In the current real estate market, we believe it is best to get “pre-approved” for a mortgage. You can visit a bank or contact a mobile mortgage specialist who will help and give advice on all of your needs. We can always recommend different specialists too, who will help you get the highest mortgage possible with payments that you are comfortable with paying.
Mortgage Types & Options
There are many variables when deciding on what “type” of mortgage to get, so we recommend always speaking to a professional first before deciding what type to choose. It also gives you the opportunity to ask questions and to familiarize yourself with the mortgage industry.
One option for younger buyers is a 25 year mortgage with 0% down. We must warn you though that even though it is “0% down” you will still need some money upfront for the deposit (this goes to the seller of the house, but the bank should reimburse this money if you have a 100% mortgage – 0% down). So make sure your line of credit is available and ready to go! Another option for buyers is a 30 year mortgage, only with at least 20% down. All of these mortgages are available with various term lengths and interest rates which are negotiable, so ask your banker/broker about your options and for a deal on rates!
5% Down Payment
Follow this information from the Canada Mortgage and Housing Corporation (CMHC):
- Get into your home sooner. Mortgage Loan Insurance helps you do it. Put as little as 5% down.
- When you need a mortgage loan that is more than 80% of the purchase price of your home, mortgage loan insurance is required. It protects the lender and, by law, most Canadian lending institutions require it.
- Having mortgage loan insurance means that if you, the borrower; default on your mortgage, the lender is paid back by the insurer – CMHC or a private company. With the risk of losing their money removed, lenders have the confidence to make mortgage loans of up to 95% of the purchase price/value of the home.
- That means your down payment can be as little as 5% of the house price. With mortgage loan insurance, many Canadians who might be unable to obtain a 20% down payment can still buy a home.
The Cost of Mortgage Loan Insurance
The Insurance Premium: this can range from 0.5% to 2.75% of the amount of your loan (additional charges may apply) and is dependent on the size of the loan and the value of your home.
That means your down payment can be as little as 5% of the house price. With mortgage loan insurance, many Canadians who might be unable to obtain a 20% down payment can still buy a home.
Applying for Mortgage Loan Insurance
Once you have chosen your mortgage broker they can obtain the Mortgage Insurance.
CMCH will insure mortgages of up to 95% of the home’s purchase price or the market value of the property, whichever is less. However be aware that certain restrictions may apply so it is best to always contact your local lender.
To be eligible for loan insurance you must meet some of the following criteria:
- The home must be in Canada and must be your principal residence.
- Housing payments, including principal, interest, property taxes, heating (P.I.T.H.), the annual site lease in the case of leasehold tenure and 50% of applicable condominium fees, can’t be more than 39% of your gross household income (GDS ratio).
- Your total debt load can’t be more than 44% of your gross household income (TDS ratio).
Other criteria do apply and are subject to change. Contact CMHC or your local lender for more information and any up-to-date changes.
At mysaskhome.com we feel it is important that when you decide to buy a home you have a good understanding of the costs associated with it. The assumption is that “the cost” only refers to the cost of buying a home. Unfortunately that isn’t true. You should have extra funds set aside to cover the additional costs, although you might have already made arrangements with your bank to cover these costs and absorb them into your mortgage.
The largest initial expense is the deposit. First time buyers (or even repeat buyers) have to pay a minimum of 5% of the purchase price. However, even though 5% is the minimum set by the Government, it is up to the seller to determine how much they require as a deposit because they want to feel confident that you won’t walk away from the deal.
Additional costs/fees you should be prepared to pay for include:
- Legal fees and disbursements.
- If you are buying a new home (that’s newly built and has never been lived in) you are sometimes responsible for GST if applicable.
- Property or land transfer tax.
- Adjustments (payable to the vendor such as taxes).
- Property Taxes.
- Utility Payments.
- If in a Condominium type of ownership, condo or strata fees.
- Home inspection fees or any other ancillary service fees requested by you as the buyer which include: furnace inspection, appraisal fee, water quality/quantity tests for acreages.
- Mortgage broker’s fees (if applicable).
- Mortgage loan insurance premium (if less than 25% down) plus application fee.
- Moving expenses.
- Renovations, repairs, paint, carpeting, window coverings.
- Property/Condominium Insurance.
It’s a lot, we know, but we haven’t quite finished yet. In addition to the above, once you have purchased your home you will incur regular monthly, quarterly or yearly expenses such as:
- Mortgage payments (you can do these weekly, bi-weekly, or monthly).
- Water/sewer payments.
- Electricity and gas services.
- Cable/telephone/internet services.
- Property taxes (can go on the monthly TIPPS program through the City).
- Strata or Condo fees.
- Repair/Maintenance expenses.
- Homeowners insurance.
And that’s it!
However, don’t be worried about these additional expenses. It looks like a lot of extra “costs” but they all part of purchasing a home and are well worth it. You can always contact us if you want more information about these costs or information on how to buy or sell your home.