership Act. As between themselves, partners can have a written or oral agreement. A written agreement is preferable, as it provides a greater level of certainty as to what the partners’ rights and obligations are as regards each other. As regards third parties, each partner is liable for all of the partnership’s debts and liabilities. There are general partnerships and limited partnerships, the rules for which differ

In each instance, consideration should be given as to which form of business organization to use. In some cases, it may be prudent to consider other forms not described above

 

In a corporation, the owners are called shareholders. The corporation is a separate legal entity from its owners. It can sue or be sued in its own name. The owners are only liable to the extent of the property they have advanced to the corporation in exchange for their shares. This is commonly referred to as the limited liability concept. Other reasons for incorporating may include tax planning. The corporation will have directors and officers. Despite the limited liability concept, they may be personally liable for unpaid taxes, employment insurance, Canada Pension Plan, for environmental offences, and for other matters.

Presented by:

Anton M. Katz, Barrister and Solicitor

1600 Steeles Avenue West, Suite 318

Concord, Ontario L4K 4M2

Tel: (416) 410-1981, Fax: (905) 660-6727

anton@amklaw.ca
The above article is provided for information purposes only, and is not intended as legal advice.

Available Franchises

I will keep updating this list as and when new franchises become available. In the meantime you can check at www.franchiseworks.com

www.tpi.ca – email: info@tpi.ca – Travel Professionals International – Own a home based travel business- Investment $8,900 to $12,900. 1-800-799-9910

www.atmbusiness.com – Proven Business Plan, Earn immediate income, Complete Training Program and Support Provided 1-866-557-5505 0r 905-474-3208

www.expressfitfranchising.com – Low $10,000.00 Franchise Fee. Turnkey Packages. Expressfit for women only – a fun, easy, comfortable way to get into shape. 1-800-871-6907 or 905-662-6712

www.cashnow.com – Own your own payday and cheque cashing business – small investment, low overhead, outstanding returns, repeat customers, turnkey systems. 1-866-778-2996or 905-470-6100

www.motophoto.ca – Largest Franchised photo imaging retail chain in North America. 1-877-322-2153

www.fastway.ca – Fastway Couriers – low risk, low startup cost, exclusive territory, perpetual franchise rights, incredible earning potential, guaranteed income over20 weeks – 1-877-739-2520

www.dial-a-husband.com – Professional Handyman Services – Be your own boss – Available Exclusive Territories in Ontario. Financing Assistance Available – you will be part of a winning team.1-800-266-1815

STAGING… FOR A FASTER SALE AND HIGHER PRICE

 

There   are many television shows today that focus on home staging. If you have not   watched any, do yourself a favor and tune in. They all say the same thing: do   not even consider putting your house on the market until you have taken a   close look at its condition. Experienced sales people know that you only have   one shot at impressing potential buyers, so take some time to prepare your   home for showings. You will be rewarded with a faster sale and a higher   offer.

Start with the Basics

• Everything from floors to windows must be spotless. Remember to clean   the oven and other major appliances.
• Skylights   should be crystal-clear, too.
• Kill the   offensive odors. They’re the first thing buyers notice, and often a permanent   turnoff.
• Eliminate   clutter.
• Put away   small kitchen appliances and other items that are sitting on countertops and   tables.
• Remove   photographs from table-tops.
• Organize   the closets.

Outside Tasks

• Clean the   drain gutters. Buyers almost always comment if gutters are full of leaves and   it makes them question other maintenance issues.
• Store or   organize items that make the yard look messy.
• Make your   front entry inviting. Decorate it, paint the door or buy a new door. It’s the   first look at your house, so make it a good one.

Tips for Vacant Homes   Vacant homes often greet Real Estate Sales Representatives and home buyers   with a blast of stale or mildew-laden air. As soon as buyers smell mildew,   they are out the door. Deal with the mildew before you list the house.     Have you ever noticed that during colder months the interior of a house   without heat always feels colder than it is outside? Leaving the heat or air   conditioning running while a home is on the market reduces odors and makes   the house more inviting. Keep the lawn and landscaping tidy, even if you have   to hire someone to do it.

Don’t Take it Personally   The first step is to separate yourself from any personal feelings you may   have about your home. It’s not your home now; it’s a commodity you intend to   market. As the seller, you must trust your own instincts. Try to evaluate   your house as if you are seeing it for the first time.     If you were a home buyer, what would you think about the house?     What changes would make immediate improvements?     What are the home’s best features and how can you show them off?     How about a look that says “comfort” or a popular decorating theme,   such as the vintage, casual look of Shabby Chic.

Create a Mood   Is there a mood that you’d like to create? If you’re near water, how about   breezy fabrics and blue-green colors that remind us of the beach? If you’re   in the mountains, perhaps you could go rustic. Study the house, brainstorm,   and speak to your friends or family members about possible ideas.

Pack It Up   Pack away most of your family photos. Buyers should be able to imagine their   own possessions in the home. When home buyers start deciding how their   furniture will fit into your rooms, you’re on your way to a contract.   Pack up the bulk of large, personal collections, so that buyers don’t get so   distracted by them that they forget to look at the house.

Make It More Spacious   Remove excess furniture to make rooms appear more spacious.     Clean and organize the closets.     Store boxes in an out of the way location or rent a temporary storage unit so   you can de-clutter every part of the house.

Expose Desirable Features   Remove rugs if they’re covering up nice hardwood floors.     Remove heavy drapes that keep out natural light, especially if there’s a   great view out the windows.

Add Some Life   Living (not artificial) plants go hand-in-hand with nearly any home staging   theme.

Freshen Up   How about a coat of fresh paint? Are walls in the house dingy? Are the   colours dated? Should you clean curtains or other window ornaments?

Create a Mood   Bake bread during showings, or place a fresh loaf in a basket on the counter   to create a warm and homey atmosphere.     Classical music playing softly in the background is nice, but choose   something that enhances the mood you are trying to create. For example, in   the Blue Ridge Mountains, locals and out of town buyers react positively to   Appalachian folk music playing softly in the background.

Essential Curb Appeal   In addition to keeping the lawn nicely trimmed, there are other elements you   can add to grab a buyer’s attention before they walk in the door:

• Use   outdoor lighting. It does wonders in the evenings when many homebuyers do   drive-bys of properties.
• Buy an   attractive doorknob set.
• Sweep the   driveway; pressure wash the house or sidewalks if necessary.
• Enhance   landscaping.     A great overall impression is often enough to make a buyer more lenient about   minor repairs that may be required. You want them to fall in love with the   house as soon as they see it from the street.

Real Estate Market Affect your Home Price

A hot market is a “seller’s market”. During a seller’s market, properties can sell within a few days of being listed and there are often multiple offers. Sometimes homes even sell above the asking price. Though most buyers want to get a “deal” on a home, reducing your offer by even a few thousand dollars could mean that someone else will get the home you desire.

A slow market is a “buyer’s market”. During a buyer’s market properties may languish on the market for some time and offers may be few and far between. Prices may even decline temporarily. Such a market would allow you to be more flexible in offering a lower price for the home. Even if your offered price is too low, the seller is likely to make some sort of counter-offer and you can begin negotiations.

More often than not, the market is simply “steady,” or in transition. When a market is steady, no real rules apply on whether you should make an offer on the high end of your range or the low end. You could find yourself in a situation with multiple offers on your desired house, or where no one has made an offer in weeks.

Transition markets are more difficult to define. If the economy slows unexpectedly, as it did in the early nineties, people who buy on the high end of a seller’s market (like the late eighties) could find their home loses value for several years. So far, no one has proven reliable in predicting when markets change or how good or bad the real estate market will become.

When should I sell my home?

Your answer to this question might be right now! If you have taken a job in another city or made an offer on a new home, or had an addition to your family, selling your home fast might be the most important goal you have. Most people, however, have some flexibility when they sell their home. Let us take a closer look at the most important factors that can go into this decision.

How quickly must you sell?

If you have decided that now is the best time for you to sell your home, then, you will probablywant to complete the process as soon as possible, but will also want to sell your home at the highest price possible. In a “sellers market”, where many buyers are competing for relatively few homes, speed and top price can go hand in hand.

However in a “buyers market”, when purchasers can take their time to choose among several properties, you may discover there is a trade-off between speed and price. Discuss your specific requirements with a Real Estate Sales Representative, who can help you decide upon an asking price that will also help you meet your timing requirements.

Cycles in the market place – what do they mean?

In real estate it is important to know that over the long term, residential real estate is one of the best investments you can make, while providing you and your family with shelter. There are cycles in the market that may affect your decision regarding when to sell. These cycles can create a shortage of homes, which will push up the prices, or a surplus which can result in a slowdown of rising prices.

What drives these cycles – the overall economy is most obvious. In periods of economic growth when employment is strong and people have confidence about their futures demand for housing grows and is high. When, however, there is a slow down in the economy and unemployment is high, – more homes will come on the market, and buyers will typically wait for times to improve. Keep in mind that these economic fluctuations can be national in scope or affect only certain pockets of the country.

Changing interest rates also influence real estate market cycles. When interest rates rise, fewer people can qualify for any given mortgage amount and demand drops – making it tougher to sell your home, or obtain the price you want. The same is true when interest rates fall, more people can afford to a buy home or qualify for financing so the demand for housing increases.

Does all this mean you need to be an economist to determine when it is the best time to sell? Not at all! But staying aware of the things that influence the cycles in real estate will help you decide when to place your home on the market.

The Seasons of home sales

Seasons also affect buyer demand and in turn, how long it will take to sell your home or the price you can obtain. For example, fewer buyers may be willing to trod through snow drifts (if you live in area with winter climate) to look at homes, but you will also be competing with fewer homes on the market.

Conversely, spring tends to be an active time for real estate sales. Homes and gardens start to look good and again buyers will come out of hibernation and begin the home hunting process. Parents with school children particularly like the spring and are likely to buy a home. Homes are sold throughout the year, so think of the seasons as only one factor in determining when the best time to put your home on the market.

Selling your Home with a Realtor or Go it alone

If you have decided that now is the time to sell   your home, you might be thinking: should I hire a Real Estate Sales   Representative or do it alone. Have you ever considered repairing your own   car? Anyone can buy the tools and parts. However, most of us just do not have   the knowledge, training, experience or the expertise and commitment of time   to do the job properly. Besides, there are plenty of experienced   professionals to do the work for us.

If you are tempted to do it yourself and “save” the real estate   commissions this article will be of great help to you in making your   decision. Selling   your home is quite a complex procedure, involving large sums of money,   stringent legal requirements and the real potential for very costly mistakes.   It requires a tremendous depth of knowledge and experience, as well as substantial   amount of time to follow-up on every detail promptly and properly.

Will you really “save” the real estate commission?   Most buyers equate a “For Sale By Owner” sign with a   “bargain.” They assume you will sell for a discount because you do   not have to pay the real estate commissions, and, as a result, they’ll   probably offer you less than Fair   Market Value. Negotiating your price upward to regain even a part of   the anticipated commission savings will be difficult at best.

Do you have the time?   If you do it alone, how much will you really save when you factor in the   considerable time you will have to invest? Without a Real Estate Sales   Representative’s support, you are the one who will have to write and pay for   the ads to market your property, remain available day or night for calls from   prospects, run the open houses on weekends and show your property on short   notice, screen potential buyers, fill-out the paper work and do the dozens of   things required to sell a home. Do you really have the time for all this? And   what is your time worth – the time spent away from your family and friends   and work?

How will you reach potential buyers?   Do-it-yourselfers are faced with the problem of how to market their home   effectively. How good are you at writing hard hitting advertisements that   will stand out from all the others and entice prospects to call you? Where   should you run these ads, when, and how often? Do you have the time and   patience to handle telephone inquiries? Are you prepared for the cost of   advertising – including a professional-looking “For Sale Sign?”   Real Estate sales people are experts in effective advertising and cover all   these costs as part of their service to you. Moreover, when you work with a   Real Estate Sales Representative, your home receives a far-reaching market   exposure through the Multiple   Listing Service. MLS® is a computer-based system that relays valuable   information about your home to a vast network of Real Estate Sales   Representatives and potential home buyers in your market area. Remember, the   greater exposure the greater the chances for a higher price. Also, most Real   Estate Sales Representatives work for real estate companies that have their   own websites or real estate online web portals which will feature your   listing; these websites are generating thousands of visitors a day.

Do you really know the true market value of your home?   Setting a sales price is perhaps the most difficult and yet critical step in   the home-selling process. It requires extensive knowledge and training, as   well as access to sophisticated market-analysis developed over years of   experience. Do-it-yourselfers usually lack these resources and often end up   guessing at their asking price.

If you set your asking price too high, many prospective buyers will be   frightened off without even seeing the property; too low and you will leave   thousands of dollars on the negotiating table needlessly. One of your Real   Estate Sales Representative’s most important roles will be helping YOU decide   upon and negotiate a realistic asking price for your home that meets your   sales objectives.

 

Are you ready to “pre-screen” every prospect?   Do-it-yourselfers are faced with the challenge of interviewing every person   who responds to their ads or “For Sale Sign.” How do you go about   this arduous task without offending those who are clearly not serious or   qualified buyers – and yet protect your own interests and security? Do you   have the skills and experience to ask the right questions over the phone   before you let a prospect visit? How are you going to find out whether they   are really qualified to purchase in your home’s asking price range?

Pre-screening prospects is absolutely necessary to weed out the   “looker” from serious buyers. Your Real Estate Sales Representative   knows how to do this effectively, saving you many hours of time and quite a   few headaches.

How are you at selling and negotiating?   Selling real estate is considerably different from selling most other   products or services. Many do-it-yourselfers attempts to over-sell,   smothering the buyer with every detail and nuance about the property. Few   understand the subtle differences between a home’s features and the potential   benefits to the buyer. Few know how to ask the right questions and uncover   the buyer’s true needs and wants. Even fewer know how to complete the sale   successfully through firm, impartial negotiation.

Real Estate Sales Representatives are skilled intermediaries with considerable ability to market your home successfully. Would you not feel a   lot more comfortable knowing an experienced Real Estate Sales Representative   is on your team negotiating the Highest   Price Possible for your home?

Are you up-to-date on real estate laws?   Remember when you bought your home and had to deal with all these papers   thrust in front of you for your signature? Well, selling your home is equally   complex from a contractual and legal standpoint. If you attempt to sell it   yourself, you will either have to prepare all your own legal documents when   an offer comes in, or translate the language in the offer presented from the   buyer. In the excitement of receiving an offer, are you confident you will be   able to recognize terms and conditions that are not in your best interest, or   worse, are legally risky? Real Estate Sales Representatives know how to protect   you from these potential legal pitfalls, and will work to help ensure your   interests are properly protected.

Let a Real Estate Sales Representative help you sell your home.     Most of those who sell their homes do so with the assistance of Real Estate   Sales Representatives. Of those that try to do it themselves, most change   their minds and end up going with a real estate professional, because the   process is too complex, too time consuming, and too dangerous without the   help of a professional. Working with a licensed professional to sell your   home, someone who is a member of a Real Estate Association, entitles you to   an exceptionally broad range of services and benefits unavailable to   do-it-yourselfers.

—————————————————————————————-

The trademarks MLS® is owned   by the Canadian Real Estate Association (CREA) and identifies the quality of   services provided by real estate professionals who are members of CREA. Used   under licence.

 

For those wanting a steady return on their money, houses can be a sure bet. When the baby boomers started madly buying houses in the 1980s, suddenly real estate seemed like the path to instant wealth. The real estate markets fluctuate constantly. There have been times when house prices have gone down. However if you look at the overall price of homes in your area over the last 10 years, in most cases, (depending on your region) prices have risen.
Where is the housing market headed? Nobody can accurately predict. But even if house prices don’t rise phenomenally, a home has two strong things going for it as an investment. First, any capital gains on your principal residence are tax-free. If your house appreciates by 6 per cent, you get to keep every cent of your gains.
Now 6 per cent may not sound like much, but in terms of how much you end up with, you’d have to earn as much as 12 per cent on a fixed-income investment such as a GIC to match that return, after tax.
Second, you don’t have to come up with the full purchase price, meaning you’re able to harness leverage. The conventional mortgages require a down payment of 25 per cent of a house’s appraised value. Whereas the High Ratio Mortgage, requires only 5% down payment.
For example, if you buy a $200,000 home, you need to come up with around $50,000 for a conventional mortgage. If the home’s value rises to $220,000, that’s an increase of 10 per cent. But what’s really happened is you’ve put up $50,000, and made $20,000. Your real gross return on your invested funds is around 40 per cent. But notice the word “gross”. Don’t forget that your real return will be less.
Buying a home and having a mortgage is also a tremendously powerful forced savings program.

SMALL BUSINESS FINANCING PROGRAM

 

Small business is one of the fast growing segments of Canada’s economy. Imaginative entrepreneurs with drive and spirit are creating thousands of new jobs and new opportunities for our country’s future. The Canada Small Business Financing (CSBF) Program was created to help small businesses reach their potential by making it easier for them to get term business improvement lawns to finance the purchase or improvement of fixed assets for new or expanded operations. Administered under the Canada Small Business Financing (CSBFA), the program is a joint initiative between the Government of Canada and private sector lenders.

WHY A CSBF LOAN?

Owners of small businesses frequently lack the funds they need to pay for business improvement or expansion. Financing may not be available to them unless they are willing to include their personal assets as loan security. Those wanting to start up new businesses face similar problems. Under the CSBFA, the federal government partially offsets as security support their business financing requirements.

WHO ISSUES THESE LOANS?

Chartered banks, caisses popularizes. Provincial Government’s Treasury branches, most credit unions, and many trust, loan and insurance companies are authorized to make loans directly small business owners. Lenders are required to make CSBF loans with the same care as in the conduct of their ordinary business, that is: to assess credit worthiness and draw up agreements following normal lending practice and to administer the loans in accordance with specific program requirements.

WHICH BUSINESSES ARE ELIGIBLE?

Most small businesses starting up or operating in Canada are eligible for CSBF loans, as long as their estimated annual gross revenues do not exceed $5 million during the fiscal year in which they apply for a loan. Farming and charitable religious enterprises are not considered eligible business, however, Businesses may be operated as sole proprietorships, partnerships or incorporated companies.

HOW CAN LOAN PROCEEDS BE USED?

Loan proceeds may be used to finance the purchase or improvement of real property or immovable; the purchase of leasehold improvements or improvements to leased property, and the purchase of improvement of new or used equipment; necessary for the operation of the business.

DOES THE CSBF EXCLUDE ANY LOAN PURPOSES?

Loan proceeds cannot be used to: purchase shares or other types of ownership in a business enterprise; finance working capital (finance inventory, accounts receivable, etc.); finance expenditures or commitments, made by the borrower, previously financed by a term loan; purchase real estate for resale; or purchase or improve real estate for lease or sublease purposes (hospitality, health care and mini-storage industries are exempt from this exclusion).

ARE THERE BORROWING LIMITS?

The maximum value of leans a borrower may have outstanding under the CSBFA and the Small Business Loans Act (SBLA) cannot exceed $250.000. Loan proceeds may be used to finance up to 90 percent of the cost of the asset, including non-refundable taxes and duties. Lenders are obliged to take security in the assets financed. When financing leasehold improvements or computer software, the lender may take security in other business assets. The lender may take personal guarantees or surety ships not exceeding, in aggregate, 25 percent of the original amount of the loan. These guarantees or surety ships cannot be secured with personal assets.

WHAT ABOUT LOAN REPAYMENT?

The period during which a loan must be repaid will generally coincide with the expected economic life of the asset being financed, up to a maximum of 10 years. Installment payments on the loan principle must be scheduled at least annually, but monthly payments are usually called for depending upon arrangements between the borrower and the lender.

HOW ARE THE INTEREST RATES DETERMINED?

Under the CSBFA, borrowers may choose between:

Floating rate loans, where the interest rate fluctuates with changes in the lender’s prime lending rate over the term of loan, but cannot be more than 3 percent over the lender’s prime lending rate: and fixed rate loans, where the interest rate is fixed for the term of the loan, but cannot be more than 3 percent over the lender’s residential mortgage rate for the applicable term. This 3 percent includes an annual administration fee of 1.25 percent payable by the lender to the government. A loan can be prepaid or the interest can be converted to a fixed or floating rate. The lender may charge a penalty for the prepayment or conversion of the loan.

ANY OTHER COSTS?

Lenders are required to pay a one-time loan registration fee to the government equal to 2 percent of the amount loaned. The fee is recovered from borrowers who may reimburse the lenders when their loans are advanced or have the amount of the fee added to their loan balanced, provided that the individual borrower’s loan maximum of $250,000 in total is not exceeded.

Home Closing Costs:

Now that you know what you can afford, the next step is to determine the additional costs of the home-buying process. According to CMHC and GE Capital, one should have, in addition to the down payment, at least 1.5% of the purchase price for closing costs (we say 2-2.5%, just to be on the safe side). The costs vary across provinces, and for that matter, cities.

Below you will find a brief explanation of these costs, yet it may not include all items required specific to your property, or the area in which you have purchased. This is a guideline, but your lawyer can provide a fairly close estimate, and is the best resource.

Appraisal Fee:

The appraisal provides the lenders with a professional opinion of the market value of the property. This cost is normally the borrower’s responsibility and it ranges as low as $100 for a drive-by appraisal to as much as $200 for a full appraisal, and the average being $175, plus G.S.T. Occasionally, the costs could be slightly higher for larger, custom-built homes, or homes in remote parts.

Home Inspection Fee:

A professional inspection of the home, top to bottom, is for the benefit of the buyer, therefore, that’s who absorbs the cost. A typical home inspection can cost anywhere from $250-$350, but our opinion is that they are well worth the investment. New home buyers may not worry about it, but a definite must for buyers purchasing properties older than 5 years. When hiring a home inspector, make sure the inspector has liability insurance, just in case a mistake is made.

Fire Insurance:

All mortgage lenders will require a certificate of fire insurance to be in place from the time you take possession of the home. The amount required is generally at least the amount of the mortgage or the replacement cost of the home. This cost can vary on the property size and extras being insured, as well as the insurance company and the municipality. The cost can vary anywhere from $250-$600 for most properties.

Land Survey Fee Or Title Insurance Fee:

A recent Survey of the property is usually required by the lender, and if one is not available, it normally costs anywhere from $600-$900 for a new survey. In lieu of the Survey, most lenders today will accept Title Insurance, at a much lower price of approximately $225.

Legal Costs and Disbursements:

A lawyer or notary will charge a fee for their professional services involved in drafting the title deed, preparing the mortgage, and conducting the various searches. The disbursements, on the other hand, are out-of-pocket expenses incurred, such as registrations, searches, supplies, etc., plus G.S.T.

Land Transfer Tax:

Most provinces charge a land transfer tax, payable by the purchaser, and the amount varies from province to province. This tax is based on the purchase price (refer to mortgage ABC’s for exact calculation).

New Home Warranty:

In many provinces, new homes are covered by a new home warranty program. The cost to the purchaser for this warranty is approximately $600 and should the builder default or fail to build to an agreed-upon standard, the fund will finish or repair the deficiencies.

Mortgage Application and Processing Fee:

On a high-ratio insured mortgage (mortgages above 75% of the purchase price), the mortgage insurer (CMHC or GE Capital) charges a fee of $165-$185 for applying and processing the file, as well as appraising the property. On new homes, this fee drops to $75.

Closing Adjustments:

An estimate should be made for closing adjustments for bills that the seller has prepaid such as property taxes, utility bills, and other charges. Any bills after the closing date are the purchaser’s responsibility. Your lawyer/notary will let you know what they are exactly once the various searches have been completed.

G.S.T.:

On the purchase of a newly constructed home, GST is payable, but make sure you know who pays this, you or the builder. Therefore, on the offer, the purchase price will say “Plus GST” or “GST Included”, and who gets the GST new home rebate. A lot of builders have included this cost into the purchase price so that the buyer does not have to come up with that at closing. (As well, this tax is also charged on all professional fees).