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Arrange Financing
Get a Mortgage Pre-Approval An important ingredient in a successful home search is knowing how much you can afford. You don’t want to fall in love with a property only to find out it’s outside your price range. That’s why I recommend getting a Mortgage Pre-Approval. This is a document from your bank or other lender stating how much of a mortgage they are willing to give you. There are two advantages to getting this pre-approval:
How Much Home Can You Afford? Banks and lenders use specific criteria to determine how much of a mortgage they’re willing to offer you. They look at your income, expenses, credit history and employment status, as well as the down payment you plan to make on a home. It may seem like a scary process, but it is actually straightforward. You can usually get a Mortgage Pre-Approval in a day. You’ll be glad that you did. By knowing what you can afford, you can confidently shop within that price range. For example, if you qualify for a $250,000 mortgage, and you have another $100,000 available as a down payment, you can look for homes in the $350,000 range. Have questions about arranging financing? Please submit the form or call me. |
Mortgages
Mortgage Types
Conventional and High Ratio Mortgages
To qualify for a conventional mortgage, you simply have to have a 20% down payment of the purchase price, with the mortgage not exceeding 80% of the appraised value.
If your down payment is less than 20%, then you qualify for a high-ratio mortgage. This type of mortgage requires loan insurance, which can cost an additional 0.5% to 3.75% of the mortgage amount. With this type of mortgage you could also be limited to a maximum house price.
Second Mortgage
Of course, if you cannot add on to your mortgage, you may consider a second mortgage. Each mortgage uses your home as security and gives the mortgagee the right to take your home if you default on your loan. The first mortgagee gets paid first in cases of default and has the best chance of recovering all of its money. So it only goes to figure that subsequent mortgages usually come with a higher interest rate.
Mortgage Features
Every lending institution is different, and each will have their own customizable mortgage options. When you're hunting for a lender and a home, see how the following features could be beneficial to you.
Prepayment
This is a wonderful option if you receive regular bonuses or if your income fluctuates throughout the year. With a pre-payment privilege, you have the right to make payments toward the principal portion of your mortgage over and above the monthly payments. A mortgage with a pre-payment option is closed. An open mortgage means you can pay the entire principal sum without notice of bonus.
Conventional and High Ratio Mortgages
To qualify for a conventional mortgage, you simply have to have a 20% down payment of the purchase price, with the mortgage not exceeding 80% of the appraised value.
If your down payment is less than 20%, then you qualify for a high-ratio mortgage. This type of mortgage requires loan insurance, which can cost an additional 0.5% to 3.75% of the mortgage amount. With this type of mortgage you could also be limited to a maximum house price.
Second Mortgage
Of course, if you cannot add on to your mortgage, you may consider a second mortgage. Each mortgage uses your home as security and gives the mortgagee the right to take your home if you default on your loan. The first mortgagee gets paid first in cases of default and has the best chance of recovering all of its money. So it only goes to figure that subsequent mortgages usually come with a higher interest rate.
Mortgage Features
Every lending institution is different, and each will have their own customizable mortgage options. When you're hunting for a lender and a home, see how the following features could be beneficial to you.
Prepayment
This is a wonderful option if you receive regular bonuses or if your income fluctuates throughout the year. With a pre-payment privilege, you have the right to make payments toward the principal portion of your mortgage over and above the monthly payments. A mortgage with a pre-payment option is closed. An open mortgage means you can pay the entire principal sum without notice of bonus.
Mortgage Terms and Fees
Mortgage Term
Over the course of your amortization period, you may have many different mortgages. The term is simply the length of time that interest rates, payment schedules and obligations to the lender exist. When the term comes to a close, you will have the option to renew your mortgage at your current or new lending institution. You can also put a lump sum toward the principal without restriction, or pay off your entire mortgage without penalty. If you wish to change the structure of your agreement during the term you may have to pay a substantial fee to the lender.
Choosing Security or Flexibility
Mortgages are available with closed, open and convertible options, with fixed or variable rates. The options you choose will reflect your beliefs about the market -- is it going up or down? -- and your short-term goals and desire for long-term security.
Amortization
This is the amount of time over which the entire debt will be repaid. Most mortgages are amortized over 15-, 20-, or 25-year periods. The longer the amortization, the lower your scheduled mortgage payments, but the more interest you pay in the long run.
Open Mortgage
This type of mortgage offers a great deal of flexibility, as it can be repaid in part or full at any time without penalty. This is a great mortgage if you believe interest rates are moving down or if you plan to move in the near future. The term may be limited to six months or one year.
Closed Mortgage
Here the interest rate is fixed for the full term of the mortgage, and you will have to pay a penalty to change the agreement conditions. This type of mortgage is ideal for buyers who suspect that interest rates will rise and who are not planning to move in the near future. This type of mortgage is usually available in a wide variety of terms.
Convertible Mortgage
With this mortgage, you'll enjoy the same peace of mind as a closed mortgage, plus the flexibility to convert to a longer closed mortgage at any time without penalty. If you think rates will drop, this will allow you to wait until you feel they have hit bottom, or if rates rise, you can lock in.
Additional Costs
Before you calculate the amount of your down payment and determine what you can afford, it's a good idea to set aside a few thousand dollars to cover the extra costs that seem to spring out of nowhere. Here is an overview of costs you could encounter. The good news is that not all of them will apply.
Property Taxes
If the Vendor has paid a portion of the taxes in advance, you will be responsible for reimbursing the Vendor on closing. Plus, if you have a high-ratio mortgage, your lender may require that you have your property taxes added to your mortgage payments.
Utility Fees
Utility fees are calculated through a meter so you will be responsible for paying what you have used up on the meter.
Land Transfer Tax
This applies in most provinces and ranges from 1% to 4%. For instance, in Ontario, you'll pay 1% of the first $55,000 - $250,000 and up to 2% of any amount over $400,000.
Survey Fee
Your lender will require an up-to-date survey. You can make it a condition of the Offer to Purchase that the Vendor provide a survey, or you will have to have one done. If there is no survey available, you may purchase "Title Insurance" in lieu of a survey which saves you about $500 - 700.
Appraisal Fee
A basic appraisal usually costs under $250.
Property Insurance
Your lender will insist that you have insurance on your property because your home is used as security for the mortgage.
Service Charges
You'll be charged for telephone, cable and a variety of other services that you hook up at your new home.
Lawyer (Notary) Fees
Each real estate transaction requires the assistance of a legal professional to review the Offer to Purchase, search the title, draw up the mortgage documents and take care of the details on the day of closing. Lawyers fees range widely depending on the complexity of the transaction. Ask your sales representative to recommend a lawyer. And remember, fees can be negotiated.
Mortgage Loan Insurance Premium and Application Fee
Mortgage loan insurance will be necessary if you have a high-ratio mortgage (less that 20% down payment). The application usually costs $75 with a valid appraisal, otherwise it's $235. The actual insurance premium will range from .5% to 3.75% of the purchase price and is added onto the mortgage.
Mortgage Broker Fee
Some brokers may charge as much as 2% of the total mortgage to find you a lender. In most cases though, the broker is paid by the lender. Buyers with good credit should not have to pay a fee.
Moving Costs
Whether you've decided to do it yourself or hire a moving company, now is the time to budget for the costs involved.
Status Certificate
If you're moving into a condominium (complex not necessarily a high-rise) this certificate outlines the condominium corporation's financial and legal state. It will cost you up to $100, usually paid for by the seller if agreed to in the Offer to Purchase.
Condominium Fees
These monthly fees vary from complex to complex. The fees are applied to everything from grounds keeping and carpet cleaning to security personnel and health club maintenance. Depending on the type of structure, these fees will usually be a few hundred dollars.
Home Inspection Fee
For around $300, depending on the size of your home, you'll receive a complete written report about the condition of the structure. Do your research and hire a reputable firm.
Renovation and Repairs
Your home inspection may indicate the need for some general repairs or a major project. Have some money set aside, particularly if you are purchasing an older home.
Redecoration
Your taste will be different from the previous owner. Set aside money to paint and wallpaper. Prepare a list of things you can live with, for now, and decorating faux pas that need immediate alteration.
Water Quality Certification
If you are purchasing a home with a well, you'll want to ensure the quality of the water. This will cost approximately $50 to $100.
Over the course of your amortization period, you may have many different mortgages. The term is simply the length of time that interest rates, payment schedules and obligations to the lender exist. When the term comes to a close, you will have the option to renew your mortgage at your current or new lending institution. You can also put a lump sum toward the principal without restriction, or pay off your entire mortgage without penalty. If you wish to change the structure of your agreement during the term you may have to pay a substantial fee to the lender.
Choosing Security or Flexibility
Mortgages are available with closed, open and convertible options, with fixed or variable rates. The options you choose will reflect your beliefs about the market -- is it going up or down? -- and your short-term goals and desire for long-term security.
Amortization
This is the amount of time over which the entire debt will be repaid. Most mortgages are amortized over 15-, 20-, or 25-year periods. The longer the amortization, the lower your scheduled mortgage payments, but the more interest you pay in the long run.
Open Mortgage
This type of mortgage offers a great deal of flexibility, as it can be repaid in part or full at any time without penalty. This is a great mortgage if you believe interest rates are moving down or if you plan to move in the near future. The term may be limited to six months or one year.
Closed Mortgage
Here the interest rate is fixed for the full term of the mortgage, and you will have to pay a penalty to change the agreement conditions. This type of mortgage is ideal for buyers who suspect that interest rates will rise and who are not planning to move in the near future. This type of mortgage is usually available in a wide variety of terms.
Convertible Mortgage
With this mortgage, you'll enjoy the same peace of mind as a closed mortgage, plus the flexibility to convert to a longer closed mortgage at any time without penalty. If you think rates will drop, this will allow you to wait until you feel they have hit bottom, or if rates rise, you can lock in.
Additional Costs
Before you calculate the amount of your down payment and determine what you can afford, it's a good idea to set aside a few thousand dollars to cover the extra costs that seem to spring out of nowhere. Here is an overview of costs you could encounter. The good news is that not all of them will apply.
Property Taxes
If the Vendor has paid a portion of the taxes in advance, you will be responsible for reimbursing the Vendor on closing. Plus, if you have a high-ratio mortgage, your lender may require that you have your property taxes added to your mortgage payments.
Utility Fees
Utility fees are calculated through a meter so you will be responsible for paying what you have used up on the meter.
Land Transfer Tax
This applies in most provinces and ranges from 1% to 4%. For instance, in Ontario, you'll pay 1% of the first $55,000 - $250,000 and up to 2% of any amount over $400,000.
Survey Fee
Your lender will require an up-to-date survey. You can make it a condition of the Offer to Purchase that the Vendor provide a survey, or you will have to have one done. If there is no survey available, you may purchase "Title Insurance" in lieu of a survey which saves you about $500 - 700.
Appraisal Fee
A basic appraisal usually costs under $250.
Property Insurance
Your lender will insist that you have insurance on your property because your home is used as security for the mortgage.
Service Charges
You'll be charged for telephone, cable and a variety of other services that you hook up at your new home.
Lawyer (Notary) Fees
Each real estate transaction requires the assistance of a legal professional to review the Offer to Purchase, search the title, draw up the mortgage documents and take care of the details on the day of closing. Lawyers fees range widely depending on the complexity of the transaction. Ask your sales representative to recommend a lawyer. And remember, fees can be negotiated.
Mortgage Loan Insurance Premium and Application Fee
Mortgage loan insurance will be necessary if you have a high-ratio mortgage (less that 20% down payment). The application usually costs $75 with a valid appraisal, otherwise it's $235. The actual insurance premium will range from .5% to 3.75% of the purchase price and is added onto the mortgage.
Mortgage Broker Fee
Some brokers may charge as much as 2% of the total mortgage to find you a lender. In most cases though, the broker is paid by the lender. Buyers with good credit should not have to pay a fee.
Moving Costs
Whether you've decided to do it yourself or hire a moving company, now is the time to budget for the costs involved.
Status Certificate
If you're moving into a condominium (complex not necessarily a high-rise) this certificate outlines the condominium corporation's financial and legal state. It will cost you up to $100, usually paid for by the seller if agreed to in the Offer to Purchase.
Condominium Fees
These monthly fees vary from complex to complex. The fees are applied to everything from grounds keeping and carpet cleaning to security personnel and health club maintenance. Depending on the type of structure, these fees will usually be a few hundred dollars.
Home Inspection Fee
For around $300, depending on the size of your home, you'll receive a complete written report about the condition of the structure. Do your research and hire a reputable firm.
Renovation and Repairs
Your home inspection may indicate the need for some general repairs or a major project. Have some money set aside, particularly if you are purchasing an older home.
Redecoration
Your taste will be different from the previous owner. Set aside money to paint and wallpaper. Prepare a list of things you can live with, for now, and decorating faux pas that need immediate alteration.
Water Quality Certification
If you are purchasing a home with a well, you'll want to ensure the quality of the water. This will cost approximately $50 to $100.
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42 Zaduk Court Conestogo, ON N0B 1N0