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The Home Buying process
Master the essentials of the home buying and financing process with this online step-by-step reference.
1. Choosing Home Ownership
Purchase Contract
A purchase contract or purchase agreement, is a signed agreement between the buyer and seller describing all the terms of the transaction.
Homeownership is about security and comfort. The sense of community that comes with putting down roots in a place of your own, the security of owning the roof over your head, accompany the choice to become a homeowner. But buying a home is also the single largest investment most people ever make. Along with all the benefits of homeownership comes the responsibility to manage that investment wisely.
The Benefits of Homeownership
The rewards of owning your own home include many benefits unavailable to renters. Among other things, homeownership allows you to:
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Start building wealth: Making a mortgage payment every month builds up your equity stake in your home, contributing to your long-term savings and helping you solidify your financial future.
- Build your credit history: Timely mortgage payments can contribute to a positive credit history.
- Eliminate landlord hassles: You will no longer have to fear rent increases.
Responsibilities of Homeownership
Before deciding to buy a home, consider the responsibilities that will accompany your purchase. You will most likely have to make some adjustments to account for the following:
- Additional financial responsibility: Whether buying is more costly than renting depends on your individual circumstances. You'll also be responsible for property taxes and homeowner's insurance in addition to your loan.
- Maintenance and repairs: Maintaining your property will be up to you, not the landlord.
- Less mobility: Moving when you own a home is more complicated since you are responsible for ensuring the mortgage gets paid.
- Depreciation: Real estate often increases in value over time, but not always. Owning a home means facing the risk that its value will depreciate.
Beyond the financial benefits, the personal rewards of homeownership can be tremendous as long as you prepare for the responsibilities that come along with it, and choose a home and a mortgage that is well-suited to your needs. National Bank Mortgage consultants can help you make the right decisions throughout the home financing process, so contact us today.
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2. Mortgage Basics
Although each individual home financing package has its own variety of features, the concept of a mortgage is really quite simple: a mortgage is a loan made to help you finance a home. Your lender advances you a certain amount of money, which you repay over a specified period.
Interest Rates & Loan Fees
The total cost of your mortgage is determined by the interest rate and loan and loan fees.
- Interest Rate refers to the percentage of your outstanding loan balance that you pay the lender each month as part of the cost of borrowing money. Your interest rate will be based on the current overall rate environment, as well as your financial profile and the specific features of your loan.
- Loan Fees are up-front charges to cover the cost of originating, processing, and closing your loan, among other things.
Your Monthly Mortgage Payment
Mortgage payments can generally be divided into two parts: principal and interest.
- Principal refers to the amount of money you borrow to buy a home and to the outstanding loan balance at any point during the mortgage term.
- Interest is the cost of borrowing money. As noted above, the amount of interest you pay each month is determined by your interest rate.
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3. Choosing National Bank
At National Bank, our Mortgage specialists are fully equipped with experience and a wealth of knowledge to assist you with your borrowing needs. National makes it easy to buy or build a new home. Our home mortgage rates are very attractive. National Bank lends 100% cost of constructing or renovating your home for amounts up to $270,000; and for mortgages greater than $270,000 your input can be as low as 5%. Our interest rates start as low as 8% per annum and are calculated on the reducing balance. Repayment terms are up to 30 years.
Choosing a Home
One of the most important parts of the home buying process is finding the right home for you and your family. After all, you will probably be living there for years to come, so it should be a place where you will be happy.
Envisioning Your Home
The first step is deciding what is most important to you in a home, and then trying to find the one that comes closest to what you've envisioned. Here are some basic points to keep in mind during your search:
- Location. Where your home is located can be just as important as what it looks like or how big it is. Do you need to be in a particular neighbourhood, or close to a job, bus route, or day-care facility? Remember, even the perfect home will not seem so perfect later on if you are not happy with the surrounding neighbourhood.
- Size and special features. Before you start your search, sit down with your family and make a “wish list” of all the features and amenities you want in your new home. How many bedrooms and baths do you need? Make sure you distinguish your “wants” from your “needs.” Rank each item according to its importance, and look for a home with the most important features first. Even if you have to do without some of the items on your wish list, your home should be a place where you can be comfortable – you should not have to settle for a place that isn’t right for you. Educate yourself, think about your options, and take the time you need to make the right choice.
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4. Building a Home
The decision to build suggests that you have already determined where you would like to build and you have already purchased the land. You have thought about this long and hard and you have a good idea as to what you want.
- The architect: - Having decided what you want you need to select a qualified architect to draw your plans.
- Get referrals from friends and family to find out whether they were pleased with the plans.
- Look at the prospect work first hand by viewing completed projects to before selecting your architect.
- The Plan: - The complexity of the design should influence the decision to use an architect.
- The plan can cost up to 6% of the cost of the home or structure; the cost varies widely.
- Once the plan is completed, it must be approved by the Building Board.
- The Estimates: - These are essential to determine how much to borrow. The estimated cost of construction may be prepared by a quantities surveyor or a contractor.
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5. Purchasing a Home
Once you have found a home you want to buy, you will need to negotiate a price with the seller and agree to a purchase contract.
Making an Offer
Unlike many major purchases which have a specific price tag, homes sell for whatever amount the buyer and seller negotiate. Your real estate agent or legal counsel should help you determine the best amount for your initial offer. When you make the offer, keep these things in mind:
- Put it in writing. All negotiations should be handled in writing – not verbally – to ensure that there is a clear understanding between the parties. If you must negotiate verbally, at least follow up in writing.
- Be prepared to submit an earnest money deposit (also called a “good faith” deposit) to show your commitment to the transaction (usually 10% of the purchase price).
The Contract
The purchase contract/agreement is a signed agreement between the buyer and seller describing all the terms of the transaction. Like other contracts, this document represents a legally binding agreement, so approach it with care. An attorney or real estate agent may help negotiate and draft the contract. Purchase agreements typically include these items:
- The home address and legal description of the property.
- The sales price and down payment.
- The names of parties and their respective agents, brokers or attorneys.
- Any applicable time limits. These may apply to the buyer's acquisition of financing, the seller's response to the offer, the closing, or the transition of occupancy.
- Any conditions or contingencies that must be met in order to complete the transaction. For example, the contract may be contingent on the buyer's ability to a mortgage or the home being appraised at a certain value.
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Bank Cards
Your bank cards are very important financial instruments. Learn how to maximize their potential and prevent unauthorized use.
1. Debit vs Credit Cards
Is it better to use a debit or credit card to pay for purchases? Many people have both types of cards but are not sure which is better and what benefits there are for each. Take a closer look at both.
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Debit cards pull funds directly from your bank account so it has a built–in limit on spending.
– You can only spend as much money as is in your account. This can be good for people on a budget, or impulsive shoppers.
- When you use a debit card, the payment is made immediately, eliminating any interest payments and late charges as might be incurred with the use of a credit card.
– You don’t have to worry about remembering to make the payment and due dates.
- Using your debit card means items paid for are paid in full.
– If you use a credit card, when you get the statement for the purchase you have the option of not paying the entire balance, This is often a temptation and keeps you paying for months for one purchase incurring monthly interest and other fees. Carrying a balance for long periods of time eats up a lot of money that could have been used for something else or put into a high interest savings account.
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2. Protecting Your Card and Personal Information
To protect your card from theft and unauthorized use:
- Keep your card in a safe place to avoid damage.
- Memorize your Personal Identification Number (PIN). Never write the PIN down on anything in your wallet or on the card itself.
- Immediately report a lost or stolen card to your financial institution.
- To help guard against fraud, keep your ATM receipts until you check them against your monthly statement.
- Observe your surroundings before using an ATM. If the machine is obstructed from view or poorly lit, visit another ATM.
- Take a friend with you – especially at night.
- Have your card out and ready to use.
- Shield the screen and keyboard so anyone waiting to use the ATM cannot see you enter your PIN or transaction amount.
- Put your cash, card and receipt away immediately. Count your money later, and always keep your receipt.
- If you see anyone or anything suspicious, cancel your transaction and leave immediately. If anyone follows you after making a transaction, go to a crowded, well–lit area and call the police.
- When using an enclosed ATM that requires your card to open the door, avoid letting strangers follow you inside.
- Do not leave your car unlocked or engine running when you get out to use an ATM.
- Check with your financial institution to determine what the daily limit of funds that can be withdrawn from your account is.
Protecting your username, password and pin number.
- Never disclose you Login Name, Password/PIN Number to anyone, including your family members. Most of the online banking fraud cases result from a “it wont happen to me” attitude. Be mindful
- Ensure that nobody is observing you when you perform financial transactions at a public Internet access point. A fair number of cases have been reported where the customer’s account access data was obtained by just observing transactions performed at public Internet locations.
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3. Safety tips when using your Visa Debit/ Prepaid Card abroad
Your Bank cards are a safe and easy way for you to pay when traveling abroad.
Before you leave:
- Check the expiry date on your Visa debit card.
- Make sure you have enough funds in your account.
- Note that our customer service centre telephone number is on the back of the card if you need to contact us while abroad.
- For fraud reasons, call the customer service team and let them know the dates you are travelling.
When you arrive at your destination:
- Try not to keep cards and cash in the same place – that way you won't lose everything.
- When you pay with your Visa card, check the information on the sales voucher before you sign or enter your Personal Identification Number (PIN).
- Use safety deposit boxes or room safes in hotels.
- Keep a copy of all sales receipts and check them against your statement.
- Memorise your PIN if you plan to get local currency from an ATM – and make sure nobody can overlook you when you are withdrawing money.
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4. Saving money with your Prepaid Card
The tendency to overspend or to make impulsive purchases is much higher with a credit card than with a prepaid card. You are much more cautious with spending when you have to use your own funds. Of course the prepaid card can also be used at ATMs and online for your convenience.
- The prepaid card guards against paying overdraft fees and is useful when saving money as a channel to control spending.
- The only cost involved in using a prepaid card is the purchase of the card itself.
- Credit card companies charge fees on credit cards in the form of late payment fees and interest rates. Prepaid cards use the cardholders won funds and is not taxed with interest payments.
- The prepaid card is reloadable as often as desired.
- Prepaid card transactions can be monitored online so you can keep track of your finances and purchases.
- No chance of account going overdrawn and incurring fees because you do not need an account to have a card. You spend whatever sum is on the card.
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