Chances are, you're not the first person to ask! Take a look at answers to some of our more frequently asked questions.
To determine 'affordability, you will need first to know a few things. First, you should know what your taxable income is, along with the amount of any outstanding debt and monthly payments. If it is your principal residence that you are purchasing, calculate 32% of your income for use toward a mortgage payment and property taxes. After this, calculate 40% of your taxable income and subtract all of your monthly debt payments. The smaller of the calculation assists in determining how much of your income can be used towards housing payments. As well as examining what the ratios say you can afford, calculate how much you believe you can afford. If your payment amount is less than 32%, you potentially will want to settle for the lower amount instead of stretching yourself financially. Ensure that you structure your payments to afford still simple everyday things instead of ending up house poor.
A home inspection is an assessment of a property, which assists in ascertaining the state of the home. The inspector should check all crucial components during the process, such as the foundation, roof, electrical, drainage, and exterior weatherproofing. After the inspection is finalized, the inspector will provide a written report that lists all the house's details. Having a home inspection completed before you purchase a house can put your mind at ease. It helps to eliminate possibilities of damage or any serious issues with the house. The inspection will also help you determine the risk level that the house is in and if any maintenance needs to be complete.
To purchase a home, you need a minimum down payment of 5%. You also must prove that you can cover any additional fees involved in the closing. Some costs can range from an appraisal to legal fees. No matter how large your down payment is, 5% of the down payment needs to be your money. This money can come from your bank account, or it could be a gift from a family member. Most lenders will accept a gift from a family member as long as it is accompanied by a letter that proves that it was a gift. If your mortgage loan is with Canada Mortgage and Housing Corporation, the gift money must be in your ownership before the application is sent in for approval. You must have mortgage loan insurance if you have less than 20% down for your mortgage.
Mortgage loan insurance is a type of insurance provided by Canada Mortgage and Housing Corporation and GE Capital Mortgage Insurance Company. It is vital to have this insurance to insure lenders against default on mortgages with a loan to value ratio greater than 80%. There are insurance premiums, which range from .50% to 3.75%. The borrower pays for this, and it can be added directly to the mortgage amount. Keep in mind, though, that this is not the same as mortgage life insurance.
A conventional mortgage is where the down payment equals 80% or more of the purchase price. It also can be when a loan to value is less than 80% and does not require mortgage loan insurance.
Depending on the circumstances of your bankruptcy, some lenders will consider providing mortgage financing. When you have a mortgage broker to assist you, you are more likely to get a mortgage loan. Lenders will want to see that you have cleared your significant debts and have saved up for your mortgage.
When you pay child support to another person, the amount paid out is usually subtracted from your total income before they determine the size of the mortgage you can qualify for. When you receive child support from someone, the amount paid usually will be added to your total income amount before estimating the size of mortgage that you will qualify for. Of course, you need to provide valid proof of regular receipts for your lender to qualify you.
Subject to qualification, yes. Purchasers who even have 5% down could qualify to buy a home and make enhancements to it. When it comes to high-ratio financing, Canada Mortgage and Housing Corporation and GE Capital mortgages are accessible to cover the purchase price. They also will cover the costs involved in making any needed renovations to the property. Having this option would remove the need to finance these two areas at different times. The mortgage loan insurance premium will be unchanged from the standard schedule when cosmetic improvements are made. However, where the modifications are considered systemic, the mortgage loan insurance premium will increase by .50% over the standard plan.
In most cases, lenders will accept down payment funds that are a gift from family. However, a gift letter signed by the donor will be required to confirm that the funds are a gift. A company such as Canada mortgage and housing corporation will need the gift money in the purchaser's ownership prior to the application being sent to them for approval. With GE Capital, which provides mortgage loan insurance, this is not needed.
A pre-approved mortgage offers a guaranteed interest rate from a lender for a set period of time and money. The lender calculates the pre-approval from the information that you provide them with. Before the mortgage is finalized, there will be some conditions that need to be met. Usual conditions include employment and income confirmation, along with a down payment from your resources. Successful real estate professionals want to ensure you have a pre-approved mortgage in place before them taking you to look for a home. They do this to make sure that they present you with properties that fit your affordable price range. Overall, a pre-approved mortgage is one of the first steps a home buyer should make before starting their buying process.
Frequently, lenders will assure you of an interest rate up to 120 days before your mortgage maturing. As long as you keep your mortgage at the same amount, they will also cover the costs of transferring your mortgage. Having the rate promised well before your maturity date eliminates any worries of receiving a higher rate. If rates do drop before your maturity date, the lender will typically lower your interest rate. To inform existing clients of interest rates, lenders will usually send them their mortgage renewal notices. Unfortunately, the rate you are being offered may not be the best one for you. Always speak with the lender to see if there is the possibility of a lower interest rate. If you don't bring this forward to your lender, you could end up paying much more on your mortgage than is necessary.
Very few home buyers have the necessary cash available to buy a home outright in today's society. Instead, most buyers will get a mortgage from a financial institution. Yet even though you have a mortgage, you still need to save money for a down payment. A down payment is the amount of the purchase price that you pay yourself. The amount of the down payment (which represents your financial value) should be defined before house hunting. The more money you have for your down payment, the less your home will cost in the long run. When you have a smaller mortgage, interest costs can be much lower, saving you a significant sum over some time.
Many lenders now offer insured mortgages for new and resale homes, with lower down payment requirements. These down payments can be as low as 5%, much lower than a conventional mortgage. When having a low down payment, though, the mortgage must be insured to cover any potential default of payment. This will involve carrying costs and an insurance premium, making it higher than a conventional mortgage. With low down payment insured mortgages, the buyer is responsible for: : an appraisal, with legal fees : an application fee for insurance : the amount of the premium (if applicable to the mortgage) : the payment of the insurance premium.
There are many ways to reduce your mortgage by several years. Some ways to do so can include: : Selecting a bi-weekly or accelerated payment : Increasing your payment frequency period : Selecting a shorter amortization at renewal : Making Double-Up Payments
Around 50% of first-time homebuyers today use their Registered Retirement Savings Plan savings to help them to finance a down payment. As a first-time homebuyer, the Home Buyers Plan can allow you to take out money from your RRSP tax-free to create your down payment. If you are a home buyer, the big question that you must be thinking about is how much can you withdraw? You are permitted to withdraw a maximum of $25,000 from your RRSP. If you purchase the house with a second person, each person on the deal can withdraw $25,000. No tax will be included in the amount that you withdraw. Another question that may arise for you is, what is the payback period? The simple answer is that you must pay back the money to your RRSP two years after your home purchase.
You first need to ensure that you have sufficient funds for a down payment. The down payment is a part of the purchase price, which needs to be money that is in your possession. You will require a down payment of at least 20% to qualify for a conventional mortgage. However, if you have a down payment as low as 5%, you can be eligible for a low down payment insured mortgage. After having your down payment saved, you will require money for the closing costs. There also will be an inspection fee if you want a professional inspector to have the home inspected. The inspection can inform you of any repairs that will need to be made and assure you that the house is structurally safe. Ensure that the inspector provides a written report for the record. Another significant fee involved is for the lawyer, who is acting for you on your purchase. Before you settle with just any lawyer, make sure that you check their services and prices. You want to ensure that you go with someone who will meet your needs and be at a price you can afford. Finally, you will be required to have property insurance in place by the closing date. There are also closing costs, which are paid on your closing day. As a homebuyer, you will be responsible for the moving expenses. Remember, there will be all kinds of things you'll have to purchase early on - appliances, garden tools, cleaning materials, etc. So factor these expenses into your initial costs. You must remember to factor other purchases into your initial cost (such as appliances, new furniture, and other house necessities).
The length of any mortgage term can vary for every homebuyer. It can range anywhere from six months up to ten years. It is essential to keep in mind that the shorter the term, the lower the interest rate. This principle is also the same with a longer-term, as the longer your term, the higher the rate. Most homebuyers choose to have a five-year term, yet you can undoubtedly have the option to consider a short-term mortgage. If you can handle risk more quickly and are not ready for a long-term commitment, it could be a good option for you. To ensure that you wisely choose a term, consider the following questions: 1. Are you willing to follow interest rates closely? If so, a short mortgage term may best suit your needs. 2. Are you looking for certainty as a first-time homebuyer? Then you most likely will prefer a longer mortgage term to sufficiently manage your mortgage payments. 3. Are you planning to sell your house in the short term without buying another? If you are, a short mortgage term may be the best option. 4. Do you feel that interest rates are not going to drop anytime soon? If so, a long mortgage term may be the right choice for you.
As a homeowner, you certainly will have financial responsibilities. Such responsibilities will include taxes, which are usually not billed monthly like other expenses. Below you can locate a list of main costs. Mortgage Payment This is usually the most significant expense for most home buyers. But, of course, every mortgage will be different, some higher or lower. In addition, the term and amortization can affect the payment amount every pay period for a home buyer. Property Taxes Everyone is required to pay their property taxes. They can be paid in two ways, either sent directly to the municipality by you or paid as part of your monthly mortgage payment. If you pay the first way, you may be required to show proof of payment to your financial institution. School Taxes In some municipalities, school taxes are integrated into property taxes. They are collected alone as one single lump sum, usually due at the end of the school year. Utilities As a homeowner, you'll be responsible for all utility bills, including heating, gas, electricity, water, telephone, and cable. Maintenance You will also have to cover the cost of electrical, plumbing, lawn, and repairs. When a property is maintained, it helps to preserve the home's market value. This can untimatley enhance the neighbourhood, and potentially add worth to the property.
If you consider what term to go with for your mortgage, consider the following points on a shorter and longer-term. A longer-term mortgage is a good option if you are busy and cannot keep up with current mortgage rates. Yet terms that are 4, 5, and 7-year allow you to take advantage of current rates while still having long-term security with your rate. If you can keep your mortgage flexible, it would be in your interest to explore a shorter-term mortgage. This would allow you to take advantage of lower rates and save quite a bit.
A fixed interest rate for a mortgage is a rate that is set for a pre-determined term. This term is typically between 6 months to 25 years. A fixed interest rate provides the security of knowing what you will be paying for your entire term.
A variable rate for a mortgage is when your rate fluctuates with the primary rate of your lender. This means that it can either go up or down during the term of your mortgage. If the interest rate goes down, a larger payment goes towards reducing the principal. If the rate goes up, a more significant portion of the monthly fee covers the interest. With a variable rate, you can make a prepayment of any amount (with certain minimums) on any payment date.