Real Estate Buying FAQ

Read the Real Estate Buying FAQ to find out about buying a property. Key points you need to be aware of before making any decisions on the purchase of a home.

Should I buy or sell first?

If you sell your house first, you are typically under time pressure to buy another house in a short time period. So you may end up buying something which would not satisfy your needs or you may be overpaying for what you are looking for.

If you buy first before selling, you will have to sell your old house in a short time period to come up with down payment. There is no quick formula this topic. It depends on if you are in buyers-market versus sellers-market that would make a big difference in term of numbers of houses available in the market. It is also important to find out if you can carry a bridge loan which could also create financial stress.

What is CMHC Insurance?

CMHC stands for Canada Mortgage and Housing Corporation. CMHC Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protect lenders against mortgage default, and enables consumers to purchase homes with a minimum down payment of 5% — with interest rates comparable to those with a 20% down payment.

To obtain mortgage loan insurance, lenders pay an insurance premium. Typically, your lender will pass this cost on to you

What is a Title Insurance?

When you purchase real estate, it is crucial that you obtain a property with clear ownership or “good title”. Title insurance can assist in ensuring that the quality of the legal title that you are purchasing is unproblematic thereby giving you peace of mind.

Title insurance can provide coverage for work orders which arise from the failure of previous owners to obtain proper permits. Title insurance can also cover a purchaser for issues that an up to date survey might reveal (such as encroachments of buildings over lot lines), access related problems, fraud, mortgages or other encumbrances affecting title and, in general, the unmarketability of title to the property.

Title insurance will not necessarily fix any issue that is discovered on title but will often protect an owner from financial loss for issues which may not be discoverable through regular investigations. Title insurance is a tool to be discussed with your lawyer to provide you added protection and peace of mind when purchasing real estate.

What is TARION?

As the regulator of Ontario’s new home building industry, Tarion registers new home builders and vendors, enrols new homes for warranty coverage, investigates illegal building practices, resolves warranty disputes between builders/vendors and homeowners, and promotes high standards of construction among Ontario’s new home builders. Tarion also works with the building industry to help educate new home buyers about their warranty rights, and about how to protect and maintain their warranty.

Tarion Warranty Corporation is a private corporation that was established in 1976 to protect the rights of new home buyers and regulate new home builders.

Tarion is responsible for administering the Ontario New Home Warranties Plan Act, which outlines the warranty protection that new home and condominium builders must provide, by law, to their customers.

The primary purpose of Tarion is to ensure that builders abide by this legislation, and to step in to protect consumers when builders fail to fulfill their warranty obligations

What is a Land Transfer Tax?

Buyers in Ontario will have to add Land Transfer Taxes to their closing costs. These taxes, levied on properties that are changing hands, are the responsibility of the buyer. Depending on where you live, taxes can range from a half a per cent to two per cent of the total value of the property.

Many provinces have multi-tiered taxation systems that can sometimes be difficult to understand. If you buy a property for $260,000 in Ontario, for example, .5 per cent is charged on the first $55,000, 1 per cent is charged on $55,000 – $250,000, while the $250,000 – $400,000 range is taxed at 1.5 per cent. Your total tax bill? $2,375.00.

The following information illustrates Land Transfer Taxes in Ontario:

  • Up to $55,000 X .5 % of total property value
  • From $55,000 to $250,000 X 1 % of total property value
  • From $250,000 to $400,000 X 1.5 % of total property value
  • From $400,000 up X 2 % of total property value

Go to the Toronto Real Estate Board Land Transfer Calculator.

How do I know that my deposit is safe?

When your deposit on a property is held by a registered real estate brokerage, the funds are placed in a special trust account. RECo provides a consumer deposit insurance program that offers protection in the event of fraud, insolvency or misappropriation of those funds by a brokerage.

In a mere posting scenario, make sure your deposit is held by your representative’s brokerage, because if you provide the deposit directly to the seller or an individual or organization that is not registered to trade in real estate, RECo’s insurance program can not protect you.

What is an assignment?

An assignment is essentially a sale of a contract or right to acquire property. An assignment is a transaction whereby the original purchaser (the “Assignor”) of a property sells, and thereby transfers, their interest and obligations under the original contract to a new purchaser (the “Assignee”). The Assignee will generally assume all of the Assignor’s duties and obligations under the original Agreement of Purchase and Sale. These rights and obligations are stated in the original Agreement of Purchase and Sale and include terms such as interest payments, taxes and maintenance fees during interim occupancy. Upon completion, the Assignee is granted the title to the real property and will incur all final closing costs.

Please check the Assignment FAQ page for more information.