FREQUENTY ASKED QUESTIONS
New To Canada fAQS
first you should consider what you want now and in the future. You need to know size requirements in terms of how many bedrooms you need, special features such as air condition, fireplace, swimming pool, etc., Lifestyle stages such as if you have any children, or teenagers movig away to school, setting in terms of living in the city or suburbs, work in terms of taking a long commute in the morning, school such as where yours children will go to school, hobbies in terms of recreation facilities, how important is it to live close to family and friends, and of course do you want to be in a close place of worship.
A mortgage broker can help you finance your home in addition to recommending a real estate agent that can help find the perfect home for you.
You have the option of buying a condominium, townhouse, semi-detached house, single/detached home, and duplex/triple house.
Lot Loans and Construction Loans fAQs
Most homeowners are familiar with the typical mortgage loan used to finance the purchase of an existing, already-built home (referred to by some as a "purchase money" mortgage or loan). Purchase money loans are the standard of the residential lending industry, and entire financial markets, mortgage products and automated systems have been created to make these loans efficient and easy for banks to underwrite and process.
Are you ready to start buidling a home from the ground up, but cannot take on the whole task because of life and financial situations such as a job, children or even selling an existing home. Sometimes buyers found their ideal lot or vacant property for building their future home, but need to wait before they start construction. If that is your situation, you likely will want to consider some form of "lot loan" or "land loan" to make your vacant property purchase first. And later, when you're actually ready to build a home on your lot, you can consider your construction loan options.
A lot or land loan allows you to secure your ideal homesite so you can continue to get ready to build your home.
from a borrower's perspective, lot and land loans are both harder to find and have less favorable terms than a conventional purchase money mortgage for a home. Although lot and land loans are structured and documented similar to purchase money home loans, be prepared to see shorter-term loans, higher down payments, higher interest rates and additional borrower commitments and underwriting.
Home Construction Loans
Construction loans typically fund the construction of custom or semi-custom homes from the ground up.
When buying either a "Spec" home that already is built or when buying new homes from production builders, a buyer usually would not use a construction loan. In these transactions, if the builder is selling a completed home the borrower should only need a purchase money mortgage to buy the new home and the land on which it sits.
from a borrower's perspective, and much like lot and land loans, construction loans usually are more difficult to obtain and will include less favorable financing terms when compared to a standard home mortgage.
Hidden Cost fAQS
To determine affordability' you will first need to know your taxable income along with the amount of any debt outstanding and the monthly payments. Assuming it is your principal residence you are purchasing, calculate 32% of your income for use toward a mortgage payment, property taxes and heating costs. If applicable, half of the estimated monthly condominium maintenance fees will also be included in this calculation. Second, calculate 40% of your taxable income and deduct all of your monthly debt payments, including car loans, credit cards, lines of credit payments. The lesser of the first or second calculation will be used to help determine how much of your income may be used towards housing related payments, including your mortgage payment. These calculations are based on lenders' usual guidelines. In addition to considering what the ratios say you can afford, make sure you calculate how much you think you can afford. If the payment amount you are comfortable with is less than 32% of your income you may want to settle for the lower amount rather than stretch yourself financially. Make sure you don't leave yourself house poor. Structure your payments so that you can still afford simple luxuries.
A minimum down payment of 5% is required to purchase a home, subject to certain maximum price restrictions. In addition to the down payment, you must also be able to show that you can cover the applicable closing costs (i.e. legal fees and disbursements, appraisal fees and a survey certificate, where applicable). Regardless of the amount of your down payment, at least 5% of it must be from your own cash resources or a gift from a family member. It cannot be borrowed.
The down payment usually represents between 5-20% of the total price of the property.
first and foremost, you have to make sure you have enough money for a down payment - the portion of the purchase price that you furnish yourself. To qualify for a conventional mortgage you will need a down payment of 20% or more. However, you can qualify for a low down payment insured mortgage with a down payment as low as 5%.
Unlike loan officers, mortgage brokers don't work for banks. They operate independently and must be licensed. They charge a fee for their service, which is either paid by you, the borrower or the lender. The fee is a small percentage of the loan amount, generally between 1% and 2%.
first Time Home Buying fAQs
The first thing to think about is not the mortgage, but purchasing the home itself. Be prepared to make a lot of decisions. An existing home has a kitchen, cabinets, flooring. You either like it or you don't and move on. One of the exciting things about purchasing a new home is that you get to make a lot of choices and decisions. for some, it can be a little daunting, but enjoy it. You'll have a lot of things to think about. Be prepared to go through the process and make those decisions.
When you are ready to purchase a home the first thing you should do is look around at model homes or houses for sale to get ideas about what you like and dislike about a home. That will help you make an informed decision about what you are looking for in a home. Once you have an idea of what you want when purchasing your home, you will need to prepare for the mortgage process. Prepare yourself to document your income and assets. Put together a list of outstanding credit that you have: car loans, student loans, credit cards, etc. Have documentation ready. Lenders are going to request a lot of that stuff from you.
Steps in the mortgage process for a new home buyer is in two steps. 1) You can apply for a mortgage preapproval before you even sign a purchase agreement on a house. Then typically you get approved within the first 30 days. Then the paperwork sits while the home is being built. Please note that credit documents include bank statements, W2s, pay stubs are only valid for 90 days. 2) Once that home gets close to completion, the lender is going to call that buyer again and ask for that paperwork again. The lending industry wants to make sure that your job is still in place, you're still paying things on time, and you haven't spent a bunch of savings. Keep all of those documents in a file because will need that documentation again.
Is it important not to make big financial changes during the "quiet period" because changes can impact your qualification. When the lender goes to update everything because those credit documents have expired, if you've taken on added debt it can hurt your qualifications even though you were approved months ago when you purchased the home.
People can get mortgages with beacon scores from the 500's to the 800's. for lower beacon scores, it's a different process and a different product and probably a slightly different interest rate because of the difference in repayment risk.
first and foremost, meet with a lender prior to signing any purchase. Make sure you sign a contract that's within qualification and comfort in terms of the payment for the homebuyer. We want the buyer to be successful long-term.
There aren't necessarily unique mortgage products, but there are additional requirements around the condominium project and documents. When the builder is done, he's going to turn over control of that condominium project to the homeowner's association. It's important to make sure the legal documents are structured properly, are fair to all owners in that project and that the association's budget is structured properly to maintain the grounds. It's important to make sure the budget is adequate for maintenance in common areas, pools, tennis courts, even parking facilities. With common amenities, there's going to be maintenance costs. Review the budget and make sure those association fees and that budget is set realistically so the association will be successful in maintaining the building.
Home Buying fAQs
Subject to qualification, yes. In fact, even purchasers with 5% down may qualify to buy a home and make improvements to it. for high-ratio financing, both Canada Mortgage and Housing Corporation and GE Capital, insured mortgages are available to cover the purchase price of a home as well as an amount to pay for immediate major renovations or improvements that the purchaser may wish to make to the property. This option eliminates the need to finance the renovations or improvements separately. Some conditions apply. Where the improvements are cosmetic, the mortgage loan insurance premium is unchanged from the standard schedule. Where the improvements are deemed to be structural, the mortgage loan insurance premium is increased by .50% over the standard schedule. for information on mortgage loan insurance premiums see high-ratio home mortgage financing.
A home inspection is a visual examination of the property to determine the overall condition of the home. In the process, the inspector should be checking all major components (roofs, ceilings, walls, floors, foundations, crawl spaces, attics, retaining walls, etc.) and systems (electrical, heating, plumbing, drainage, exterior weather proofing, etc.). The results of the inspection should be provided to the purchaser in written form, in detail, generally within 24 hours of the inspection. A pre-purchase home inspection can add peace of mind and make a difficult decision much easier. It may indicate that the home needs major structural repairs which can be factored into your buying decision. A home inspection helps remove a number of unknowns and increases the likelihood of a successful purchase.
Mortgage loan insurance is insurance provided by Canada Mortgage and Housing Corporation (CMHC), a crown corporation, and GE Capital Mortgage Insurance Company, an approved private corporation. This insurance is required by law to insure lenders against default on mortgages with a loan to value ratio greater than 80%. The insurance premiums, ranging from .50% to 3.75%, are paid by the borrower and can be added directly onto the mortgage amount. This is not the same as mortgage life insurance.
Depending on the circumstances surrounding your bankruptcy, generally some lenders would consider providing mortgage financing.
Yes. Your ideal mortgage formula has probably already been created, but if you want to consider a change let's review the possible benefits and implications.
There is no GST unless the house has been renovated substantially, and then the tax is applied as if it were a new house. (Please Note: Tax information consists of general comments only, for full details see the applicable legislation or review with your advisor.)
High ratio mortgage insurance protects the lender against payment default by the home buyer. It is required by most lenders if the home buyer has less than 20% downpayment. An insurance premium will apply. Mortgage life insurance protects your dependents and loved ones in the event of your death.
The estimated amount of your property taxes can be added to the mortgage payment and paid on your behalf at the appropriate times. Depending on the balance in your tax account, it may be necessary to increase or decrease the amount of monthly payments to reflect the timing of property tax payments.
Where child support and alimony are paid by you to another person, generally the amount paid out is deducted from your total income before determining the size of mortgage you will qualify for. Where child support and alimony are received by you from another person, generally the amount paid may be added to your total income before determining the size of mortgage you will qualify for, provided proof of regular receipt is available for a period of time determined by the lender.
Most lenders will accept down payment funds that are a gift from family as an acceptable down payment. A gift letter signed by the donor is usually required to confirm that the funds are a true gift and not a loan. where the mortgage requires mortgage loan insurance, Canada mortgage and housing corporation requires the gift money to be in the purchaser's possession before the application is sent in to them for approval. where mortgage loan insurance is provided by GE Capital this is not a requirement. See what is mortgage loan insurance?' for further information.
Lenders will often guarantee an interest rate to you as much as 120 days before your mortgage matures. And, as long as you are not increasing your mortgage, they will cover the costs of transferring your mortgage too. This means a rate promised well in advance of your maturity date, thus eliminating any worries of higher rates. And if rates drop before the actual maturity rate, the new lender will usually adjust your interest rate lower as well.Most lenders send out their mortgage renewal notices offering existing clients their posted interest rates. The rate you are being offered is usually not the best one. Always investigate the possibility of a lower interest rate with the lender or another lender. If you don't you may end up paying a much higher interest rate on your renewing mortgage than you need to.
There are ways to reduce the number of years to pay down your mortgage. You'll enjoy significant savings by: Selecting a non-monthly or accelerated payment schedule, increasing your payment frequency schedule, making principal prepayments, making double-up payments, and selecting a shorter amortization at renewal.
Today, about 50% of first-time home buyers use their RRSP savings to help finance a down payment. If you are a first-time home buyer, the Home Buyers Plan (HBP) allows you to withdraw money from your Registered Retirement Savings Plan (RRSP) tax-free to make your down payment. The HBP is administered by the Canada Revenue Agency (CRA).There are certain conditions you must meet to be eligible for the HBP. for more information, contact CRA at www.cra.gc.ca.
The length of mortgage terms varies widely - from six months right up to 10 years. As a rule of thumb, the shorter the term, the lower the interest rate the longer the term, the higher the rate.While four or five year mortgages are what most home buyers typically choose, you may consider a short-term mortgage if you have a higher tolerance for risk, if you have time to watch rates or are not prepared to make a long-term commitment right now.
A longer-term mortgage is worth considering if you have a busy life and don't have time to watch mortgage rates. Our 4, 5 and 7-year mortgages let you take advantage of today's rates, while enjoying long-term security knowing the rate you sign up for is a sure thing.If you want to keep your mortgage flexible right now, you can explore a shorter-term mortgage that usually allows you to take advantage of lower rates and save.
Property searches (also known as conveyancing searches) are enquiries that discover additional information about a property you plan to purchase. As part of the home-buying process, your conveyancer will carry out a variety of 'searches' with the local authority and other parties.
When you are leaving a lender, they have very little incentive to process your discharge request quickly. In fact, the longer the discharge takes the more money they charge in interest! Some lenders take four weeks to process a discharge but, luckily, most will take two weeks.
You will need a lawyer to complete the purchase of your house. Legal fees can vary but on average you should allow for $600 - $900 for legal fees and an additional $200 - $400 for disbursements, which include registering the mortgage, completing a tax certificate, and doing a title search on the property.
Once you've paid off your mortgage and any other loans on the property, the biggest chunk of change home sellers pay at closing is the sales commission to the real estate agent. That ranges from 5% to 8% of the purchase price, with the average around 6%.
The mortgage registration fee is a State Government charge for the registration of a home loan. Because the property acts as security for a home loan, the government requires a home loan to be registered so that all claims on a property can be checked by any future buyers of that property.
Needless to say, you'll have financial responsibilities as a home owner. Some of them, like taxes, may not be billed monthly, so do the calculations to break them down into monthly costs. Below you will find a list of these expenses.
for most home buyers, this is the largest monthly expense. The actual amount of the mortgage payment can vary widely since it is based on a number of variables, such as mortgage term or amortization.
Property tax can be paid in two ways - remitted directly to the municipality by you, in which case you may be required to periodically show proof of payment to your financial institution; or paid as part of your monthly mortgage payment.
In some municipalities, these taxes are integrated into the property taxes. In others, they are collected separately and are payable in a single lump sum, usually due at the end of the current school year.
As a home owner, you'll be responsible for all utility bills including heating, gas, electricity, water, telephone and cable.
You will also have to cover the cost of painting, roof repairs, electrical and plumbing, walks and driveway, lawn care and snow removal. A well-maintained property helps to preserve your home's market value, enhances the neighbourhood and, depending on the kind of renovations you make could add to the worth of your property.