Financing

Let's Talk Mortgage

Let’s Talk Mortgages & Terms You Should Know

You’ve likely heard this quote from Napoleon Hill’s THINK AND GROW RICH many times that “Knowledge is Power”. I’ve always considered this to be incomplete! Simply put, Cliffy from Cheers had knowledge ;D In my mind – Knowledge is only Power when put into action. Since we want to go from Buying to BOUGHT, the first piece of advice I can give is PRE-APPROVAL!

WHY GET PRE-APPROVED

It is important to be qualified or ‘pre-approved’ for financing before you start looking for a home. This lets us both know what your Buying Power is. In either Halifax or Toronto area markets, things are fast paced and selling quickly. Even if the market slows, a firm understanding of what you can afford AND your payment structure will help your comfort level.

To obtain pre-approval, contact your mortgage broker, or I can provide names of several who can help. Essentially, brokers will go over your GDS & TDS using the price of the home and monetary obligations to help ensure you’re not setting yourself up for an emotional let down if you find the home you want, only to find out later you do not qualify.

CONVENTIONAL MORTGAGES

The maximum amount of conventional mortgage is 80% of the purchase price. The amortization or length of time in which to repay the loan is usually 25 years. The term of the mortgage is the number of months or years, usually six months to five years, for which the rate of interest is set.

GROSS DEBT SERVICE RATIOS

FIRST AFFORDABILITY RULE – Lenders such as banks and trust companies allow you to spend approximately 35%* of your gross monthly income on housing costs (including property taxes, heating and, if applicable, 50% of condominium fees.

LOCKED-IN

Important to have your Lender ‘lock-in’ your mortgage rate for as long as they can to afford you the lowest rate possible while we search for your new property.

HIGH RATIO MORTGAGES

For most people the hardest part of buying a home – especially the first one – is saving for the necessary down payment. With mortgage loan insurance, you can put as little as 5% down. Mortgage loan insurance, protects the Lender and, by law most Canadian lending institutions require it. The cost of high ratio mortgage loan insurance is in the form of a premium. The premium is calculated as a percentage of the principal and can be paid in a single lump sum or be added to your mortgage and included in your monthly payments.

TOTAL DEBT SERVICE RATIOS

SECOND AFFORDABILITY RULE – Your entire monthly debt load shouldn’t be more that 42% of your gross monthly income. This includes housing costs and other debts, such as car loans and credit card payments.

TALK TO YOUR MORTGAGE BROKER – THEY ARE THE TRUE EXPERTS

I believe it is time now to speak to one of my trusted advisors when it comes to mortgages and qualifying. Information above is just an overview on some, but not all, of the terms and definitions to assist you in a mortgage. Please reach out to one for more details and ask about other items as the all important STRESS TEST; Portable Mortgages; Bridge Financing; Variable versus Fixed Rates;

CMHC or GENWORTH Mortgage Insurances. They will advocate for you the very same as I will be.