(Disclaimer, I am not an expert on this! This post is solely based on our own experiences, talk to Real Estate Agents, Banks, Lawyers, Mortgage Brokers etc. for information and advice specific for your needs.)
Part 3: The Close
Or the period where you spend all your money and sign a lot of papers.
In the last post we had our offer accepted and we had BOUGHT A HOUSE! Immediately after signing the offer, things started rolling.
For the deposit, within 24 hours of our offer being accepted we had to drop off a certified cheque for 5% of the purchase price. Luckily we were expecting this, so we had that money in “cash”, not stuck in TFSAs or RRSPs. I can imagine though this may be a surprise to some people, so it is good to note. We both went to our banks and took out half the deposit each (note to bring an ID). Our realtor, Rory was great and he ran around the city to our work places to pick up the cheques and drop them off with the seller’s agent. Lesson Learned, the first chunk of money is hard to part with.
Next came collecting the rest of the down payment from the various accounts. First of all, be careful with work retirement savings accounts. As much as they are great, I learned the hard way that not all of it can be accessed until you leave the company, so a large chuck of savings I thought I could use are actually “locked” in. That wasn’t a fun surprise. Lesson learned would be to call the work savings plan company earlier in the process to get an idea of how withdrawals can be made.
Same to be said with any RRSPs. Under the Canadian Home Buyer Plan, up to 25K can be withdrawn for a home purchase. Things to note are that you need to fill out and submit this form, and only money deposited 90 days before the withdrawal can be taken out. Also important to note is that this is a “loan” to yourself and the money has to be paid back in over the next 15 years, starting 2 years from the withdrawal, so we had to make sure our budget still had room for RRSP savings. I worked with the RRSP accounts to determine the best day to withdraw the money to maximize the withdrawal.
I was a little OCD with this and tracked every penny as it moved from one account to another, and was constantly running numbers to make sure we would have enough on August 29th to pay the down payment and all the closing costs, and still be able to buy groceries (spoiler alert, we were totally fine, but I still lost sleep over it).
During this time we worked less with realtor and more with the Mortgage broker. We had to prove that we had the full down payment amount in our account, and get her all the paper work. Even though we were pre approved, more documentation was needed, but it wasn’t too bad. At this point we knew our rate and our monthly payment and could double (quadruple) check our monthly expenses. I won’t get into how to get the best rate, or the difference between all the mortgages/terms are, because a lot of way better websites do that...like this one. Once again for us it just meant reading through it, asking questions, and then making a decision that suited our lives.
Our mortgage provider didn’t require an appraisal, but keep that in mind if you have no conditions on financing, the bank might not agree on the value of the house, and may not finance the entire mortgage. Something to consider if we had gone way over value for the house (note that over asking, does not necessarily mean over value.), so we made sure our house was of good value comparable to the others in the neighborhood.
We got our lawyer as he was referenced by our realtor, and because he specialized in real estate law and was located conveniently. We were bad and didn’t get a quote, but trusted our realtor. Everything worked out fine, but lesson learned would be to get a quote first. The lawyer basically takes care of collecting the down payment, land transfer tax, and other fees and in turn gives you the keys to the house. More details here about what the lawyer does. The lawyer also requires proof of home insurance, and mortgage info.
A few days before closing the lawyer sent us the expenses, and we went to the bank and got a certified cheque of the remainder of the down payment and closing costs. Our estimated closing costs were between 1-2%, and it was around the 1% in reality (we didn’t have CHMC insurance, and we didn’t buy a new construction home so there may be additional taxes on top of that for other buyers), so keep that in mind when buying the house. It depends on the complexity of the deal.
We met with our lawyer the day before closing to sign all the paper work (we had to consider things like Joint Holding Tenants vs Tenancy in Common). The lawyer also sent the information to the city for the transfer of utilities and property tax, but not all lawyers do (note that a transfer fee is applied on the first bill).
Home insurance- this needs to be done before the documents are signed at the lawyers office, we did it the same week as closing, but we should have/could have done it right after the offer was approved.
Life insurance- we are getting this vs Mortgage insurance (that protects the bank, life insurance protects each other), Life insurance takes a while to be processed, and we forgot to double check our work plans so we had a few steps back before we got everything finalized. Lesson learned, I would have started this process right after we had our offer accepted.
Utilities- As mentioned the Toronto stuff should automatically be transferred but check with your lawyer, the fee is 51 dollars if both are transferred at once. A good suggestion was to check the water meter on the day of possession.
Power- Luckily for us we were just transferring from one address to another with Toronto Hydro, so it was very easy (a few clicks on a website).
Gas- Since we are a new account, we need to pay the deposit, and set up an account for them to transfer the meter over. A good suggestion was to check the reading on the day you take possession to make sure you are charged correctly.
Viewings- We had agreed on 2 viewings of the house before closing, but only really needed one due to the short closing time, so we went with our realtor 2 days before closing to make sure everything was ok.
(Don’t forget about the more optional utilities such as phone/cable/internet, and all the other moving stuff such as change of address etc. perhaps I’ll do a moving post at some point!).
After all that commotion, we finally had our house!! YAY! We are currently moved in and unpacking, and getting settled into the new routine and ever growing to do list of home ownership!
If I have forgotten anything about the process please add in comments below!!