Shane Coxworth &  Chris Larmer

Shane Coxworth & Chris Larmer

Sales Representatives

Coldwell Banker - R.M.R. Real Estate, Brokerage*

Mobile:
905-903-7965 or 416-500-6377
Office:
905-852-4338
Toll Free:
866-666-2696
Email Me
Shane Coxworth &  Chris Larmer

Shane Coxworth & Chris Larmer

Sales Representatives

Coldwell Banker - R.M.R. Real Estate, Brokerage*

Mobile:
905-903-7965 or 416-500-6377
Office:
905-852-4338
Toll Free:
866-666-2696
Email Me

Preparing For A Mortgage

 

STEP 1 - CREDIT SCORE

It doesn't matter if you are applying for a mortgage through a bank, credit union or a mortgage broker, if you are putting 20% or less down the minimum credit score you are looking to have is 680 for at least one borrower.   If you can afford to put more than 20% down the score of 680 is not required.

If you need to improve your credit score here are a few tips you can use.

1) Pay your bills in full and on time.   If you cannot pay the bill in full make sure you at least pay the minimum required.

2) Pay off your depts as quickly as you can.

3) Keep your balances on your credit cards as low as possible and stay within your cards limit.

4) Try and limit the amount of applications for credit cards and loans you make.

5) If you are struggling you can always check with alternative lenders (also known as B lenders).

 

STEP 2 - THE DOWN PAYMENT

When purchasing a home with a mortgage the ideal amount of your down payment is 20%.  A down payment of less than 20% is permitted, however any purchaser with less than a 20% down payment will be required to purchase default insurance on the mortgage.   The minimum down payment is 5%.

Here you can visit the Government of Canada website for:

How much you need for a down payment

https://www.canada.ca/en/financial-consumer-agency/services/mortgages/down-payment.html

Your down payment can come from your own savings or your RRSP.  For potential first-time home buyers the Canadian government also has programs, plans and incentives to help you purchase your home.

*Taken from the above government of Canada website

Home Buyers’ Plan (HBP)

To help you come up with a down payment, you may be eligible for the HBP. The HBP allows you to withdraw up to $35,000, tax-free, from your Registered Retirement Savings Plan (RRSP). You must use this amount to buy or build a qualifying home. You have up to 15 years to repay the amounts you withdraw.

Before you sign up for the HBP, consider:

  • if you can make the repayments
  • if withdrawing funds impacts your retirement savings.

Keep in mind:

  • not making the repayments could end up costing you a lot of money in income tax
  • you may lose out on any growth in your RRSP while the funds are withdrawn.

 

First-Time Home Buyer Incentive

First-time home buyers may be eligible for a shared equity mortgage with the Government of Canada. With a shared equity mortgage, the government offers you financing without interest. This helps reduce your monthly mortgage payment without increasing your down payment.

Through the First-Time Home Buyer Incentive, the Government of Canada offers to a first-time home buyer:

  • 5% of the purchase price of an existing home
  • 5% or 10% of the purchase price of a newly constructed home

You need to repay the incentive after 25 years, or when you sell the property. You can also repay it at any time without a prepayment penalty.

The property’s fair market value at the time of repayment will determine the repayment amount.

 

STEP 3 - MORTGAGE OPTIONS

The mortgage rate is only one of the many features in selecting the best mortgage product that meets your financial goals.   Ask your mortgage agent on the best mortgage features to achieve your dream of home ownership

 

STEP 4 - PAPERWORK YOU NEED

Your mortgage agent will ask you to provide a standard package of documents to apply for your mortgage.

The standard list usually includes the following:

  • Government-issued personal identification.
  • One month of recent pay stubs from any applicants who will be listed on the loan.
  • A letter of employment.
  • Three months of bank account statements.
  • Your down payment amount (minimum 5%).
  • Documentation to explain any unusual (generally non-payroll) large deposits or withdrawals.
  • If incorporated, your most recent two years’ worth of personal CRA tax filings and financials.

 

STEP 5 - PRE-APPROVAL

As exciting as it is to get out looking at houses it is important to be pre-approved.  Your mortgage agent will ensure you get the best mortgage and features for your needs.  A pre-approval can also lock your rate in for a selected number of days (based on the lender) and shows the seller that you are in a position where securing financing will not be an issue which can help when in a competitive market.   Remember there is no point looking at houses until you know how much you can afford to spend.  

 

STEP 6 - YOUR BUDGET

It is important to have a budget in place.   It is possible to be house rich but cash poor.  Your mortgage payment is not your only expense.  As a home owner you need to be prepared for a list of expenses.   

The following is a example of SOME expenses you will have to be prepared for

  • Property Taxes (can be incorporated with your mortgage).
  • House insurance.
  • Gas, water, hydro bills.
  • Cable/Satellite and internet.
  • Home maintenance.

 

CLOSING COSTS

When planning your down payment make sure you also have money set aside for closing costs.  Closing costs can typically be 1-4% of your purchase price.

 

Closing costs typically consist of:

  • Home inspection.
  • Land transfer tax.  (*for calculating land transfer tax see below)
  • Legal Fees.
  • Appraisals.
  • Moving expenses (don't forget the movers tip)

 

Calculating Land Transfer Tax

Effective January 1, 2017, the tax rates for land transfer tax will depend on the date of the agreement of purchase and sale.

If an agreement of purchase and sale is entered into after November 14, 2016, and registration or the disposition occurs on or after January 1, 2017, the tax rates on the value of the consideration are as follows:

  • amounts up to and including $55,000: 0.5%
  • amounts exceeding $55,000, up to and including $250,000: 1.0%
  • amounts exceeding $250,000, up to and including $400,000: 1.5%
  • amounts exceeding $400,000: 2.0%
  • amounts exceeding $2,000,000, where the land contains one or two single family residences: 2.5%.

 

You can also visit https://trreb.ca/index.php/buying/calculators/residential to calculate how much tax you would owe.

 

First-time homebuyers of an eligible home may be eligible for a refund of all or part of the tax.  Click this link https://www.fin.gov.on.ca/en/bulletins/ltt/1_2008.html to learn about the Land Transfer Tax Refunds for First-Time Homebuyers.

 

 

STEP 7 - THE FUN BEGINS

With the first 6 steps completed we can now start shopping for your new home.  As your REALTOR® we will sit down with you and discuss your needs and wants in your new home then create a plan of searching, viewing and offering on the home you want.

If you need help with steps 1-6 we would be happy to recommend a mortgage agent to you.  We work with a number of great ones and can put you in touch with one TODAY!

 

VISIT US AT http://www.PowerofBluex2.ca

     

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