Buying a home is a big financial commitment, and many Canadian renters are still sitting on the white picket fence when it comes to homeownership. They're renting now, but maybe they could be in a home of their own.
Here are some questions buyers might be asking themselves...
Q. How much house could my rent buy?
A. If you're paying $950 in rent each month, you could be carrying a mortgage of $198,000. If you're paying $1,200, that's potentially a mortgage of $250,000! How are the mortgage payments so affordable? Firstly, right now we're benefiting from historically low mortgage rates. Secondly, we still have 30 year amortization mortgages that lower your monthly mortgage payments. (These examples are based on: a 4.04*% rate and 30-year amortization. Note that: you would need a 5% down payment and we would also calculate a 2.95% mortgage insurance premium into your mortgage).
Q. What is this mortgage insurance premium for?
A. This insurance premium is a mortgage loan insurance 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.
Q. Can I really buy a house with little money down?
A. You can buy a home with 5% down and use some of the flexible options to obtain the downpayment, for example, from gifts, through borrowing or cash-back incentives.
Q. If I'm self-employed, do I have to prove my income to get a mortgage?
A. No, not in today's mortgage world. You can now qualify based on the income that you say... "stated income". The lender takes into account the income you state, and not the income you can prove. The income should be reasonable, of course, and the lender may want proof of your self-employment by way of NOA's (Notice of Assessments: the form you would receive back from Revenue Canada after completing and submitting your taxes) and T1 Generals (T1's are documents that summarize your business costs and expenses usually prepared by your accountant) and the lender may require up to 10% down. If you don't want to state your income, you can also qualify on the strength of a strong credit history, rather than on your income. You'll need a good credit score and proof that you've been self employed for at least two years.
Q. Are there extra costs to consider?
A. Yes, you need to consider land transfer tax, property taxes, legal fees, the cost of utilities, furnishings for the home, and any needed repairs. If you're concerned with these extra costs, cash-back mortgages can offer some needed up-front cash.
Q. Where do I start?
A. Talk to a mortgage broker. Why? A mortgage broker deals with several lending institutions, including major banks, credit unions, trusts and other national and regional lenders, which means they can put significant negotiating power behind finding the best mortgage to fit your specific situation. This service costs you nothing (oac). Instead, the lender selected pays compensation for the services and solution provided. And since a mortgage broker's business is built primarily through referrals from satisfied customers, your positive mortgage experience is essential!
Ensure you get off on the right foot in your home ownership journey! Talk to us today!
A purchase plus improvements mortgage allows homebuyers to roll immediate renovation costs into their mortgage.
• A detailed list of improvements, including a copy of contracts outlining the scope of the work and cost estimates is required.
• An appraisal with two separate values will be required: current value of the property "as is" and the estimated value of the property once the improvements are completed.
• Lender will lend based on the improved value as confirmed by the appraiser.
• The entire committed amount of the mortgage will be advanced to the solicitor.
• The solicitor will be instructed to holdback the cost of the improvements.
• All improvements must be completed within 90 days or the funds will be recalled and applied back to the mortgage.
• Once an inspection from an appraiser confirms ALL work is complete and a copy of the building permit (if applicable) has been received, the balance will be released.
EXAMPLE: Purchase price: $300,000
Improvements: $20,000
Total mortgage: $304,000 (95% of $320,000)
$284,000 will be released on closing date. $20,000 will be released upon completion of improvements i.e. improvements are 100% complete and a final inspection has taken place. OAC
Plan for closing costs. There are additional costs that come with buying a home so you'll need to have some extra funds set aside to cover these costs. We will discuss all of these for you so you won't be caught by surprise.
A mortgage designed for you. We will help you decide what kind of mortgage is suited for you. Fixed versus variable, your term, amortization length, etc. There are many options available and we have the answers.
Getting professional mortgage advice is a great place to start. We specialize in the kind of homebuyer education that can help get new homebuyers off on the right foot in their home ownership journey! Talk to us today!
