Buying the Best Home for You

General Rob Skoko 24 Jul

Before you begin searching for a home, it’s always helpful to think about your needs both now and in the future. And if you have any questions about the home-buying process or different types of real estate, you can always ask your mortgage professional or real estate agent for input.

 

Following are some things to consider when you’re deciding which type of home to buy:

 

  • Location. Do you want to live in a city, town or in the countryside? How long will your work commute be? Where will your children attend school and how will they get there? Are you close to amenities?
  • Size requirements. Do you need several bedrooms, more than one bathroom, space for a home office, a two-car garage?
  • Special features. Do you want air conditioning, storage or hobby space, a fireplace, a swimming pool? Do you have family members with special needs? Do you want special features to save energy, enhance indoor air quality and reduce environmental impact?
  • Lifestyles and stages. Do you plan to have children? Do you have teenagers who will be moving away soon? Are you close to retirement? Will you need a home that can accommodate different stages of life?

 

 

New Versus Resale Homes

When thinking about your ideal home, the first thing you should consider is whether you want a previously owned home (often called a resale) or a new home. Here are some characteristics that may help you decide:


New Home

  • Modern design. A new home has an up-to-date design that takes into account the latest trends, materials and features.
  • Personalized choices. You may be able to upgrade or choose certain items such as siding, flooring, cabinets, plumbing and electrical fixtures.
  • Up-to-date with the latest codes/standards. The latest building codes, electrical and energy-efficiency standards will be applied.
  • Maintenance costs. Maintenance costs will be lower because everything is new and many items are covered by a warranty. You should still set aside money every year for future maintenance costs.
  • Builder warranty. This is a warranty that may be provided by the builder of the home. Be sure to check all the conditions of the warranty. A homebuilder’s warranty can be important if a major system such as plumbing or heating breaks down.
  • Neighbourhood amenities. Schools, shopping malls and other services may not be complete for years.
  • Extra costs. You may have to pay extra if you want to add a fireplace, plant trees and sod or pave your driveway. Make sure you know exactly what’s included in the price of your home.

 

Resale Home

  • You can see what you are buying. Easy access to services. Probably established in a neighbourhood with schools, shopping malls and other services.
  • Landscaping is usually complete and fencing already installed. Previously owned homes may have extras like fireplaces, finished basements or swimming pools.
  • No GST. You don’t have to pay the GST unless the house has been substantially renovated, and then the taxes are applied as if it were a new house.
  • Possible redecorating and renovations. You may need to redecorate, renovate or do major repairs such as replacing the roof, windows and doors.

 

 

Deciding Which Type of Home to Buy

There are many types of homes to choose from and each has its advantages and disadvantages. Think about your needs before making a decision, and don’t forget to look beyond the interior walls. The environment surrounding your home can be as important as the environment within.

 

Following are some different types of homes from which to choose:


Single-Family Detached –
A home containing one dwelling unit that stands alone and sits on its own lot, thereby offering a greater degree of privacy.

 

Semi-Detached – A single-family home that is joined to another one by a common wall. It can offer many of the advantages of a single-family detached home and is usually less expensive to buy and maintain.

 

Row House or Townhouse – Many similar single-family homes, side-by-side, separated by common walls. They can be freehold, condominiums or rental units. They offer less privacy than a single-family detached home but still provide a separate outdoor space. These homes can cost less to buy and maintain but they can also be large, luxury units.

 

Link or Carriage Home – Houses joined by garages or carports, which provide access to the front and back yards. Builders sometimes join basement walls so that link houses appear to be single-family homes on small lots. These houses can be less expensive than single-family detached homes.

 

Condominiums or Stratas – A condo or strata is a form of ownership, not a type of construction. They can be high-rise residential buildings, townhouse complexes, individual houses and low-rise residential buildings.

Why Use a Mortgage Professional

General Rob Skoko 16 Jun

 

There are generally two ways to get a mortgage in Canada: From a bank, or from a licensed mortgage professional.

While a bank only offers the products from their particular institution, licensed mortgage professionals send millions of dollars in mortgage business each year to Canada’s largest banks, credit unions, and trust companies … offering their clients more choice, and access to hundreds of mortgage products!

As a result, clients benefit from the trust, confidence, and security of knowing they are getting the best mortgage for their needs.

Mortgage professionals work for you, and not the banks; therefore, they work in your best interest. From the first consultation to the signing of your mortgage, their services are free. A fee is charged only for the most challenging credit solutions, and it’s especially under those circumstances that a mortgage professional can do for you what your bank cannot.

Whether you’re purchasing a home for the first time, taking out equity from your home for investment or pleasure, or your current mortgage is simply up for renewal, it’s important that you are making an educated buying decision with professional unbiased advice.

Budgeting Towards Homeownership

General Rob Skoko 7 Jun

Transitioning from renter to homeowner is one of the biggest decisions you’ll make throughout your lifetime. It can also be a stressful experience if you don’t plan ahead by building a budget and saving prior to embarking upon homeownership.

 

Budgeting is a core ingredient that helps alleviate the stress associated with money issues that can sometimes arise if you purchase a home without knowing all of the associated costs – including down payment, closing expenses, ongoing maintenance, taxes and utilities.

 

The trouble is, many first-time homeowners fail to carefully think about their finances, plan a budget or set savings aside. And in this society of instant gratification, money problems can quickly escalate.

 

The key is to create a realistic budget based on your goals. Track your spending and make your dollars go further by sticking to your budget once it’s in place. Budgeting offers a step-by-step formula for figuring out how to best save your hard-earned money to invest in homeownership.

 

Start by listing your household income, then your household expenses, and review your spending habits. All of this can be done on a pad of paper or on a computer spreadsheet.

 

Keeping receipts for everything that you purchase will enable you to accurately keep track of where your money is going each month so that you can review and make necessary changes to your plan on an ongoing basis.

 

Examine all areas of your life from entertainment to the type of food you buy, where you buy your food and clothes, and how and where you travel. Also look at your spending personality and make necessary adjustments. Are you a saver, a splurger, a spontaneous shopper or a hoarder? Become smarter with your money and avoid impulse buying.

 

If you find you’re spending a lot of money in one area, such as entertainment for instance, set aside a reasonable amount each month and prepare to stop spending money in this area once your budget has been exhausted.

 

Budgeting provides you with the opportunity to re-evaluate your needs and wants. Do you really need the magazine subscriptions, the gym membership and all the other things you may spend money on each month? Although everyone needs some “me time” to wind down, could you not get that by taking a walk or reading a good book you borrowed from the library?

 

If you can set your budget solidly in place before you head out home or mortgage shopping, you will be far more prepared to purchase your first home.

 

Following are three top tips to help you prepare for the purchase of your first home:

  1. Set up a savings account. You can deposit a predetermined amount into this account each pay period that you will not touch unless it’s absolutely necessary. This will enable you to put money aside for a down payment and cover closing costs, as well as address ongoing homeownership expenses such as maintenance, taxes and utilities.

 

  1. Save up for big-ticket items. As you accumulate money in your savings account, you will be able to also save for specific purchases to help furnish your home – avoiding the buy now, pay later mentality, which can have a negative impact on your credit when you’re seeking mortgage financing.

 

  1. Surround yourself with a team of professionals. When you’re getting ready to make your first home purchase, enlist the services of a licensed mortgage professional and a real estate agent. These experts are invaluable to you as you set out on the road to homeownership because they help first-time buyers through the home purchase and financing processes every day. They will be able to answer all of your questions and set your mind at ease. A mortgage professional has access to multiple lenders, and can help you get pre-approved for a mortgage so you know exactly what you can afford to spend on a home before you head out house hunting, while a real estate agent will be able to match your needs with a house you can afford. Both parties will negotiate on your behalf to ensure you get the best bang for your buck. And, best of all, these services are typically free. They will also be able to refer you to other reputable professionals you may need for your home purchase, including a real estate lawyer and home appraiser. 

Mortgage options for the self-employed

General Rob Skoko 1 May

 

If you’re self-employed, you may have a more difficult time obtaining financing for your real estate purchases than you encountered just 18 months ago thanks to the recent recession. And as of April 9th, 2010, Canada Mortgage and Housing Corporation (CMHC) raised the required down payment amount, as well as decreased the percentage at which you can refinance an existing mortgage if you’re self-employed.

 

To add to the confusion, there are also new rules for those who have been self-employed for more than three years.

 

Still, if you can prove your income, show you’re up-to-date on your taxes and you have solid credit, your chances of being approved for a mortgage are greatly improved.

 

There are essentially two types of self-employed or business-for-self (BFS) borrowers – those who can prove their income and those who cannot, and must instead use a stated-income mortgage product. But, if you have been self-employed for more than three years, you can no longer use a stated-income product.

 

By providing the required documentation, you’re much more likely to be approved for a mortgage if you qualify based on your income. The trouble is that if you cannot prove your income, you pose a higher risk in the eyes of lenders.

 

CMHC currently offers default mortgage insurance for people who have been self-employed less than three years through a stated-income mortgage product up to 90% loan to value (LTV) – meaning the down payment can be as low as 10% of the purchase price. But prior to April 9th, 2010, the maximum LTV for self-employed individuals was 95% for purchases – meaning the down payment would have only been 5% instead of the current 10%.

 

And if a BFS individual wishes to refinance an existing mortgage, the maximum loan amount was reduced to 85% from the previous 90% of the home’s value.

 

Regardless of the maximum LTV, however, the income amount you are stating has to make sense based on your occupation. This is important, because the chances of finding lenders to fund this type of deal are significantly boosted if the mortgage is insured.

 

Lenders and insurers are well aware of the tax write-offs that BFS borrowers can leverage, but these deals are accepted or declined based on average incomes for specific fields, as well as your credit rating. It pretty much goes without saying that those with credit blemishes will have a tough time obtaining mortgage financing if they’re self-employed.

 

Getting pre-approved

While BFS mortgage financing is viewed on a case-by-case basis, if you work with a licensed mortgage professional to obtain a pre-approval, you can be confident you have access to mortgage financing and you will know how much you can spend before you head out shopping for a property.

 

It’s important to note, however, that there is a significant difference between being pre-approved and pre-qualified. In order to obtain a pre-approval, the lender fully underwrites the deal whereas, with a pre-qualification, only the most basic details are considered. Remember that many banks will only issue a pre-qualification.

 

Should a pre-approval and/or mortgage default insurance be unobtainable, the maximum mortgage amount you are likely to qualify for is between 50% and 75% – meaning you will need a much larger down payment.

 

 

Alternative financing

If you do not qualify for traditional financing all is not lost, since you may be eligible for alternative – or private – funding.

 

Mortgage professionals often have access to private investors who are willing to lend money to BFS individuals looking to obtain mortgages. Although you will pay a higher interest rate – on average about 12% – this route may enable you to acquire funds to purchase a home.

 

It’s also important to note that there are added fees involved with private funding because the deals involve a higher degree of risk. The combined lender/brokerage fee will depend on the specific deal and the risk it poses, but the figure will be disclosed upfront so you know exactly what you’ll be expected to pay for these services.

 

Another key point to consider is that private financing is equity based, meaning that the lender’s decision will be based on a specific piece of real estate. Private lenders want to know that the property is marketable and that they will be able to easily sell it should the mortgage go into foreclosure.

 

To discuss further please dont hesitate to contact me at 604-771-4085 or email me rob@skoko.ca

 

Getting a Mortgage Pre-Approval

General Rob Skoko 1 May

 

If you are looking for a new home, be sure you are pre-approved. With a mortgage pre-approval, a licensed mortgage professional can do a more complete verification prior to sending you shopping for a home, and with that done, the dollar figure you are going shopping with is actually what you can spend.

The mortgage professional that you work with to get pre-approved will let you know for certain what you can afford based on lender and insurer criteria, and what your payments on a specific mortgage will be.

Licensed mortgage professionals can lock-in an interest rate for you for anywhere from 60 – 120 days while you shop for your perfect home. By locking in an interest rate, you are guaranteed to get a mortgage for at least that rate or better. If interest rates drop, your locked-in rate will drop as well. However, if the interest rates go up, your locked-in interest rate will not, ensuring you get the best rate throughout the mortgage pre-approval process.

In order to get pre-approved for a mortgage, a mortgage professional requires a short list of information that will allow them to determine your buying power. A mortgage professional will explain to you the benefits of shorter or longer mortgage terms, the latest programs available, which mortgage products they believe will most likely meet your needs the best, plus they will review all of the other costs involved with purchasing a home.

Getting pre-approved for a mortgage is something every potential home buyer should do before going shopping for a new home. A pre-approval will give you the confidence of knowing that financing is available, and it can put you in a very positive negotiation position against other home buyers who aren’t pre-approved.

Deciding which type of home to purchase

General Rob Skoko 29 Apr

 

There is an endless supply of different types of homes available for purchase – ranging from condos to townhouses to fully-detached homes. The key is to decide what you can afford and which amenities you prefer before heading out shopping for a new home.

 

Your best first step is to seek the advice of a Dominion Lending Centres Mortgage Professional and get pre-approved on a mortgage. That way, you already know what your price range is – and, therefore, which type of home you’re in the market for – before you begin shopping.

 

Budgeting is also an important part of preparing yourself for the purchase of a home. If you save for a down payment and up-front costs, such as closing costs and emergency reserves, much sooner, you’ll be sure to save enough to cover the many expenses facing a new homeowner, including moving, utility hook-ups, tools, maintenance supplies, window coverings, etcetera.

 

Once you have the money available to make your home purchase a reality, you should weigh the following options to help decide what type of home is right for you:

 

Condo

A condo makes a great first home because it typically costs less than a townhouse or a detached home, which translates into a smaller down payment. But there are, however, monthly maintenance fees you must take into consideration when budgeting for a condo.

 

Condos are also ideal for those who do not want to maintain a lawn or worry about clearing snow away from walkways and driveways.

 

Townhouse

If the condo life is not your forte and you’re not looking for a big yard to maintain, a townhouse may be your best home purchase option.

 

A townhouse costs less than a fully-detached home and results in cheaper property taxes as well.

 

Many townhouses also come with monthly maintenance fees unless they are freehold townhouses. In situations where you pay a monthly fee, however, you won’t have to worry about outdoor maintenance or snow removal.

 

Detached Home

If it’s privacy you’re seeking as well as a larger yard, a detached home is your ideal choice. Still, prices can vary drastically based on such variables as whether you’re seeking a spot in the city, a place in the suburbs or a more rural location.

 

Other Considerations

The size of the home and property (if you decide not to opt for a condo) are also important things to consider before you head out shopping. While everyone has their dream home in mind, this is not always a practical purchase choice, especially if this is your first home purchase.

 

When it comes to location, think about in which area or neighbourhood you’d like to make your purchase, and which home features are absolutely essential – including what you can live without and what aspects are entirely out of the question.

 

Take a look at real estate ads for the area(s) you’re interested in to see what’s on the market and the price ranges. Also drive around a few neighbourhoods and see what’s for sale or visit Open Houses. This can help crystallize what you want or don’t want in a home.

 

By making your first purchase a modest and affordable ‘starter’ home, you will be putting money towards a mortgage that will build equity in that home. And once you’ve paid down a significant portion of that first home’s mortgage, you will then have more money to put towards an upgrade into your dream home.

 

 

 

 

 

10 Questions Every Borrower Should Ask

General Rob Skoko 28 May

1. If I have mortgage default insurance do I also need mortgage life insurance?

  • Yes. Mortgage life insurance is a life insurance policy on a homeowner, which will allow your family or dependents to pay off the mortgage on the home should something tragic happen to you. Mortgage default insurance is something lenders require you to purchase to cover their own assets if you have less than a 20% down payment. Mortgage life insurance is meant to protect the family of a homeowner and not the mortgage lender itself.

 

2. What steps can I take to maximize my mortgage payments and own my home sooner?

  • There are many ways to pay down your mortgage sooner that could save you thousands of dollars in interest payments throughout the term of your mortgage. Most mortgage products, for instance, include prepayment privileges that enable you to pay up to 20% of the principal (the true value of your mortgage minus the interest payments) per calendar year. This will also help reduce your amortization period (the length of your mortgage). Another way to reduce the time it takes to pay off your mortgage involves changing the way you make your payments by opting for accelerated bi-weekly mortgage payments. Not to be confused with semi-monthly mortgage payments (24 payments per year), accelerated bi-weekly mortgage payments (26 payments per year) will not only pay your mortgage off quicker, but it’s guaranteed to save you a significant amount of money over the term of your mortgage. With accelerated bi-weekly mortgage payments, you’re making one additional monthly payment per year. In addition to increased payment options, most lenders offer the opportunity to make lump-sum payments on your mortgage (as much as 20% of the original borrowed amount each year). Please note, however, that some lenders will only let you make these lump-sum payments on the anniversary date of your mortgage while others will allow you to spread out the lump-sum payments to the maximum allowable yearly amount.

 

3. Can I make lump-sum or other prepayments on my mortgage, or will I be penalized?

  • Most      lenders enable lump-sum payments and increased mortgage payments to a      maximum amount per year. But, since each lender and product is different,      it’s important to check stipulations on prepayments prior to signing your      mortgage papers. Most “no frills” mortgage products offering the lowest      rates often do not allow for prepayments.

 


 

 

 

 

 

 

4. How do I ensure my credit score enables me to qualify for the best possible rate?

  • There      are several things you can do to ensure your credit remains in good      standing. Following are five steps      you can follow: 1) Pay down credit cards.      The number one way to increase your credit score is to pay      down your credit cards so they’re below 70% of your limits. Revolving      credit like credit cards seems to have a more significant impact on credit      scores than car loans, lines of credit, and so on. 2) Limit the use of credit      cards. Racking up a      large amount and then paying it off in monthly instalments can hurt your      credit score. If there’s a balance at the end of the month, this affects      your score – credit formulas don’t take into account the fact that you may      have paid the balance off the next month. 3) Check credit limits. If your lender is slower at      reporting monthly transactions, this can have a significant impact on how      other lenders view your file. Ensure everything’s up to date as old bills      that have been paid can come back to haunt you. Some financial      institutions don’t even report your maximum limits. As such, the credit      bureau is left to only use the balance that’s on hand. The problem is, if      you consistently charge the same amount each month – say $1,000 to $1,500      – it may appear to the credit-scoring agencies that you’re regularly      maxing out your cards. The best bet is to pay your balances down or off      before your statement periods close. 4) Keep old cards.      Older credit is better credit. If you stop using older      credit cards, the issuers may stop updating your accounts. As such, the      cards can lose their weight in the credit formula and, therefore, may not      be as valuable – even though you have had the cards for a long time. Use      these cards periodically and then pay them off. 5) Don’t let mistakes build      up. Always dispute      any mistakes or situations that may harm your score. If, for instance, a      cell phone bill is incorrect and the company will not amend it, you can      dispute this by making the credit bureau aware of the situation.

 

5. What amortization will work best for me?

  • While the lending      industry’s benchmark amortization period is 25 years, and this is the      standard that is used by lenders when discussing mortgage offers, and      usually the basis for mortgage calculators and payment tables, shorter or      longer timeframes are available – to a maximum of 30 years. The main      reason to opt for a shorter amortization period is that you’ll become      mortgage-free sooner. And since you’re agreeing to pay off your mortgage      in a shorter period of time, the interest you pay over the life of the      mortgage is, therefore, greatly reduced. A shorter amortization also      affords you the luxury of building up equity in your home sooner. Equity      is the difference between any outstanding mortgage on your home and its      market value. While it pays to opt for a shorter amortization period,      other considerations must be made before selecting your amortization.      Because you’re reducing the actual number of mortgage payments you make to      pay off your mortgage, your regular payments will be higher. So if your      income is irregular because you’re paid commission or if you’re buying a      home for the first time and will be carrying a large mortgage, a shorter      amortization period that increases your regular payment amount and ties up      your cash flow may not be the best option for you.

 

 

 

 

 

 

 

6. What mortgage term is best for me?

  • Selecting      the mortgage term that’s right for you can be a challenging proposition      for even the savviest of homebuyers, as terms typically range from six      months up to 10 years. The first consideration when comparing various      mortgage terms is to understand that a longer term generally means a      higher corresponding interest rate. And, a shorter term generally means a      lower corresponding interest rate. While this generalization may lead you      to believe that a shorter term is always the preferred option, this isn’t      always the case. Sometimes there are other factors – either in the      financial markets or in your own life – that you’ll also have to take into      consideration when selecting the length of your mortgage term. If paying      your mortgage each month places you close to the financial edge of your      comfort zone, you may want to opt for a longer mortgage term, such as five      or 10 years, so that you can ensure that you’ll be able to afford your      mortgage payments should interest rates increase. By the end of a five- or      10-year mortgage term, most buyers are in a better financial situation,      have a lower outstanding principal balance and, should interest rates have      risen throughout the course of your term, you’ll be able to afford higher      mortgage payments.

 

7. Is my mortgage portable?

  • Fixed-rate products usually have a      portability option. Lenders often use a “blended” system where your      current mortgage rate stays the same on the mortgage amount ported over to      the new property and the new balance is calculated using the current rate.      With variable-rate mortgages, however, porting is usually not available.      This means that when breaking your existing mortgage, a three-month      interest penalty will be charged. This charge may or may not be reimbursed      with your new mortgage. While porting typically      ensures no penalty will be charged when you sell your existing property      and buy a new one, it’s best to check with your mortgage broker for      specific conditions. Some      lenders allow you to port your mortgage, but your sale and purchase have      to happen on the same day, while others offer extended periods.

 


 

 

 

 

 

 

8. If I want to move before my mortgage term is up, what are my options?

  • The answer      to this question often depends on your specific lender and what type of      mortgage you have. While fixed mortgages are often portable, variable are      not. Some lenders allow you to port your mortgage, but      your sale and purchase have to happen on the same day, while others offer      extended periods. As long as there’s not too much time      between the sale of your existing home and the purchase of the new home, as      a rule of thumb most lenders will allow you to port the mortgage.      In other words, you keep your existing mortgage and add the extra funds      you need to buy the new house on top. The interest rate      is a blend between your existing mortgage rate and the current rate at the time you require the extra money.     

 

9. What steps can I take to help ensure I don’t become a victim of title or mortgage fraud?

  • The best way to prevent fraud      is to be aware of how it’s committed. Following are some red flags for mortgage fraud: someone      offers you money to use your name and credit information to obtain a      mortgage; you’re encouraged to include false information on a mortgage      application; you’re asked to leave signature lines or other important      areas of your mortgage application blank; the seller or investment advisor      discourages you from seeing or inspecting the property you will be      purchasing; or the seller or developer rebates      you money on closing, and you don’t      disclose this to your lending institution. Sadly, the only red flag for      title fraud occurs when your mortgage mysteriously goes into default and      the lender begins foreclosure proceedings. Even worse, as the homeowner,      you’re the one hurt by title fraud, rather than the lender, as is often      the case with mortgage fraud. Unlike with mortgage fraud, during title      fraud, you haven’t been approached or offered anything – this is a form of      identity theft. Following      are ways you can protect yourself from title fraud: always view the      property you’re purchasing in person; check listings in the community      where the property is located – compare features, size and location to      establish if the asking price seems reasonable; make sure your      representative is a licensed real estate agent; beware of a real estate      agent or mortgage broker who has a financial interest in the transaction;      ask for a copy of the land title or go to a registry office and request a      historical title search; in the offer to purchase, include the option to      have the property appraised by a designated or accredited appraiser; insist      on a home inspection to guard against buying a home that has been      cosmetically renovated or formerly used as a grow house or meth lab; ask      to see receipts for recent renovations; when you make a deposit, ensure      your money is protected by being held “in trust”; and consider the      purchase of title insurance.

 

 

 

 

 

 

 

 

 

10. How do I ensure I get the best mortgage product and rate upon renewal at the end of my term?

  • The      best way to ensure you receive the best mortgage product and rate at      renewal is to enlist your mortgage broker once again to get the lenders      competing for your business just like they did when you negotiated your      last mortgage. A lot can change over a single mortgage term, and you can      miss out on a lot of savings and options if you simply sign a renewal with      your existing lender without consulting your mortgage broker.

10 Most Commonly Asked Mortgage Questions

General Rob Skoko 7 Nov

1. What’s the best rate I can get?

  • Your      credit score plays a big part in the interest rate for which you will      qualify, as the riskier you appear as a borrower, the higher your rate      will be. Rate is definitely not the most important aspect of a mortgage,      however, as many rock-bottom rates often come from no frills mortgage      products. In other words, even if you qualify for the lowest rate, you      often have to give up other things such as prepayments and porting privileges      when opting for the lowest-rate product.

 

2. What’s the maximum mortgage amount for which I can qualify?

  • To      determine the amount for which you will qualify, there are two      calculations you’ll need to complete. The first is your Gross Debt Service      (GDS) ratio. GDS looks at your proposed new housing costs (mortgage      payments, taxes, heating costs and 50% of strata/condo fees, if      applicable). Generally speaking, this amount should be no more than 32% of      your gross monthly income. For example, if your gross monthly income is      $4,000, you should not be spending more than $1,280 in monthly housing      expenses. Second, you will need to calculate your Total Debt Service (TDS)      ratio. The TDS ratio measures your total debt obligations (including      housing costs, loans, car payments and credit card bills). Generally      speaking, your TDS ratio should be no more than 40% of your gross monthly      income. Keep in mind that these numbers are prescribed maximums and that      you should strive for lower ratios for a more affordable lifestyle. Before      falling in love with a potential new home, you may want to obtain a      pre-approved mortgage. This will help you stay within your price range and      spend your time looking at homes you can reasonably afford.

 

3. How much money do I need for a down payment?

  • The      minimum down payment required is 5% of the purchase price of the home. And      in order to avoid paying mortgage default insurance, you need to have at      least a 20% down payment.

 

4. What happens if I don’t have the full down payment amount?

  • There      are programs available that enable you to use other forms of down payment,      such as from your RRSPs, a cash-back product, or a gift.

 


 

 

 

 

 

 

5. What will a lender look at when qualifying me for a mortgage?

  • Most      lenders look at five factors when determining whether you qualify for a      mortgage: 1. Income; 2. Debts; 3. Employment History; 4. Credit history;      and 5. Value of the Property you wish to purchase. One of the first things      a lender will consider is how much of your total income you’ll be spending      on housing. This helps the lender decide whether you can comfortably      afford a house. A lender will then look at your debts, which generally      include monthly house payments as well as payments on all loans, credit      cards, child support, etc. A history of steady employment, usually within      the same job for several years, helps you qualify. But a short history in      your current job shouldn’t prevent you from getting a mortgage, as long as      there have been no gaps in income over the past two years. Good credit is also      very important in qualifying for a mortgage. The lender will also want to      know that the house is worth the price you plan to pay.

 

6. Should I go with a fixed- or variable-rate mortgage?

  • The      answer to this question depends on your personal risk tolerance. If, for      instance, you’re a first-time homebuyer and/or you have a set budget that      you can comfortably spend on your mortgage, it’s smart to lock into a      fixed mortgage with predictable payments over a specific period of time.      If, however, your financial situation can handle the fluctuations of a      variable-rate mortgage, this may save you some money over the long run.      Another option is to opt for a variable rate, but make payments based on      what you would have paid if you selected a fixed rate. Finally, there are      also 50/50 mortgage options that enable you to split your mortgage into      both fixed and variable portions.

 

7. What credit score do I need to qualify?

  • Generally speaking, you’re a prime candidate      for a mortgage if your credit score is 680 and above. The higher you can      get above 700 the better, as you will qualify for the lowest rates. These days almost anyone can obtain a mortgage,      but the key for those with lower credit scores is the      size of the down payment. If you      have a sufficient down payment, you      can reduce the risk to the lender providing you with the mortgage.      Statistics show that default rates on mortgages decline as the down      payment increases.

 

 

 

 

 

 

 

8. What happens if my credit score isn’t great?

  • There      are several things you can do to boost your credit fairly quickly.      Following are five steps you can use      to help attain a speedy credit score boost: 1) Pay down credit cards.      The number one way to increase your credit score is to pay      down your credit cards so they’re below 70% of your limits. Revolving      credit like credit cards seems to have a more significant impact on credit      scores than car loans, lines of credit, and so on. 2) Limit the use of credit      cards. Racking up a      large amount and then paying it off in monthly instalments can hurt your      credit score. If there is a balance at the end of the month, this affects      your score – credit formulas don’t take into account the fact that you may      have paid the balance off the next month. 3) Check credit limits. If your lender is slower at      reporting monthly transactions, this can have a significant impact on how      other lenders view your file. Ensure everything’s up to date as old bills      that have been paid can come back to haunt you. Some financial      institutions don’t even report your maximum limits. As such, the credit      bureau is left to only use the balance that’s on hand. The problem is, if      you consistently charge the same amount each month – say $1,000 to $1,500      – it may appear to the credit-scoring agencies that you’re regularly      maxing out your cards. The best bet is to pay your balances down or off      before your statement periods close. 4) Keep old cards.      Older credit is better credit. If you stop using older      credit cards, the issuers may stop updating your accounts. As such, the      cards can lose their weight in the credit formula and, therefore, may not      be as valuable – even though you have had the cards for a long time. Use      these cards periodically and then pay them off. 5) Don’t let mistakes build      up. Always dispute      any mistakes or situations that may harm your score. If, for instance, a      cell phone bill is incorrect and the company will not amend it, you can      dispute this by making the credit bureau aware of the situation.

 

9. How much will I have to pay for closing costs?

  • As a general rule of thumb, it’s recommended that you put aside at least 1.5% of the purchase price (in addition to the down payment) strictly to cover closing costs. There are several items you should budget for when it comes to closing costs. Property Transfer Tax is charged whenever a property is purchased. The tax will vary from jurisdiction to jurisdiction, but I can help with the calculation. GST/HST is only charged on new homes, and does not affect homes priced at less than $400,000. Even homes that exceed the price threshold are only taxed on the portion that exceeds $400,000. Certain conditions may apply. Please contact you lawyer/notary for more detailed information. Your lawyer/notary will charge you a fee for drawing up the mortgage and conveyance of title. The amount of the fee will depend on the individual that you use. The typical cost is $900. If you’re purchasing a single-family home, you’ll need to give your lender a survey certificate showing where the property sits within the property lines. Some exceptions are made, however, on low loan-to-value deals and acreage properties. A survey will cost approximately $300-$350, but the lender will often accept a copy of an existing survey. Other costs include such things as an appraisal fee (approximately $200), title insurance and a home inspection (approximately $350).

 

 

 

 

 

 

10. How much will my mortgage payments be?

  • Monthly      mortgage payments vary based on several factors, including: the size of      your mortgage; whether you’re paying mortgage default insurance; your      mortgage amortization; your interest rate; and your frequency of making      mortgage payments. You can view some useful calculators to find out your      specific mortgage payments: www.dominionlending.ca/mortgage-calculators

The Harper Government Takes Prudent Action to Support the Long-Term Stability of Canada’s Housing Market

General Rob Skoko 17 Jan


The Honourable Jim Flaherty, Minister of Finance, and the Honourable Christian Paradis, Minister of Natural Resources, today announced prudent adjustments to the rules for government-backed insured mortgages to support the long-term stability of Canada’s housing market and support hard-working Canadian families saving through home ownership.

“Canada’s well-regulated housing sector has been an important strength that allowed us to avoid the mistakes of other countries and helped protect us from the worst of the recent global recession,” said Minister Flaherty. “The prudent measures announced today build on that advantage by encouraging hard-working Canadian families to save by investing in their homes and future.”

“The economy continues to be our Government’s top priority,” continued Minister Paradis. “Our Government will continue to take the necessary actions to ensure stability and economic certainty in Canada’s housing market.”

The new measures:

  • Reduce the maximum amortization period to 30 years from 35 years for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent. This will significantly reduce the total interest payments Canadian families make on their mortgages, allow Canadian families to build up equity in their homes more quickly, and help Canadians pay off their mortgages before they retire.
  • Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes. This will promote saving through home ownership and limit the repackaging of consumer debt into mortgages guaranteed by taxpayers.
  • Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs. This will ensure that risks associated with consumer debt products used to borrow funds unrelated to house purchases are managed by the financial institutions and not borne by taxpayers.

Our Government’s ongoing monitoring and sound underlying supervisory regime, along with the traditionally cautious approach taken by Canadian financial institutions to mortgage lending, have allowed Canada to maintain strong and secure housing and mortgage markets.

The adjustments to the mortgage insurance guarantee framework will come into force on March 18, 2011. The withdrawal of government insurance backing on lines of credit secured by homes will come into force on April 18, 2011.

____________________________________
For further information, media may contact:

Annette Robertson
Press Secretary
Office of the Minister of Finance
613-996-7861

Jack Aubry
Media Relations
Department of Finance
613-996-8080

Interest Rates

General Rob Skoko 19 Oct

*BoC Keeps Key Rate Unchanged

The market widely predicted the Bank of Canada would not raise rates, and it was right. The BoC has left its key lending rate at 1.00%.

In turn, prime rate will remain at 3.00%, making today’s BoC meeting a non-event for mortgage holders in the short-term.

The BoC’s call comes amid languid recent growth and inflation numbers. Here’s a sampling of the Bank’s commentary from its official statement:

  • The BoC sees a “weaker-than-projected recovery in the United States.” (No revelations there)
  • The potential exists for “a more protracted and difficult global recovery.”
  • “…domestic considerations…are expected to slow consumption and housing activity in Canada.”
  • “Inflation in Canada has been slightly below the Bank’s July projection.”
  • “The inflation outlook has been revised down and both total CPI and core inflation are now expected to converge to 2% by the end of 2012.” (That’s potential good news for mortgage rates)
  • The 1% overnight target rate “leaves considerable monetary stimulus in place.”

The next and final interest rate meeting of 2010 is on December 7.

 

*BoC Keeps Key Rate Unchanged – Canadian Mortgage Trends – October 19, 2010

Click here to view article: http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2010/10/boc-keeps-key-rate-unchanged.html

 

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