What to think about when buying a property

For many Canadians purchasing a home is the biggest investment they will ever make. In fact, the majority of most Canadians’ wealth is tied up in the equity of their homes. One of the advantages of owning a home is that the gains are tax free under most circumstances. There are many things to think about when purchasing a property.

Firstly, look for a good, qualified real estate agent. One who knows the neighborhood you are interested in and comes well referred. Do not be shy to check for references. A good real estate agent makes all the difference in the world.

It is important to understand how mortgages work. Talk to several financial institutions and/or a qualified mortgage broker. Pay attention to mortgage ratios ( the ratio of your total mortgage payment to your total income). Do not forget to factor in your debt load. Remember to get preapproved before you purchase. The process is quick and easy and facilitates the sale. Make sure you are aware of your financial details. Understand the impact of your credit history. Create a budget that incorporates your mortgage expense plus any other unforeseen expenses which may arise including your existing financial commitments.

Have a series of questions ready regarding the property you wish to purchase. Verify what similar properties have sold for in your neighborhood of choice. There are many resources online that can provide these types of information to you. Once you find a property that you feel is acceptable to you, determine what your offer will be. Be prepared to negotiate and try not to go over budget. Purchasing a property can be a very emotional time. Seek counsel from others that you trust.

For non-residential property or for rental or commercial properties one must be aware of the impact on disposition that capital gains may trigger. In addition, there may be recapture of depreciation which will add significantly to the amount of tax that must be remitted on disposition. One is best advised to speak to their accountant or tax professional in order to clearly understand if this investment is suitable for their situation.

Finally, it is recommended to insure the mortgage so that in the event of sickness or death the obligation to the lender is taken care of. There are many ways to procure this insurance, either through financial institutions or through simple term life insurance which offer guaranteed rates of 10 20 or 30 years.

There are many advantages to purchasing the insurance with an independent life insurance broker:

• You choose the beneficiary.

• The premium does not change for the term of the insurance.

• If you elect to refinance your mortgage with another institution, your insurance is portable and there is no need to reapply.

• Policies are available that insure well beyond the age of 70.

• The amount of the insurance will never decrease.