What can be used for a down payment?
 
Most lending institutions will accept:
 
- Registered Retirement Savings Plans: First Time Home Buyers may use an RRSP as a down payment up to a maximum amount of 25,000. This money is not subject to income tax if repaid within a specified time period. A copy of the RRSP statement is required.
 
- Down Payment As A Gift From Immediate Family: All or part of the minimum equity requirement may be provided by way of a financial gift, as long as all of the following conditions are met:
 
   a. the donor is an immediate relative of the borrower
 
   b. the Approved Lender has verified that the money is a genuine gift.
 
- Accumulated Savings: This may be verified in the form of a copy of your bank book confirming a balance equivalent to your down payment including the amount of deposit confirming the savings of said amount for a period of not less than 3 months. Should a substantial deposit have been made recently, the source of such funds, i.e. Bonds, Stocks, G.I.C.''s or RRSP receipts will also be required.
 
- Sale Of Existing Home: Here, you will be required to provide a copy of the unconditional Purchase and Sale Agreement on your existing property. This needs to be accompanied by a copy of the statement of Mortgage Balance on any mortgages presently held against the property. The difference between the sale price and the mortgages owing will substantiate the funds available for your down payment. If the funds are already in the account from the proceeds of the sale of the home, then the unconditional Purchase and Sale Agreement along with the solicitors trust ledger Should reflect this.
 
 
How much can I afford to pay for a home?
 
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 34% 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, and 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 lender''''s 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 34% 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.
 
 
What is a home inspection and should I have one done?
 
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.
 
 
What is the minimum down payment needed for a home?
 
A minimum down payment of 5% is required to purchase a home, subject to certain 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.
 
Lenders will generally accept a gift from a family member as an acceptable down payment provided a letter stating it is a true gift, not a loan, is signed by the donor. Where the mortgage loan insurance is provided by Canada Mortgage and Housing Corporation CMHC, the gift money must be in your possession before the application is sent in to CMHC for approval.
 
Mortgages with less than 20% down must have mortgage loan insurance provided by CMHC, Genworth Financial Canada or AIG United Guaranty.
 
 
What is mortgage loan insurance?
 
Mortgage loan insurance is insurance provided by Canada Mortgage and Housing Corporation CMHC, a crown corporation, Genworth Financial Canada or AIG United Guaranty, approved private corporations. 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 0.50% 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.
 
 
What is a conventional mortgage?
 
A conventional mortgage is usually one where the down payment is equal to 20% or more of the purchase price, a loan to value of or less than 80%, and does not normally require mortgage loan insurance. If your down payment is less than 20% of the purchase price, you will generally require a high-ratio mortgage with mortgage loan insurance.
 
 
How does bankruptcy affect qualification for a mortgage?
 
Depending on the circumstances surrounding your bankruptcy, generally some lenders would consider providing mortgage financing. 
 
 
Can I Still Apply For A Mortgage Even If I Have Poor Credit ?
 
Yes . At Canadawide Mortgages we have lenders who work around the value of the property and not your credit situation.
 
 
How will child support affect mortgage qualification?
 
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.
 
 
Can I get a mortgage to purchase a home?
 
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, CMHC, Genworth Financial and AIG United Guaranty, 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. 
 
 
Can I use gift funds as a down payment?
 
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, CMHC requires the gift money to be in the purchaser&rsquos possession before the application is sent in to them for approval. Where mortgage loan insurance is provided by Genworth Financial Canada or AIG United Guaranty this nay not be a requirement. 
 
 
What is a pre-approved mortgage?
 
A pre-approved mortgage provides an interest rate guarantee from a lender for a specified period of time usually 60 to 90 days and for a set amount of money. The pre-approval is calculated based on information provided by you and is generally subject to certain conditions being met before the mortgage is finalized. Conditions would usually be things like written employment and income confirmation and down payment from your own resources, for example.
 
Most successful real estate professionals will want to ensure you have a pre-approved mortgage in place before they take you out looking for a home. This is to ensure that they are showing you property within your affordable price range.
 
In summary, a pre-approved mortgage is one of the first steps a home buyer should take before beginning the buying process. 
 
 
How can you pay off your mortgage sooner?
 
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
  • Selecting a shorter amortization at renewal
 
How can you use your RRSP to help you buy your first home?
 
Today, about 50% of first-time home buyers use their RRSP savings to help finance a down payment. With the federal government''s Home Buyer''s Plan, you can use up to $25,000 in RRSP savings $50,000 for a couple to help pay for your down payment on your first home. You then have 15 years to repay your RRSP.
 
To qualify, the RRSP funds you''re using must be on deposit for at least 90 days. You''ll also need a signed agreement to buy a qualifying home.
 
Even if you have already saved for your down payment, it may make good financial sense to access your savings through the Home Buyer''s Plan. For example, if you had already saved $20,000 for a down payment - and assuming you still had enough contribution room in your RRSP for a contribution of that amount you could move your savings into a registered investment at least 90 days before your closing date. Then, simply withdraw the money through the Home Buyer''s Plan.
 
The advantage? Your $25,000 RRSP contribution will count as a tax deduction this year. Use any tax refund you receive to repay the RRSP or other expenses related to buying your home.
 
While using your RRSP for a down payment may help you buy a home sooner, it can also mean missing out on some tax-sheltered growth. So be sure to ask your financial planner whether this strategy makes sense for you, given your personal financial situation.
 
 
What are the costs associated with buying a home?
 
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%.
 
Secondly, you will require money for closing costs up to 2.5% of the basic purchase price.
 
If you want to have the home inspected by a professional building inspector - which we highly recommend - you will need to pay an inspection fee. The inspection may bring to light areas where repairs or maintenance are required and will assure you that the house is structurally sound. Usually the inspector will provide you with a written report. If they don&rsquot, then ask for one.
 
You will be responsible for paying the fees and disbursements for the lawyer or notary acting for you in the purchase of your home. We suggest you shop around before making your decision on who you are going to use, because fees for these services may vary significantly.
 
There are closing and adjustment costs, interest adjustment costs between buyer and seller and depending on where you live land transfer tax - a one-time tax based on a percentage of the purchase price of the property and/or mortgage amount.
 
Finally, you will be required to have property insurance in place by the closing date. And you will be responsible for the cost of moving.
 
Remember, there will be all kinds of things you&rsquoll have to purchase early on - appliances, garden tools, cleaning materials etc. So factor these expenses into your initial costs.
 
 
What should the length of my mortgage term be?
 
The length of mortgage terms varies widely - from six months right up to 25 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.
 
Before ing your mortgage term, we suggest you answer the following questions:
 
  • Do you plan to sell your house in the short-term without buying another? If so, a short mortgage term may be the best option.
  • Do you believe that interest rates have bottomed out and are not likely to drop more? If that''''s the case, a long mortgage term may be the right choice for you. Similarly, if you think rates are currently high, you may want to opt for a short to medium length mortgage term hoping that rates drop by the time your term expires.
  • Are you looking for security as a first-time home buyer? Then you may prefer a longer mortgage term, so that you can budget for and manage your monthly expenses.
  • Are you willing to follow interest rates closely and risk their being increased mortgage payments following a renewal? If that''''s the case, a short mortgage term may best suit your needs.

 

What are the monthly costs of owning a home?

 
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.
 
The Mortgage Payment
 
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 Taxes
 
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.
 
School Taxes
 
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.
 
Utilities
 
As a home owner, you''''ll be responsible for all utility bills including heating, gas, electricity, water, telephone and cable.
 
Maintenance and Upkeep
 
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&rsquos market value, enhances the neighbourhood and, depending on the kind of renovations you make could add to the worth of your property.
 
 
Should you go with a short or long-term mortgage?
 
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.
 
 
What is a fixed rate mortgage?
 
The interest rate on a fixed-rate mortgage is set for a pre-determined term - usually between 6 months to 25 years. This offers the security of knowing what you will be paying for the term ed.
 
 
What is a variable rate mortgage?
 
A mortgage in which payments are fixed for a period of one to two years although interest rates may fluctuate from month to month depending on market conditions. If interest rates go down, more of the payment goes towards reducing the principal if rates go up, a larger portion of the monthly payment goes towards covering the interest. Most open variable rate mortgages allow prepayment of any amount with certain minimums on any payment date, up to a maximum total amount per year.