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Remember, you'll rarely get the best fixed rate when you convert. Moreover, it's impossible to successfully time interest rates over the long run. For those reasons, do not go variable to save money in the short run, hoping to lock in "at the right time." Variables are a long-term strategy.

Semi-annual compounding costs you less than monthly compounding.

Typically you won't. Lenders know you'd have to break your mortgage and pay a penalty. Most use that as leverage to offer merely average rates on conversions.

Appraisal fees are usually $225 to $325, but can be significantly more based on location and property-type. There is usually no appraisal cost if your mortgage is insured.

Be sure you can afford your mortgage if rates jump 2 to 3 per cent.

This service ensures that your rate is still competitive and that your mortgage type still makes sense for your changing needs.

You should always have the email address and direct number of your primary mortgage contact.

The best lenders allow you to make prepayments any time during the year, in multiple instalments.

  • Examples include monthly, bi-weekly, weekly, and semi-monthly.
  • Accelerated payments (like "accelerated bi-weekly") are the equivalent of making one extra monthly payment per year. RBC Mortgage Specialist Jennifer Bissonnette notes: "A 25 year amortization can be reduced to 22 years simply choosing accelerated bi-weekly payments instead of monthly." Being mortgage-free three years sooner will cost you just $59 more every two weeks, she adds. That's on a $300,000 mortgage at 3.69 per cent with a 25-year amortization.

Your mortgage can be used as a key financial planning tool to accelerate your savings, create future equity and build your investment portfolio.

Proper term selection saves you way more than small rate differences, almost every time. Find an adviser that does more than glibly quote industry research or ask if you can "sleep at night" with a variable rate. At a minimum, your adviser should compare the estimated interest cost of various terms, given sample rate increases over the next five years.

Default insurance generally applies if you have less than 20 per cent equity. When you switch lenders with an insured mortgage, you must ensure that the new lender accepts that insurer's mortgages. CMHC and Genworth allow you the most flexibility when switching lenders.

  • Readvanceable mortgages let people with at least 20 per cent equity re-borrow principal that they've previously paid off. This feature usually involves a credit line linked to your mortgage. Readvanceables are good low-cost sources of funds for investment opportunities, a small business, renovations and so on. Readvanceables also let you pre-pay your mortgage without the fear of not having cash on hand in an emergency. Some people even use them as an alternative to a contingency fund.
  • There are two types of readvanceables: manual (where you must apply to re-borrow paid-down principal) or automatic (where every principal payment is instantly available to you if you need it).
  • Collateral charges help you avoid paying legal fees to refinance with your lender. But they also make it potentially more expensive to switch institutions at maturity. The reason: most lenders only pay switch fees on "standard charges," not collateral charges.
  • Some collateral charge lenders register your mortgage for 100 to 125 per cent of your property value. That lets you borrow more if your property value rises. The tradeoff: It prevents you from securing anything else against your property, like a second mortgage.
  • Nowadays you can fully service your mortgage online or by phone, but some people still like a branch presence.
  • Almost all lenders link to your chequing account to automatically withdraw mortgage payments and make prepayments. So it's no longer inconvenient to separate your mortgage and banking.
  • There are over 300 mortgage lenders in Canada. Don't fear small lenders that you've never heard of.

Don't underestimate your odds of moving. Look for good porting flexibility, especially if you're young, need job mobility and/or have a growing family. Some lenders let you port, but not increase. That forces you to pay a penalty if you buy a pricier house and need more financing. Note that credit unions typically prevent porting across provincial lines–a problem if you move out of province. If you have a line of credit attached to your mortgage, make sure you can easily port it as well and keep your rate.

"Hybrid mortgages," as they're called, let you lock part of your mortgage into a fixed rate, or various fixed rate components, while the other parts may float at a variable rate. The purpose is to diversify your rate risk. If you pick a mortgage with both long and short terms, remember that the lender may not offer you the best rates on the renewal of your shorter term. It knows you'd have to pay a penalty to get out of your longer term, making you less rate sensitive.

Most mortgages let you increase your ongoing payments by 15 to 20 per cent each year. Some go up to 100 per cent and/or offer double-up payments.

This is vital if you need to refinance or buy a more expensive home. Some lenders have a policy of charging penalties, or not giving you the best rates when you increase your mortgage.

Insurance premiums go up as you age, so you want insurance that's not tied to one lender. That way, you can keep your premiums as-is on your original mortgage amount, even if you change lenders. If you don't have portable creditor life insurance and get sick, your pre-existing condition may not be covered by the new lender's insurer.

Most lenders let you pay a penalty and get out of a closed mortgage early. Some no-frills lenders only let you out if you sell your property. Some don't let you discharge your mortgage at all, until the term is up.

You'll almost always pay a rate premium for an "open" mortgage with no penalties. If you plan to keep the mortgage for more than six months, you're often better off choosing a lower rate and paying the penalty to get out early (if needed).

This is useful if rates drop and you want to blend your rate with the new lower rate (which lowers your payment). It's also key if you're past the middle of your term and you want to mitigate the risk of higher rates at renewal. Beware of lenders that let you "blend and extend" but then bake a prepayment charge into your new mortgage rate.

If so, and rates rise, more of your payment goes to interest. If rates fall, less of your payment goes to interest. Note that most fixed payment variable mortgages have "trigger rates." If prime rate increases so much that it exceeds the trigger rate, the lender will boost your "fixed payment."

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. For more information on mortgage loan insurance premiums see ‘what is mortgage loan insurance?’

Pre-approvals often come with rate premiums.

"Payment vacations" can be handy in emergencies. But some lenders require that you make an equivalent pre-payment first. Remember that skipped payments aren't free. You still have to make all payments eventually, and interest accrues in the meantime.

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’s possession before the application is sent in to them for approval. Where mortgage loan insurance is provided by CapitalGenworth Financial Canada or AIG United Guaranty this nay not be a requirement. See ‘what is mortgage loan insurance?’ for further information.

Some lenders have minimum amortizations (like 18 years) while a handful of others still offer amortizations up to 35 years (assuming you have 20 per cent-plus equity).

The answer is commonly yes, but some lenders don't require title insurance, or they will pay it for you. It can be $150 to $300 or more.

Doing this can save interest as your spare cash lowers your mortgage balance, thus reducing the amount used to calculate your interest.

A 120 to 180 day early renewal can potentially reduce your rate risk. But beware of lenders that try to create false urgency and lock you into a "limited time" offer well before your renewal date.

Available only at credit unions who rebate a small portion of your interest paid. You can access these funds only after a vesting period, which can last 3-7 years or more.

Major banks and large non-bank lenders (like First National, Street Capital and the big credit unions) usually have the best online access

Unlike days gone by, you no longer need to bundle financial products to get the market's best mortgage rates. Nor do you need a "special relationship" with your banker. Simply shopping around and negotiating will get you the same mortgage discounts 99 per cent of the time

Some variable-rate mortgages prevent you from porting or blending your rate, prevent increases and have fewer prepayment privileges.

Just because a lender approves you doesn't mean you can safely afford the payments. Moreover, alternative down payment options may not be worth the trade-offs.

Most lenders now offer insured mortgages for both new and resale homes with lower down payment requirements than conventional mortgages – as low as 5%. Low down payment mortgages must be insured to cover potential default of payment, and their carrying costs are therefore higher than a conventional mortgage because they include the insurance premium. With all low down payment insured mortgages, you are responsible for:
Appraisal and legal fees, an application fee for the insurance, the payment of the mortgage default insurance premium (although the amount of the premium may be added to the mortgage amount).

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.

Today, about 50% of first-time home buyers use their RRSP savings to help finance a down payment. With the federal government’s Home Buyers’ Plan, you can use up to $20,000 in RRSP savings ($40,000 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 Buyers’ 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 Buyers’ Plan. The advantage? Your $20,000 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.

Depending on the circumstances surrounding your bankruptcy, generally some lenders would consider providing mortgage financing.

Some lenders, like ING, adjust their variable rates every three months, which keeps your rate lower longer. (This delay works against you if rates drop) A few lenders offer capped-rate variables with a ceiling on how high your rate can go. These are usually a bad deal if you do the math.

The longer the better. At least 60 days is preferable. Some lenders make you close your old property and new property on the same day, which can be unrealistic.

The best rates often come with only 30-45 day rate hold periods (aka. "quick close rates").

These questions apply to brokers because bankers and credit union reps generally don't shop around for you.

RateSpy.com is a tool I created to help mortgage shoppers benchmark the competitiveness of their rate. If you're within 0.10 per cent to 0.15 per cent of the lowest rates on this site (for the term you've selected), you're in good shape. Just be sure to compare apples to apples because the cheapest rates are often for no frills mortgages with potentially costly restrictions.

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.

Standard "closed" mortgages offer annual "lump-sum" prepayment options ranging from 10 to 30 per cent of the original mortgage amount.

Don't pay for more prepayments than you need (only 18 per cent of Canadians use lump-sum prepayments in any given year). But, just as importantly, don't underestimate the prepayment options you'll need. Prepayment flexibility can help you reduce a mortgage penalty, or it can save you interest in the event of a cash windfall.

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.

Fixed rate penalties are usually three months of interest or the interest rate differential (IRD), whichever is more. Variable-rate penalties are typically three months of interest based on your current rate.

Penalty calculations based on posted rates (i.e. rates higher than the rate you actually pay) can sometimes be several thousand dollars more expensive. This method is common at most large banks, and is their single greatest weakness. If you want to compare penalties, try some sample calculations using each lender's online penalty calculator.

Some lenders get tricky. For example, instead of a standard three-month interest penalty based on your current rate, some lenders charge three-month interest penalties based on posted rates. Others charge interest rate differential penalties when three-month interest charges normally apply. A few even ding you with 12-month interest penalties or penalties equal to three per cent of your balance. Avoid such mortgages unless the rate savings is significant.

Some lenders restrict you from using your prepayment options for this purpose, if you do so within 30 days of discharging the mortgage. Some lenders, like RBC, automatically apply unused prepayment privileges to lower your penalty when refinancing–a cost-saving feature.

Only a handful of lenders offer this option, which gives you variable-rate type features without committing to a long term.

Very few lenders do this, but it can't hurt to ask.

Usually it's a pro-rated amount but some lenders make you repay 100 per cent of the cash back, even if you break the mortgage one day early. Have your mortgage adviser calculate your "effective rate," including the cash back. That tells you how much of a rate premium you're paying for the cash.

Lenders will often guarantee an interest rate to you as much as 90 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.

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.

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’t, 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’ll have to purchase early on – appliances, garden tools, cleaning materials etc. So factor these expenses into your initial costs.

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’s market value, enhances the neighbourhood and, depending on the kind of renovations you make could add to the worth of your property.

How long have you been a mortgage adviser? (The more experience, the less chance for costly mistakes. Look for two years minimum experience.) Do you specialize in mortgages or are you a generalist who sells many financial products but is a master of none? Have you closed over $10-million of financing in the last 12 months? (That's a minimum rule of thumb for professional mortgage advisers.) Are you the right mortgage adviser for me?<b> (Read this)</b>

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.

Very few home buyers have the cash available to buy a home outright. Most of us will turn to a financial institution for a mortgage the first step in a potentially long-standing relationship. But even with a mortgage, you will need to raise the money for a down payment. The down payment is that portion of the purchase price you furnish yourself. The amount of the down payment (which represents your financial stake, or the equity in your new home) should be determined well before you start house hunting. The larger the down payment, the less your home costs in the long run. With a smaller mortgage, interest costs will be lower and over time this will add up to significant savings.

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.

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.

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.

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.

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.

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 selecting your mortgage term, we suggest you answer the following questions:

1. 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.

2. 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.

3. 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.

4. 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.

The best lenders allow you to make prepayments any time during the year, in multiple instalments.

Most lenders now offer insured mortgages for both new and resale homes with lower down payment requirements than conventional mortgages - as low as 5%. Low down payment mortgages must be insured to cover potential default of payment, and their carrying costs are therefore higher than a conventional mortgage because they include the insurance premium.

With all low down payment insured mortgages, you are responsible for:

Appraisal and legal fees

An application fee for the insurance

Paying the mortgage default insurance premium, although the amount of the premium may be added to the mortgage amount

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.

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.

The simplest way to accomplish this is to decrease your principal; thus, decreasing your interest obligation. There are a number of very feasible approaches to performing this task:
Increase Payment Frequency

Instead of paying monthly, consider paying bi-weekly. This simple step is very feasible for most working Canadians who are paid bi-weekly. It can cut your mortgage amortization by up to five years, and can save you tens of thousands of dollars.
Prepay

Use every advantage that the term of your mortgage offers you to prepay your mortgage. One way to do this would be to use your RRSP tax refund to make a yearly pre-payment.
Increase Payments

Round up your bi-weekly payment. For example, if you have a bi-weekly payment of $531.59, round your payment to an even $550.00. This will have a profound effect on the interest paid, and the amortization of the mortgage.

There are numerous 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

Today, about 50% of first-time home buyers use their RRSP savings to help finance a down payment. With the federal government's Home Buyers' Plan, you can use up to $20,000 in RRSP savings ($40,000 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 Buyers' 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 Buyers' Plan.

The advantage? Your $20,000 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.

Depending on the circumstances surrounding your bankruptcy, generally lenders would consider providing mortgage financing.

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 a 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 and lines of credit. 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.

According to the guidelines of the Canadian Mortgage and Housing Corporation (CMHC), one must have a minimum down payment of at least 5% of the total cost of the prospective property. With a down payment between 5 - 24.99%, one's mortgage is deemed "high-ratio". A high ratio mortgage is subject to a CMHC premium in accordance with the following schedule:

With a down payment of 25% or greater, the mortgage is deemed "conventional". A conventional mortgage is not subject to any CMHC fees. Thus, a larger down payment represents a two-fold advantage to the prospective homebuyer. First, the prospective homebuyer will avoid CMHC premiums with 25% down payment. Secondly, a larger down payment will relate into smaller monthly payments, or a shorter amortization; both of which lead to interest savings over the life of the mortgage.

  • Yes, you can buy a home with a down payment of less than 10%:
  • Single-family dwelling: 5%
  • Two-unit dwelling: 7.5%

Minimum equity of 5% from your own resources is required. Gift down payments from an immediate relative are acceptable.

Maximum house price ceilings apply for 5% down payment. Limits of $125,000, $175,000 or $300,000 apply to locations throughout Canada.

Table of Insurance Premiums

Loan amount (Relative to Home Equity) CMHC Fee
Up to and including 65% 0.50%
Up to and including 75% 0.65%
Up to and including 80% 1.00%
Up to and including 85% 1.75%
Up to and including 90% 2.00%
Up to and including 95% 3.25%

<p>Most lenders now offer insured mortgages for both new and resale homes with lower down payment requirements than conventional mortgages - as low as 5%. Low down payment mortgages must be insured to cover potential default of payment, and their carrying costs are therefore higher than a conventional mortgage because they include the insurance premium.</p>
<p>With all low down payment insured mortgages, you are responsible for:</p>
<p>Appraisal and legal fees</p>
<p>An application fee for the insurance</p>
<p>Paying the mortgage default insurance premium, although the amount of the premium may be added to the mortgage amount</p>

I've found that affordability is probably the single biggest concern of today's first-time homebuyers. Given the wide range of media coverage regularly devoted to the issue, it's not surprising that many young families wonder how long it will take them to afford their first home.

The amount of a mortgage for which one can qualify is generally founded in what are known as qualification ratios: Gross Debt Service ratio and Total Debt Service ratio, or "GDS" and "TDS". Lenders evaluate one's monthly income, as well as their monthly debt obligations, to determine a fair and feasible amount of mortgage available to the prospective borrower. This figure is calculated via their GDS and TDS guidelines. Generally, lenders will have an acceptable Gross Debt Service ratio ranging from 28-32%. In other words, 28-32% of one's monthly household income can be reasonably set aside for one's mortgage payment, in the eyes of the lender. Furthermore, most lenders will have an acceptable Total Debt Service ratio of 36-40%. In other words, 36-40% of one's monthly household income can be reasonably set aside for one's total debt obligations, including their impending mortgage payment.

My advice: Don't sell yourself short. Talk to a mortgage broker or lender. There are many financing options available today, and some include low down payments. Your lender will help find an option that fits your budget, and you may be surprised at just how much home you can afford.

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.

Lenders will often guarantee an interest rate to you as much as 90 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 renewing mortgage than you need to.

A longer-term mortgage is worth considering if you have a busy life and don't have time to watch mortgage rates. 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.

On the day one actually purchases their new home they are required to pay certain costs associated with this endeavour. In addition to one's down payment, the prepaid property tax and homeowner's insurance premiums there will be other fees to consider:

  • Survey charges
  • Land transfer taxes
  • Attorney fees and Disbursements
  • Garbage disposal fees
  • Title insurance
  • Fire insurance

Don't forget that your purchase will most likely be subject to the Goods and Services Tax. Please ask me, Doug Blackstock, about this and I will have an answer for you.

If you plan to sell your home without the aid of a real estate agent, then you must seriously consider working with a mortgage agent. Even though you are not buying a home or getting a loan, it is the mortgage agent that actually puts the entire transaction together for a smooth closing after you and the buyer decide on the terms of the contract.

First and foremost, you have to make sure you have enough money for a down payment - the portion of the purchase price that you pay yourself.

To qualify for a conventional mortgage you will need a down payment of 25% or more. However, you can qualify for a low down payment insured mortgage with a down payment as low as 5%.

Second, you will require money for closing costs (approximately 2.5% of the basic purchase price).

Third, if you want to have the home inspected by a professional building inspector - which I 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't, then ask for one.

Fourth, 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 to use, because fees for these services may vary significantly.

Additionally, 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'll have to purchase early on - appliances, garden tools, cleaning materials etc. So factor these expenses into your initial costs.

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's market value, enhances the neighbourhood and, depending on the kind of renovations you make, could add to the worth of your property.

Don't accept it. You have no obligation to accept any of the offers that are made to you by any lenders.

Your original offer is often rejected for one reason or another. But do not let that stop you. When an offer is rejected, you begin negotiating. If you find that daunting, don't worry; I, Doug Blackstock, can help you. You may have to offer more money, but you may ask the seller to cover some or all of your closing costs or to make repairs that would not normally be expected. Often, negotiations on a price go back and forth several times before a deal is made. Just remember, do not get so caught up in negotiations that you lose sight of what you really want and can afford! I can help you keep on track.

A conventional mortgage is usually one where the down payment is equal to 25% or more of the purchase price, a loan value of or less than 75%, and does not normally require mortgage loan insurance.

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 selected.

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.

Selecting a 2, 3 or 5 year, open Variable Interest Rate Mortgage may provide you with access to interest rates as low or lower than a banks Prime Rate - plus gain the flexibility to be able to increase your payments to any amount. You can also pay off all or part of your mortgage without penalty (an administration fee applies in year one and two only). That means lump sum payments of any amount can be made at any time. You can transfer your mortgage to any bank at any time with no penalty ($200-$300.00 discharge penalty applies). Your monthly payments will remain the same, but the portion of the payment that's applied to reducing the principal can vary. When interest rates are on their way down, a variable-rate mortgage could end up saving you thousands of dollars. But if rates go up, more of each monthly payment will go toward paying the interest. When interest rates fall, more of your set monthly payment goes toward paying off your mortgage principal and less towards interest. That means your mortgage gets paid off faster. Should interest rates rise, more is applied toward interest.

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. Some open variable rate mortgages allow prepayment of any amount (with certain minimums) on any payment date.

A minimum down payment of 5% is required to purchase a home, subject to certain maximum price restrictions. Any purchase price in excess of $250,000 requires a minimum of 10% as a down payment. 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 25% down must have mortgage loan insurance provided by either CMHC or GE.

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 75%. 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.

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.

The "term" of the mortgage should not be confused with the "amortization". The amortization of the mortgage refers to the entire length of time that it will take for the mortgage to be paid and the house to be thusly, "free and clear". The term is the period for which your current payment obligations are valid. In other words, you may choose a five-year term and a 25-year amortization. This would mean that your interest rate, your payments, and your pre-payment options would be the same for the next five years. At the end of these five years you would re-negotiate the term, and the amortization would now be 20 years. Fixed rate Mortgages can be "closed" or "open".

Open Mortgages

Allow one to pre-pay some, or all of, their outstanding mortgage obligation at any time, without penalty. Generally, open mortgages have a six-month, and a one-year term option with higher interest rates than closed mortgages of the same term length.

Closed Mortgages

Generally, closed mortgages are offered in terms ranging from six months to ten years. Generally, closed mortgages offer more stringent pre-payment options subject to various pre-set regulations. For most people, such pre-payment options can be vital to reducing the amortization of one's mortgage and should be properly discussed with one's lender/agent.

 

A mortgage agent is an independent real estate financing professional who specializes in the origination of residential and/or commercial mortgages. Typically they do not fund or service the loan itself, but instead, they act as an agent or manager for capital sources who act as loan wholesalers.

A mortgage agent is also an independent contractor working, on average, with 40 wholesale lenders at any one time. By combining professional expertise with direct access to hundreds of loan products, an agent provides consumers the most efficient and cost-effective method of offering suitable financing options tailored to the consumer's specific financial goals.

Protecting purchasers against loss is accomplished by the issuance of a title insurance policy, which states that if the status of the title to a parcel of real property is other than as represented, and if the insured suffers a loss as a result of title defect, the insurer will reimburse the insured for that loss and any related legal expenses, up to the face amount of the policy.

Title insurance differs significantly from other forms of insurance. While the functions of most other forms of insurance is to guard against future events (such as death or accidents or in the case of property, fire or flood), the primary purpose of title insurance is to eliminate risks and prevent losses caused by events that have happened in the past. To achieve this goal, title insurers perform an extensive search of the public records to determine whether there are any adverse claims to the subject of real estate. Those claims are either eliminated prior to the issuance of a title policy or their existence is exempted from coverage.

Good city services, nice parks and playground facilities, convenient shopping and transportation, a track record of sound development and good planning--these are just a few considerations that are important to many people when they choose a community in which to live.

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 selecting your mortgage term, I 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 increased mortgage payments following a renewal? If that's the case, a short mortgage term may best suit your needs.

Buying a home is an exciting time. But, as one of the largest purchases you're likely to make, it can also be seen as one of your best long-term investments - so it's important that you get it right. This means doing your homework and making sure that the property you will eventually buy is the right one for you in terms of price, location, value, size and lifestyle.

Once you've found a house you like and have the financial resources to buy it, you must decide how much to offer. In putting together your actual offer, consider the following factors:

The Advertised Price Of The House

Treat this as only a rough estimate of what the seller would like to receive, and recognize that different sellers price houses very differently. Some sellers deliberately overprice, others ask for pretty close to what they hope to get and a few (often the cleverest) under-price their houses in the hope that potential buyers will compete and overbid.

What You Can Afford

What you can pay for a house will probably depend on how much you already have in cash and how much you can reasonably borrow in a mortgage. When figuring out the cost of the house, be sure to factor in your share of the closing costs, which will be about 2%-5% of the purchase price.

Pre-qualification

Pre-qualification is the first step in obtaining the mortgage that you need to purchase the home of your dreams. It's a simple step where an institution examines your financial situation in terms of income and liabilities in order to establish your lending potential in terms of GDS and TDS.

This is accomplished through the review of a simple application process that includes the pertinent information. It is important to note that this is not the same as a pre-approval, as credit has not been reviewed and income has not been verified and funds for closing are not verified.

Pre-approval

Refers to the verification of the applicant's ability to borrow. A pre-approval gives a potential home-buyer the advantage of knowing how large a mortgage they will qualify for and the ability to use this information in negotiating the final selling price of a home.

Parts of the pre-approval process include an analysis of the borrower's credit history, a review of the client's employment history, and a verification of down payment funds.

Full Loan Approval

Full loan approval occurs when the lender has underwritten the application, and is satisfied that all conditions have been met. Furthermore, full loan approval refers to the approval of a mortgage for a specific property. Once full approval has been received, arrangements will be made by the lender to have the funds appropriately forwarded.Wah

 The best time to look for a mortgage is before you look for a house. This enables you to determine the amount of money you can borrow and how much house you can afford.

real estate appraiser is an impartial, independent third party who provides an appraisal -- an objective report on the estimate of value of real estate. The appraisal is supported by the collection and analysis of data. Most licensed appraisers will provide an advance estimate of the cost to perform the appraisal, and many will commit to a fixed fee for the appraisal. It is always wise to obtain a written contract for services that includes a description.

First, get psychologically prepared. Detach yourself emotionally from your home and start viewing it as a commodity you want to sell. This is difficult for most sellers whose identities are often reflected in their homes. However, it's important to be completely candid with yourself about how your home should look when it goes on the market.

Property appearance and condition play a bigger role in the home sale process today than a decade ago. Today's home buyers are usually savvy, choosy and short of time. They'll pay a premium for homes they can move right into.

The probable selling price for your home will depend on various factors, including: how many buyers are looking for homes like yours, how many other homes like yours are currently on the market, and the condition of your home relative to your competition. You can't control the supply and demand factors affecting the market, but you can control how your home looks when it hits the market.

"Curb appeal" is the common real estate term for everything prospective buyers can see from the street that might make them want to turn in and take a look. Improving curb appeal is critical to generating traffic. While it does take time, it needn't be expensive, provided you keep two key words in mind: neat and neutral.

Neatness sells. New paint, an immaculate lawn, picture-perfect shrubbery, a newly sealed driveway, potted plants at the front door - put them all together, and drive-by shoppers will probably want to see the rest of the house.

Hand in hand with neatness is neutrality. If you're going to repaint, stick to light, neutral colors. Keep the yard free of gardening tools and kids' toys. Remember, when a family looks at a house, they're trying to paint a picture of what it would be like as their home. You want to give them as clean a canvas as possible.

Certain home improvements that are useful to almost everyone have been proven to add value and/or speed the sale of houses. These include adding central air conditioning to the heating system, building a deck or patio, basement finishing, some kitchen remodelling (updating colors on cabinets, countertops, appliances, panels, etc.), and new floor and/or wall coverings, especially in bathrooms. Improvements that return less than what they cost are generally items that appeal to personal tastes, like adding fireplaces, wet bars, and swimming pools, or converting the garage into an extra room.

The challenge that comes with any home improvement designed to help sell your house is recouping your investment. There's always the risk of over-improving your house - that is, putting more money into it than neighbourhood prices will support.

After years of living in a home, it's easy to fall into a habit of overlooking home maintenance chores. If there's no urgency, many homeowners procrastinate. Often problems don't get fixed until a major disaster occurs, like a roof leak in the middle of a hurricane.

Deferred home maintenance can become a problem when you decide to sell. Most buyers want to buy homes they can move right into without having to make a lot of repairs. Sellers need to decide before they put their home on the market whether to fix deferred repairs or leave the work for a future buyer to do.

Usually sellers who have the time, money and inclination will do better on the sale of their home if they fix problems before they list their home for sale. A home that is in move-in condition is one that appeals to a broad audience of prospective homebuyers. First-time homebuyers, and buyers with busy lifestyles, often won't consider buying a home that needs a lot of work. They haven't the time or experience to deal with the problems.

At closing, you will most likely sit at a table with me, the broker for the buyer, probably the buyer, and a closing agent.

The closing agent will have a stack of papers for you and the buyer to sign. While he or she will give you a basic explanation of each paper, you may want to take the time to read each one and/or consult with me to make sure you know exactly what you are signing. After all, this is a large amount of money you are committing to pay for many years!

Don't hesitate to ask questions, I will be happy to answer them to the best of my ability.

A home inspection is an examination of the structure and systems: heating and air conditioning, plumbing and electrical, roof, attic, insulation, walls, floors, ceilings, windows, doors, foundation, and basement. If the inspector finds problems, it doesn't mean you can't sell your house, but you can be certain a buyer's inspector will find them too. Finding problems before you list your property can avoid accusations of misrepresentation, low offers, and even lawsuits. A home inspection can also help sellers comply with new, tougher disclosure laws.

You may or may not want to make the repairs and you can always adjust the selling price or contract terms if the problems are major.
This information will also help you determine what type of financing will or will not be available for your home. You can find home inspectors in the Yellow Pages under "Home Inspection Service," or I, Doug Blackstock, can recommend several in your area.

First, make your house look as clean and spacious as possible. Remember that people may look behind your doors - closet and crawlspace doors as well as those to the bedrooms and bathrooms. So get rid of all the clutter; have that garage sale and haul away the leftovers.

After you've cleaned, try to correct any cosmetic flaws you've noticed. Paint rooms that need it, re-grout tile walls and floors, remove or replace any worn-out carpets. Replace dated faucets, light fixtures, and the handles and knobs on your kitchen drawers and cabinets. Finally, as with the outside of your house, try to make it easy for prospective buyers to imagine your house as their home. Clear as much from your walls, shelves, and countertops as you can. Give your prospective buyers plenty of room to dream.

The key thing is determining how much your property is actually worth on the market -- called "appraising" a house's value. The most important factor that determines a house's value is recent sale prices of similar properties in the neighbourhood.

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