Arrange a Mortgage
Money makes the world go round and a mortgage gives you the power to
buy a home. This isn’t the most fun step in buying a home, but it’s
Who do you talk to?
There are hundreds of banks, credit unions and other lenders out there
who would love your monthly mortgage payments. So talk to everybody. Now
is not the time to be money-shy! Talk to your banker and call around to
other banks. Ask people you know. REALTORS® are very knowledgeable
about mortgages and have lots of good advice.
Call a mortgage broker
Mortgage brokers are another great resource. They find low rates for
a living and they usually don’t get paid unless you sign a mortgage
through them, so they’re highly motivated to get you the best deal.
Your best mortgage might be the seller’s mortgage.
You can sometimes take over or ‘assume’ the seller’s
mortgage. This is a great idea if the seller is locked into a lower interest
rate than you can get right now. Your REALTOR® can help you.
- Mortgage term - Typically from six months to five years, the ‘term’ refers
to how long the bank has agreed to lend you the money. At the end of the
term, you usually renegotiate a new term.
- Amortization - The length of time it will take you to pay off the
whole mortgage. Often as long as 25 years, if you don’t accelerate
your payments. The longer your amortization, the lower your monthly payments,
but the more you pay in interest over time.
- Interest rates - Interest is the cost of borrowing money and the
interest rate tells you exactly how much. Using this mortgage calculator,
check the difference between borrowing $100 000 at 6% and at 9% at the
same amortization. Surprising, no? That interest rate not only affects
how much you pay, it also affects how much you can borrow. So remember
to keep searching for the best rate!
How big a down payment?
You want as small a mortgage as possible, which means making the biggest
down payment possible. Just remember to set money aside for all the fees
associated with buying a home. Not to mention moving, repairs, renovations,
new furniture. Think ahead.
The RRSP Home Buyer's Plan
A little sweet relief. If you're a first-time home buyer with money in an RRSP, you can withdraw up to $25,000 (Effective January 27, 2009 the withdrawal maximum increased to $25,000 from $20,000) without paying any income tax. If your spouse is also eligible, that's $50,000. Ask your REALTOR® how to best take advantage of this plan.
Lock into an interest rate. For how long?
It’s a tough question. What if you ‘lock in’ for five
years and rates go into a period of decline? That could mean you’re
stuck paying more than you had to for a long time. But if rates were to
steadily climb over the next five years, locking in for five years now
would be a great move. For many, a long term mortgage offers peace of mind
in knowing that their mortgage payments will stay the same for several
years. Your REALTOR® will have a lot of good advice.
What you need to apply for a mortgage
- Letter of employment confirmation - Ask your employer for a
letter that confirms your position, your pay and how many years you’ve
been with the company.
- List your assets - Your car, stocks, bonds, GICs. Show which
assets will be used for your down payment.
- List your liabilities - Car payments, student loans, credit
card debt. List all the money you owe and note how you’re paying
- Social Insurance Number - And your chequing account number,
and your lawyer’s contact information
What you need to know about buying or selling your home
Information about the house you want to buy
home is your security on the mortgage, so the lender wants to know all
about it. Don’t
forget these extra costs. Face your new financial responsibilities head-on,
and you may even dodge some of them. And then won’t you look smart!
Some mortgage lenders
charge a fee to process your application. Many lenders will agree to waive
this fee, so make sure you ask!
Your mortgage lender
may need to have your new home appraised by a professional and they often
pass the bill on to you. Sometimes your lender will also waive this fee.
Again, it doesn’t hurt to ask.
Mortgage broker’s fee
In most cases, the lending institution pays the broker’s fees. Occasionally, your mortgage broker will charge a fee that is payable on your closing date. Your broker should tell you if there is a fee for their services.
Land survey fee
Lenders may require a survey of your property.
Lenders will often accept an existing survey. Get your lawyer on the case.
Home inspection fee
A home inspection is so important, we devoted
an entire Step to it. Avoid surprises and protect yourself... this is money
Mortgage lenders require you carry fire and extended-coverage
insurance because your home is the security deposit on the mortgage. Often
you can have these payments added to your monthly mortgage payments. Shop
Not mandatory, but it protects you from all sorts
of fraud and potential errors surrounding the title to your land. It’s
normally a few hundred dollars. Ask your lawyer for details.
Your lawyer is vital to the home-buying process. You’ll
pay legal fees for their time and “disbursements” which are
the costs involved in title searches, drawing up the title deed and preparing
The previous owner may have paid property tax or
utilities in advance and they want to be credited for those payments.
Ask your REALTOR® and lawyer what might come up on the closing date.
Maintenance and utility costs
Just a reminder, you now have more
regular monthly payments in the form of property tax, utilities. Maybe
some repairs are on the horizon.
Land Transfer Tax
Ask your REALTOR® or lawyer to calculate
The GST and new homes
Resale homes usually don’t involve
GST, but new homes do. If you intend to live in your new home (instead
of renting it out) there is some relief. Homes costing $350 000 or less
get a 36% rebate. Homes over $450 000 do not qualify for this rebate.
Next Step: Find Your REALTOR®