Mortgage Blog

Your First Home Mortgage

October 30, 2012 | Posted by: Laurie Anne Faulkner

Your First Home!

When you’re in the middle of a hectic search for the right home, it’s important that you don’t buy a property that’s more than you can afford.

There are some time-tested strategies that home buyers can use to make sure they don’t overextend.

When getting a mortgage there are a few tips to follow to boost your affordability:

You should get a mortgage pre-approval so you know what you can afford.

You should make a budget to ensure you have accounted for any unexpected expenses that buying a home will incur and know what to expect in closing costs.

If you are looking to get a fixed-rate mortgage, you should get a rate hold to protect against rate fluctuations while you house hunt. I can arrange a 120 day rate hold and even up to 6 months with some lenders.

You should think about increasing the size of your down payment. With a larger than 20% downpayment, you will avoid “high ratio” mortgage insurance fees.

The federal Home Buyers’ Plan allows you and your spouse to withdraw up to $25,000 each from your RRSPs to buy or build a qualifying home without tax penalties.

You should find one Realtor that you trust to look after your best interest and work with them – they will commit to you as well and you will be in better hands than shopping around on your own.

You should make pre-payments on your mortgage to reduce interest costs over the life of the mortgage. Even small prepayments near the beginning of the mortgage can have a big impact on how much interest you pay over the life of the mortgage.

To determine how much you qualify for, the amount and origin of your down payment should be stated upfront in the application. This is because lending criteria can change depending on how much you have available and where it comes from.

When the amount of your down payment is less than 20% of the purchase price, your mortgage is considered high-ratio. All high-ratio mortgages need to be insured and are done so by either the Canadian Mortgage and Housing Corporation (CMHC) or Genworth Fianacial. This insurance allows you to buy with as little as 5% down and is used to protect the lender in cases of default. The insurance premiums are determined at 5% intervals and are added to the mortgage, so they are not an out-of-pocket expense. To qualify for this insurance, your qualifications and the property you are buying must meet the insurer’s guidelines.

When the amount of your down payment is equal to or more than 20% of the purchase price, your mortgage is considered conventional. No insurance is required for a conventional mortgage. With conventional financing, lending guidelines tend to be more relaxed because you don’t need to worry about insurer stipulations.

Lenders and insurers require that your down payment be derived from non-borrowed resources.

Property (Municipal) Taxes

In many areas (including Victoria) property taxes are collected in the middle of the calendar year (July 1st). On this date, taxes are collected for the preceding six months (i.e. back to the previous January) and for the upcoming six months (i.e. until the end of December). If you are an owner occupier, you can claim the provincial Home Owners Grant each year.

The collection of property taxes generally depends upon the type of mortgage you have.

With CMHC-insured mortgages, property taxes are collected by the mortgage lender and are included in your monthly mortgage payment. CMHC requires verification from the lender that the taxes are indeed paid, and this is the preferred way for them to prove it.

With conventional mortgages, you usually have the choice to have the lender collect the taxes, or pay them on your own.

I can let you know about other ways to make sure that your mortgage debt is manageable.

Call me and we can start planning today 250-588-2288 Laurie Anne Faulkner

View More Information on First Time Home Buyers

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