ODSP real estate

10 Steps For ODSP Receipents To Own A Home

Owning a home is one of the common financial goals for many Canadians. For people who are receiving the benefits from the Ontario Disability Support Program (ODSP), purchasing a property as their primary residence could involved more complex planning. The ODSP has many specific rules, without careful planning in advance, making any financial move could potentially affect one’s eligibility in receiving the benefits. In our business practice, we have the privilege in work with many ODSP recipients. Below are 10 steps you could discuss with your case worker when it comes to purchasing a home.

  1. Find out your needs

    • Before searching for a property, it is important to understand your own personal needs first. Just because a property is good for someone else, it does not necessarily fit into your needs. Consider the following questions:
      • How many people will be living in this property?
      • How many rooms and bathrooms will be needed?
      • Will you be driving?
        • If so, how many parking spots will you need?
        • If not, is the property being closed by public transit important to you?
      • How much travelling time do you expect from home to work?
      • Can the surrounding facilities accommodate to your needs? (i.e: school, supermarkets, medical clinic, restaurants, gym)
  2. Preliminary research of the properties

    • Now you have some understanding of your personal needs, it is time to do some preliminary research about the price range of property that fit into your categories. To do so, visit: Realtor.ca, This is a website where it contains thousands of real estate listings across Canada. It allows you to refine your search by entering the postal code of the area, number of bedrooms, number of bathrooms, type of property (i.e.: condo/townhouse/house), freehold or not, your desired price range. One of the features I like is their demographics statistics, as it shows many important details which could give you a better understanding of the specific property’s neighborhood. For example, it could show the population size, median age, average household size, average household income, households with/without Children , number of households, the percentage of not in the labor force
  3. Choose your mortgage agent carefully

    • Mortgage could be one of the biggest financial responsibility for many Canadians, therefore, it is extremely important to work with a licensed mortgage agent who could give you professional and unbiased advice. Consider working with an individual mortgage agent who:
      • Has access to wide range of mortgage solutions from different lenders.
      • Represents the client and not the mortgage lenders
    • Experienced mortgage agent tend to specialize their business practice in servicing a particular niche of clients. For example, some would service self-employed business owners, while some focus on working with new immigrants. Therefore, it would be a huge value added if the mortgage agent has wealth of experience in servicing clients who are receiving ODSP.
  4. What are the costs involved?

    • When purchasing a property, there will be different costs involved. For example, the legal fees, appraisal fees, taxes, and others. Typically speaking, many mortgage lenders would require that their borrower have saved for at least 1.5% of the property purchasing price for the closing costs.
    • Before you purchase the property, find out will there be any upcoming major repair that needs to be done to the property in the near future. An experienced home inspector could give you a review about the condition of the property. It is important to count for other ongoing expenses after you purchase the property. For instances, utilities, condo fees, property tax, repair costs, parking lot rental fees.
  5. Review your mortgage options

    • Discuss with your mortgage agent that according to your current financial situation, will you be qualified for to obtain mortgage with “A-lenders”, “B-lenders” or “Private lenders”. Each lender would provide their own terms and conditions, while their underwriting guidelines could be different from one another. For instance, some lender could accept ODSP benefit as a source of income, while some might not even consider it. When reviewing your mortgage options, below are some items which should be put into consideration:
      • What is the term of the mortgage?
      • What is the amortization schedule?
      • What is the interest rate? Is this a fixed or variable term?
      • What is the prepayment privilege? and early repayment penalty?
      • Can this mortgage be portable to another property?
      • Will there be any reimbursement to help with your closing costs?
      • How much down payment does the mortgage lender require?
      • Will you be able to save for the mortgage insurance if you put a bigger down payment?
  6. Save for down payment

    • At this stage, you should have a pretty good idea of the amount of down payment you will need to purchase your property. The question is how should you save for the down payment which could minimize the impact to your ODSP benefits. According to the Ontario Ministry of Community and Social Services, each ODSP recipients would have a limit of assets they could own. “There are limits to the amount of non-exempt assets you can have and still remain eligible:
      • for a single person, the limit is $5,000
      • for a person with a spouse, the limit is $7,500
    • Although the Registered Disability Savings Plan (RDSP) is exempted from the ODSP calculation, due to the claw back rules of the Canada Disability Savings Grants and Bonds, in many instances, this might not be a suitable vehicle to save for the down payment. On the other hand, “Under the Ontario Disability Support Program, life insurance includes:
      • annuities
      • deferred annuities and
      • segregated funds.

      For you and each family member, up to $100,000 of the cash surrender value of a life insurance policy is exempt as an asset under the Ontario Disability Support Program. This means it does not affect your eligibility for Income Support.” Quote from http://www.mcss.gov.on.ca/en/mcss/programs/social/odsp/income_support/odsp_life.aspx

      Therefore, one could consider accumulating their savings as down payment with a segregated fund policy

  7. Work with a professional realtor to find your home

    • In step 2, you had already done some preliminary research about the type of home you are pursuing for. Now, it’s the time to get some advice from a professional realtor. When choosing a realtor, consider working with someone who is specializing in their business in the specific areas that you are interested in. This realtor should know the neighborhoods inside out, and able to provide you unbiased advice. It is important to work with a realtor who are willing to spend time in showing you different properties with patient, and not rush you into making quick decision into purchasing. However, as a client, you should also respect their time. Stick with the plan, do not procrastinate, do not indecisive, or else, it would be extremely difficult for others to service you.
  8. Make an offer

    • After seeing a number of property showing, hopefully, you will end up landing at a property that you can envision to be your future home, while the price is within your acceptable range. At this time, you should discuss with your realtor in placing a purchase offer. Typically speaking, a deposit is required at the time when placing a purchase offer, the agreement will also state the purchase price, closing date, and other terms and conditions. Depending on the flexibility of the seller, it is advised that the buyer to include the clauses where the purchase offer is subjected to inspection and satisfactory financing. However, this should be discussed in details with your realtor as every situation could be varied.
  9. Go through the process in getting a mortgage

    • Once your purchase offer is accepted by seller, you should inform your mortgage agent asap, so that he/she can start working on your mortgage application. If the closing date of this purchase is within the next 120 days, depending on the underwriting, your mortgage agent might be able to obtain the commitment documents from the mortgage lenders. An experienced mortgage agent should be able to guide you during every step of the process.
  10. Go through the closing documents with your lawyer

    • After all the documentation required by the mortgage lender have been fulfilled, the last step is to go through the closing documents with your lawyer. When hiring a lawyer for your real estate transaction, do not just choose one simply because he/she is charging the lowest fee. Hire one that is trustworthy, easy to get a hold of, and will review your purchasing contract thoroughly with you. Your realtor or mortgage agent might be able to provide you with some recommendation, as many of them also deal with real estate lawyers on a regularly basis.

As you could see, there could be many entitles and consideration involved during the process. As a value-added services to our clients, not only we can assist our clients in accumulating for their down payments and working on their mortgage, we are happy to discuss this home purchase planning with other professionals such as your lawyer, and ODSP case worker, in attempt to this transaction to be done in the best interest of your overall financial well-being.

 

Disclaimer: This post is for general understanding only, should not be construed to be legal/mortgage/financial/tax advice, as everyone’s situation is different. Please always consult with your ODSP case worker/legal/mortgage/financial/tax advisor before making any decisions. The property purchase mentioned above is only meant for primary residence. The details being discussed are subjected to change without any notice. Although we tried our best to provide the information to the best of our knowledge, they are not guaranteed to be error-free. Image courtesy of nenetus at FreeDigitalPhotos.net

 

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