Your Home's Equity

Equity is the amount of money you will have after the sale of

your home. To calculate equity, simply take the total sale

price and subtract all debts, liens, and charges against the

property which must be paid as part of the sale transaction.

While this seems very straightforward, it is usually difficult

to calculate your exact equity in advance because of the

uncertainty of factors including: the amount of mortgage

owing, the status of any mortgage owing, the status of any

mortgage tax account, the delay at the Land Titles Office, and

so on.

Typical Disbursements

These items are costs which the seller of a house must pay

but which, for reasons of convenience, the lawyer pays on

behalf of the seller at the appropriate time. GST is payable on

most disbursements.

Legal Fees:

The Manitoba Bar Association provides a suggested set of

legal fees for house sale transactions. The fees that will be

charged are dependent upon such factors as the complexity of

the transaction, whether there is a rush to process the

documents, seasonal delays, etc.

Our flat-rate for a basic residential home purchase

transaction is $675.00 plus G.S.T. & R.S.T .

Real Estate Commission:

The standard commission is 4% of the selling price, and this

must be paid by the seller's lawyer upon completion of the

transaction.

Personal Loans:

If your home has been used as collateral for a personal loan,

then the loan must be paid. As well as loans from utilities or

government agencies must be paid, as they cannot be

transferred to another property.

Water Accounts:

Water accounts must he paid to the date of possession, as

any unpaid water accounts are added to the property tax bill.

Outstanding accounts must be paid from the sale proceeds,

by our office.

Liens and Judgements:

Although these are not common, any liens against your

property resulting from a law suit or other legal proceeding

must be paid out before the sale is complete

Miscellaneous Disbursements:

These include the mortgage discharge fee payable to the Land

Titles Office, title investigation charges, and other fees such

as couriers, accounting fee, file fee, photocopies, faxes, file

management, file storage, postage and office supplies. These

charges usually fall or are around $300.00.

Property Taxes:

ou are responsible for the property taxes for the months that

you own your house. In all transactions, either the buyer or

the seller pays the annual tax bill. The party who paid the

taxes is then reimbursed by the other party by way of an

adjustment to the sale price.

If you have paid or will pay the tax bill prior to possession

date, then you will be reimbursed by the purchaser. The

reimbursement is done by having the sale price adjusted

upward. This will increase your equity.

If the tax bill is not paid as of possession date, the purchaser

will take over the responsibility for it and you will credit the

purchaser for your share by adjusting the sale price

downward. This will decrease your equity.

If you have been paying your taxes as part of your mortgage

payments, the tax portion of your payments will have been

placed in a separate savings account. The credit or debit in

this account will be applied to the balance owing on your

mortgage

Mortgage:

Any money owing on a mortgage will reduce your equity.

Don't forget to include any mortgage penalty and other

charges.

Unless your mortgage is at the end of the term or is an open

mortgage, you may have to pay a penalty to the lender to

have it discharged. The amount of the penalty is

predetermined by the lender. Also, there will be a discharge

fee to be paid to the lender. The average amount is $100.00.

The mortgage payments always cover the previous time

period. As a general rule, you must make mortgage payments

that fall due until title has issued.

Interest:

The question of interest arises often arises when there is a

delay in the processing of mortgage documents at the Land

Titles Office. During a delay, you will receive interest on the

proceeds of the sale at the mortgage rate of interest. At the

same time, you will pay interest on any mortgage on the

property and on any interim financing you may have.

Please Note: Fees are subject to change without notice.

The general information in this brochure and the examples

are for the purpose of illustration only. Various other factors

may come into play and affect the financial outcome of any

individual home sale. Please contact my office for details

regarding the sale of your home.

Example of a Sale

Information:

Possession Date: June 1

Price: $200,000.00

Mortgage: $150,000.00

(seller's existing to pay out, Interest rate is 5%)

Property Taxes $2,400.00

Interim Loan $10,000.00

(seller is buying a new home, borrows against equity at 7% interest)

Land Titles Delays 21 days

Calculations:

Sale Price: $200,000.00

Less:

Mortgage Owing: $150,000.00

Expenditures:

Legal Fee $ 675.00

Real Estate Commission 8,000.00

Final Water Billing 75.00

Misc. Disbursements 300.00

Tax and Title Searches 50.00

GST on * ($8,975.00) 448.75

RST on Legal Fee ($675) 54.00

Subtotal $ 9,602.75

Adjustments

Property taxes due June 30

(credit purchaser 5 months)

($2,400.00 ÷12 x 5) $1,000.00

Interest on the mortgage

$150,000.00 x 4% x 21/365 $ 345.21

Interest on interim loan (if applicable)

$10,000.00 x 7% x 21/365 $ 40.27

Combined Adjustments $1,385.48

Interest earned:

($200,000.00 - $3,000.00 deposit)

$197,000.00 x 4% x 21/365 ($453.37)

Subtotal Adjustments

($1,385.48 - $453.37) $932.11

Total payments to be made:

($150,000.00 + $9,548.75 + $932.11) $160,480.86

Net Equity:

($200,000.00 - $160,480.86) $39,519.14