Month: October 2015

28 Oct

Top Six Questions First Time Home Buyers Ask

General

Posted by: Tracey Robinson

Top Six Questions First Time Home Buyers Ask!

 

Buying a home can be an exciting and stressful undertaking at any point in your life.  Being a first time home buyer can be especially exciting and that much more stressful.  Buying a home for the first time has the added stress of the unknowns and not knowing what to expect.

 

  1. How do I save up enough money for a down payment?
    There are many ways to save for your first home.  You can save in the most traditional way, by putting money aside each month.  This can be done through automatic savings accounts or even better is to put your savings into a Tax – Free Savings Account (TFSA).  All earnings and withdrawals from your investment are tax-free and you can contribute up to $5000 a year without penalty. We work with Financial Planning Partners and can happily put you in touch with a planner to assist you with your down payment savings.

RRSP TFSA

Another option is using your RRSP’s as a place to boost your savings by using contributions to benefit your Personal Tax Return and re-investing that return into your RRSP contributions as well as taking advantage of any work related benefits that may be available through your employer.

First Time Home Buyers can withdraw up to $25,000 from RRSP’s tax free to use as a down payment, This plan then allows you to pay back the withdraw contribution over 15 years, starting the second year after the withdrawal.
For more information on this plan you can visit www.cra.gc.ca

2. How much can I afford?
This varies for everyone and every situation.  Getting a pre-approval is a good place to start (Apply Here).  You can even use a mortgage calculator to get an idea of how much of a down payment you would need on a home you would like to consider.  The mortgage calculator does not take into account other debt like car payments or student loans that you may be carrying, but it is a great tool to give you an idea of where you are at.

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3. What does pre-approval mean & should I be pre-approved?
Pre-Approval is a great idea, especially for a first time home buyer.   Being pre-approved means that your lender has reviewed your earnings, assets and liabilities  and has determined how much money you should be able to borrow. This does not guarantee the mortgage amount, as each property needs to be assessed on it’s own merits and of course you will be required to formally confirm your income and down payment. But a pre-approval is a great tool to assess how much you should spend on a home comfortably and many realtors prefer their clients to be pre-approved so that they too can avoid showing you homes that might not suit your budget requirements.  A pre-approval also means you can shop with confidence knowing exactly what you should be looking at and knowing what you can afford.

Couple Home Buyers

4. Are there any other expenses I need to be aware of buying a home?
Yes there are a some other costs that you need to be prepared for when you purchase a home.  Closing costs are additional expenses that come with completing the purchase of your home;

Conveyancing Fees
You will need to hire a Lawyer or Notary to perform a title search on the property to ensure their are no liens pending on the property you are purchasing and of course that the vendor is the legal owner of the property.  The Lawyer or Notary will then make sure all documentation has been completed and then register the mortgage and you as the new owner of the property you are purchasing. We have Conveyancing partners as well that we can refer you to to help make the process easier.

Land Transfer Tax
Most Provinces and even some municipalities charge a document fee with a change of ownership on real estate.  Your Notary or Lawyer will inform you if this applies to your purchase.

Disbursements
The Notary or Lawyer you have hired will walk you through your disbursements.  These are things that the seller has paid in advance such  a property taxes and utilities.  You will be required to reimburse the seller for these pre-payments as they will come into effect after you have taken possession of the home.  These cost vary depending on the home you are buying and how far in advance the pre-payments have been paid.

HST
HST may apply to the home you choose and again you need to be aware of which homes you will be required to pay HST on and which homes will be exempt.  A new home usually requires you to pay HST.  A home that has been lived in for more than six months will not.  Be prepared to ask your realtor to have this information available so you are prepared to pay HST on any home that requires it.

Home Inspections
You may want to take advantage of hiring a home inspector to inspect the home prior to purchase and in fact your lender may require it depending on the property.  I have many networking partners that we work with for home inspections and can point you in the right direction.

5.  Why do I have to pay mortgage insurance?
If you are buying a home with a down payment less than 20% of the purchase price you will require a mortgage that’s insured against default. The insurance protects the lender in the event that you default on your mortgage and it is mandated by law in Canada for all mortgages with less that 20% down.  The cost of this insurance will vary, but a good rule of thumb is anywhere between 0.5% to 3% of the total amount you are borrowing.  The amount can be added, and usually is, to your mortgage and calculated into your regular payment schedule.

6. How do I know I am getting the best mortgage for my situation?
At White House Mortgages we understand that not every lending situation is the same and after reviewing your lifestyle, income and budget we will work to find you the best mortgage based on your needs.  As part of the Dominion Lending Centre, unlike a bank White House Mortgages has access to over 230+ lenders.  Each offering mortgage products that are suited to individuals and their needs.  Not a single product like the banks offer that are suited to the banks needs.

 

Contact me today to get started!

Tracey Robinson

Cell – 250-328-9096

Office – 778-476-6096

traceyrobinson@dominionlending.ca

 

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13 Oct

Difference between a rate-hold and a pre-approved mortgage certificate

General

Posted by: Tracey Robinson

The Difference between a Rate-Hold and a Pre-Approved Mortgage Certificate

The Difference between a Rate-Hold and a Pre-Approved Mortgage Certificate

First, let’s start with a definition of each.

Mortgage Terminology

Rate-Hold: a rate-hold is simply that. The financial institution holds a rate for a specific term and for a certain number of days. In Canada we typically hold rates for 120 days. You must close your mortgage on or before that date to secure the held rate. In addition, in the event that rates go up over that period of time you don’t have to worry, you have your rate guaranteed. If rates lower, then your rate lowers as well.

Pre-Approval: if you are house shopping then a pre-approval can help you shop with confidence. A pre-approved mortgage certificate outlines how much you qualify for and will also hold a rate for you. Unlike just the rate hold, a pre-approval is looked over by an underwriter working for the particular financial institution. The underwriter will look at all the data provided in the application, along with a credit history report, to determine credit worthiness. If the underwriter has not been given upfront documentation, for example employment and down payment information, then the pre-approval will come back with “conditions”. Essentially saying, yes, based on the info you provided we are ready to extend credit to you once you satisfy the following conditions. This can also be called pre-qualification.

Should you wish with absolute surety that you will not be denied credit, then it is best to submit your paperwork upfront.

In our fast paced society clients receive rate-holds, not pre-approvals. So please make sure you know what you are getting based on what you need.

Almost done. If you are putting less than 20% down on your home you will have to obtain mortgage insurance from CMHC or Genworth. Both of these institutions will not look at your file unless it is a “real deal”, and they can sometimes over-rule an approval from the financial institution. I’ve completed many mortgage transactions and while I have not seen this many times, it has happened if you are in the higher risk category, for example, your employment is just less than one year or credit history is not very long. If you are not in the higher risk category, then a pre-approval should give you the confidence to look for a house without worry.

Remember to always place a financial clause in your agreement of purchase and sale. Give yourself the time and the peace-of-mind.

7 Oct

CALM DOWN! The actual math of interest rates & payment increases

General

Posted by: Tracey Robinson

   
 

Interest Rates & Payment Increases:

The Actual Math

 

     
         
 

For several years headlines have warned of ‘inevitable’ interest-rate hikes. But reality has seen interest rates drop steadily over the past several years, to new record lows. It is the opinion of most Brokers – the frontline workers – that any increases in interest rates will be small and they will be gradual.

A key component often lacking from stories about potential interest rate increases is the actual math or impact of said increases. So I offer for you a cheat sheet outlining what eventual increases would mean to you personally.

Are you in a variable rate mortgage?

If yes, the Bank of Canada meets eight times per year (with the next meeting scheduled on October 21st) in order to make a decision that will influence the prime interest rate on which variable rate mortgages are based. Very rarely does Prime move by more than 0.25%.

What 0.25% means to a variable rate mortgage:

Per $100,000 of mortgage money borrowed, a 0.25% interest rate increase for the typical mortgage holder would translate into a monthly payment increase of $13.00.

$13.00 per $100,000 of mortgage money.

Eventual increases are likely to come in 0.25% increments, gradually.

Tip of the day: Variable rate mortgage holders can utilize prepayment privileges to increase their payment by at least $13.00 per $100,000 owed each year. Every penny of the immediate increase will be going straight to principal owed and will in turn reduce the amount of interest on every future payment. More importantly, you’re getting out ahead of any future rate increases and your payment will already be increased.

Being one, two or three steps ahead makes sense, call your Broker about making a small increase today, to cushion you tomorrow.

Are you in a fixed rate mortgage?

On the upside, any immediate changes to interest rates

 

will have no effect on your monthly payments or interest expense until your actual renewal date. Also on the upside, this gives you time to prepare for the potential of higher interest rates.

What 0.25% means to you will ultimately be much the same as the mathematics above. The risk is that instead of a slow, gradual rise, you may be in for a full 1% interest rate increase by the time your renewal rolls around. But that is OK, you have time on your side and your rate is fixed for now.

Key point; the mortgage balance you are renewing will be (in most cases significantly) lower than your original balance and thus the impact of an interest rate hike is that much less dramatic.

For example, a $300,000 mortgage on a 30 year amortization, taken at 2.59% today will have an ending balance five years from now of $264,613.00. (Increase your payments each year and it will be lower still)

Renewing $264,613 at an interest rate 1% higher would increase the payment from $1,197.27 to $1,333.74.

Increasing your payment by 0.25% ($39.00 per month) each year would have you ahead of that curve.

In any event, this is an 11.5% increase in your payment. Five years from now, odds are your household income will have risen by at least $136.47.

This is not to say an increase of 1% is not meaningful, but with five years to prepare, it need not be.

In the event that interest rates continue to defy journalists’ and various analysts’ expectations, as they have done for the past six years, and remain low – while you increase your payment incrementally each year, then come renewal, you will truly be sitting in a plum position. Your mortgage payment amplified the point that your effective amortization will have reduced by several years and your mortgage balance will be decreasing at a more rapid pace than any mortgage balance has in the past 50 years.

Call your me today and talk about ways to take advantage of 50 year record low interest rates!