Buying a Home in Toronto (G-T-A) Blog Series Part 3 - Information for First Time Home Buyers

Buying your first home is a very exciting process, but it can also be a very overwhelming and stressful one. Help eliminate this stress and make buying a home in Toronto a smooth and trouble-free process by following these steps for first time home buyers:

Know how much you can afford and how much you qualify for before you even start looking.  Finding a house and falling in love with it before you know how much of a mortgage you can afford and qualify for can mean heartbreak – either for you or your pocket! Set out your monthly budget and figure out what an affordable, manageable monthly mortgage payment would be.

Now it is time to get the funds to buy a house. Find a mortgage broker so that you know that you are going to get the best mortgage at the lowest interest rate. A mortgage broker will work with the different banks in order to secure this for you! They will also explain the different types of mortgages available to first time home buyers, and the advantages of each.

Make sure that you have thought about – and saved – a down payment. “No down payment” mortgages are available, but in order to secure a low interest rate and to decrease the amount of your monthly mortgage payment, having a down payment is essential when buying a house. Look at the different options available to you in order to amass that down payment, including saving or the RRSP Home Buyers’ Plan, which allows first time home buyers to use up to $25000 tax free from your RRSP to purchase a home.

Secure the services of a real estate agent. These professionals will be able to help take the hassle out of buying a house that meets your needs/wants, and save you the time of having to wade through all of the real estate listings out there. Go to open houses and look at different properties, and always keep in mind that as a first time home buyer no house may seem perfect – but it may be the perfect house for you!

Know the costs associated with a real estate closing. A down payment and a mortgage are not the only costs associated with buying a home in Toronto. First time home buyers need to be aware of the various other fees that come with buying a house.  These other costs are important to remember:

-              Home Inspection – a home inspector will inspect the house to make sure that it is safe and to let you know of any repairs that are required.

-              Real Estate Lawyer – your real estate lawyer will go through all of the legal paperwork and make sure you understand your rights and responsibilities as a homeowner.

-              Land Transfer Tax – this tax is calculated based on the value of the property. There are substantial rebates on this for first time home buyers.

-              Home Insurance – required by the bank, this will protect your home and property from incidents such as fire or theft.

Buying a home – your first home – should be a very exciting experience. Just keep in mind that it is a complex process that involves some important steps that you cannot ignore. By using these easy tips to guide you in your home buying process, you can save yourself time, money and stress. Being a first time home buyer does not need to be intimidating – it should be fun – so just be prepared and take advantage of the services available to you to make it so!

For more information about what you need to know as a first time home buyer in Toronto, please contact Paul Mangion by calling The Mortgage Centre at 416-204-0156 or visit www.themortgagecentretoronto.com

Buying a Home in Toronto (G-T-A) Blog Series Part 2 - Estimating Real Estate Closing Costs

Buying a home can be a very exciting experience. However, it is important to keep in mind that there are certain real estate closing costs that you need to be aware of – and prepared for! Not knowing what other costs are associated with buying a house can be a major hassle – and may negatively impact your ability to close! Here is a list of the real estate closing costs you should be prepared for when buying a house in Toronto.

The first real estate closing cost you need is a down payment. Although there are “no down payment” mortgages available, these are often obtained at a higher interest rate, and therefore trying to save a down payment is a good idea. If you do not opt for, or cannot qualify for, a “no down payment” mortgage, you will be required to have at least 5% of the total cost of your home in the bank, and usually for 3 months, in order to secure a mortgage and buy a house. 

A second real estate closing cost that comes with buying a house in Toronto is the fee for a home inspection. Buying a house without a home inspection is a bad idea. Hiring a home inspector means that you are aware of any repairs that need to be done to the house and their expected costs.  Be sure to account for the inspection fees prior to buying a house in Toronto.

A third real estate closing cost that comes with buying a house is the legal fees charged by your real estate lawyer. A real estate lawyer is responsible for ensuring that all legal documentation is prepared and that you are protected in all contracts that you sign.  They also make sure that there are no issues, such as outstanding liens on the house, which can inhibit your ability to close. Being prepared for the costs of their services is essential!

Land transfer tax is a fourth real estate closing cost that you should be aware of. In Ontario, the cost of land transfer tax is:

-              Land/property under $55 000 = 0.5% of value

-              Land/property $55 000 - $250 000 = 1% of value

-              Land/property over $250 000 = 1.5% of value

-              Land/property over $400 000 = 2% of value

In Toronto, there is an additional land transfer tax, so be prepared for this as well.  However, new home buyers do get a substantial rebate on land transfer tax.

A fifth real estate closing cost is homeowners insurance. This insurance protects your home and property in the case of unforeseen incidents, such as fire or theft. It is usually paid on a monthly basis, but just be aware that acquiring homeowners insurance at the time of closing is a good idea, as it protects you the minute you take possession of your home! Be sure to shop around to find the best policy to suit your needs.

Being financially prepared for the costs associated with a real estate closing is very important. In order to make the home buying process a smooth and simple one, knowing your real estate closing costs is essential.  Make sure you know the costs associated with the home buying process when buying a house in Toronto and you will be able to find, buy, and close without any hassle or financial restraints!

For more information about buying a home in Toronto and the real estate closing costs you will need to be aware of, please contact Paul Mangion by calling The Mortgage Centre at 416-204-0156 or visit www.themortgagecentretoronto.com   

Buying a Home in Toronto (G-T-A) Blog Series Part 1 - The Toronto Real Estate Professionals You Will Need in Your Corner

Buying a home in the Greater Toronto Area? If so, there are many different things to consider throughout the process. Some of the most important are those people that will assist you in various areas: Real Estate Professionals!  This team of qualified individuals should include:

-              Realtor
-              Mortgage broker
-              Real estate lawyer
-              Home Inspector
-              Insurance Broker

All of these people will be necessary to you throughout the home buying process. So who are they and what role do they play in helping you buy a home in Toronto?

A realtor is the real estate professional that will help you find your dream home. Their job is to relieve you of the legwork necessary when trying to find that perfect property, pointing you in the right direction based on your predetermined list of wants/needs.  This means that you save yourself the hassle of combing through the available property listings. When you have found “your” house, the realtor will also work you through the negotiation process, allowing you to get the best deal on your new property!

A mortgage broker is the real estate professional who will help you secure a mortgage and at the best mortgage rate available in order to have the funds to buy a home. Your mortgage broker will discuss the different types of mortgages out there, and work with the different banks to obtain the greatest amount of money at the lowest interest rate possible.

A real estate lawyer is the real estate professional that will complete all of the necessary legal documentation required when buying a home. Your real estate lawyer will explain your rights and make sure that they are protected in any contracts you sign. They will make sure that there are no outstanding liens or debts against the house that can impact your ability to close.  They will also attend the closing of the home and make sure that you understand everything that has taken place.

A home inspector is the real estate professional that will make sure that the house you are planning to buy is safe to live in and that there will be no unexpected repairs necessary once you take possession of your new home. The home inspector will do a thorough inspection of the property to determine what needs to be fixed, and then you will be able to determine whether this will be fixed by the seller, if you would want to fix it yourself, or if you want to find a different house altogether. Making an offer without having a home inspection can have major consequences – and can mean great cost to you. This is easily avoided by having a home inspection done when buying a home in Toronto.

An insurance broker is the real estate professional that will make sure that your home and everything in it is protected. Homeowners insurance covers unexpected incidents such as fire, explosion, and theft, and allows you to rebuild or replace damaged items. Your insurance broker will work with you to find the best insurance policy that works for you. When buying a home in Toronto, securing homeowners insurance through an insurance broker is essential!

These five real estate professionals are very important when you are planning to buy a home in Toronto.  Making sure that you are properly covered and protected is the responsibility of all of these individuals, and buying a house without them is a bad idea! Before buying a home in Toronto, make sure you have assembled a team of real estate professionals in order to make the home buying process smooth and simple!

For more information about buying a home in Toronto and the real estate professionals you will need in your corner, please contact Paul Mangion by calling The Mortgage Centre at 416-204-0156 or visit www.themortgagecentretoronto.com

Qualifying for a Mortgage in Ontario

Most people aspire to own a home. To be able to own a home involves discipline because you have to save your down payment and closing costs and then you also have to be able to ensure that you can obtain mortgage financing. Qualifying for a mortgage in Ontario is a process that requires preparation. 

Many people think that to get approved for a mortgage is as simple as obtaining a mortgage pre-approval. Obtaining a mortgage pre-approval does not mean that you will eventually be approved for a mortgage and once approved for a mortgage you will have to satisfy a number of conditions in order to have your mortgage closed (or be funded).

All a mortgage pre-approval does is say that based on a preliminary review of your application, the financial institution believes that you qualify for a mortgage based on the information that you provided.

Once you find the home that you want to purchase the financial institution will have to approve the property you are purchasing, the purchase price, your credit and then they will issue a formal mortgage approval.

Qualifying for a mortgage in Ontario will mean that you must have decent credit (650 credit score or better), and your income and debt must fall within CMHC guidelines. Your housing payments on your new home must not exceed 32% of your gross income and your payments to housing and debts must not exceed 42% of your income.

After qualifying for a mortgage and obtaining a formal mortgage approval, the mortgage approval will be subject to conditions. These conditions will include proving your income, proving your down payment, proving that you have obtained home insurance and more. This is where people sometimes run into struggles.

Self-employed individuals will often apply for financing but then later be asked for documentation to substantiate their income that will be difficult to obtain. This is very common with people who are sub-contractors. Generally banks will ask a self-employed individual to provide several years of tax returns and their net income after writing off their expenses, which may be less than what they initially indicated on their application. In addition, if the income stated was based on the previous year but in years previous to that there was less income, the bank will average out the income which could impact the mortgage approval.

Where down payments are concerned the homeowner will have to show the down payment money has been in the borrower’s bank account for at least three months prior to the mortgage approval. You cannot borrow your down payment. Sometimes people plan to borrow their down payment and don’t realize until after they have made an offer that this is an issue.

To ensure that you qualify for a mortgage that will close your best bet is to work with a mortgage broker who can review your application and who will ask you for your supporting documentation. This way when you are told that your mortgage is approved you know that it will close and can enjoy a stress free mortgage closing.

For more information about qualifying for a mortgage in Ontario please call Paul Mangion at 416-204-0156 or visit www.gtamortgagematters.com.

Can You Refinance Your Home to Consolidate Debt?

In Canada there have been many reports and massive media coverage about the amount of debt being carried by Canadian households. Many don’t realize when using credit cards and lines of credit to finance big ticket purchases that the interest is not only high in many cases but also compounds monthly. Monthly compound interest means that each month interest is applied to the balance. When you make minimum payments to a credit card product the end result is that a very small amount of your monthly payments ends up being applied to principal. 

Over time credit card debt can accumulate to the point where it becomes very difficult to pay off. Home owners in Canada have one very valuable asset that they can use to deal with their debt at very flexible and affordable terms. Using your home to consolidate debt is a great way to reduce the interest and payments that you are making to high interest credit card debt. 

It is important that if you plan to refinance your home to consolidate debt that you do it in a way that you don’t end up paying more in the long run. Refinancing your first mortgage is one way to consolidate debt at a low interest rate because generally speaking mortgages do offer the lowest interest rates available when compared to other credit products. The challenge is the amortization. When you refinance your home to consolidate debt you will reduce the overall mortgage rate but you will also stretch the debt out with your mortgage over 15, 20, 25 years or whatever the remaining amortization on your mortgage is. The best way to refinance your home to consolidate debt when refinancing a first mortgage is to reduce your overall amortization by a few years. Doing this will reduce the interest that you will pay on your first mortgage and because your first mortgage will generally represent a much larger sum than your debt, the savings will offset stretching out the repayment on the new debt you have consolidated. 

Another great tool when refinancing your home to consolidate debt is second mortgage financing and home equity lines of credit. Because a second mortgage or home equity line of credit has nothing to do with your first mortgage and will sit in second position on title you can obtain a low interest rate and then amortize this product like a traditional consolidation loan, over 5 years for example. This will see you reduce your monthly payments, reduce your overall interest, consolidate your debt into a single monthly payment and have a pre-fixed time period set where you will know that at the end of the term the debt will be paid. 

Any time you refinance your home to consolidate debt the mortgage process from the point of obtaining your mortgage approval to the point where your new mortgage is funded is about 2-3 weeks. At the end of the day refinancing your home to consolidate debt makes good financial sense.

For more information about refinancing your home to consolidate debt please call Paul Mangion at 416-204-0156 or visit www.themortgagecentretoronto.com

Canada Real Estate Home Financing Tips

Thanks to the historically low interest rates that Canadians have continued to enjoy, it is still more affordable than ever to purchase a home. Purchasing a home is the single biggest investment that most people will make in their lives so it is very important to think it through. Not only do you want to make a good investment from a real estate perspective but you also want to make sure that you don’t buy a home that results in you becoming house poor. 

Here are some real estate home financing tips that will help you to purchase and finance a home that you can afford.     

Real estate home financing tips – tip number one: Review your budget. On big reason that some people find themselves house poor is purchasing a home that is at the top of their budget. Look realistically at your budget and when determining what you can afford to pay for a home, consider your future financial goals. If you currently do not have debt and so you have decent cash flow, do not take out a mortgage that puts you at your limit. This can set you up for failure. In the future if interest rates go up, you need to finance a new vehicle or you have some other need to have to take out new debt, you could find yourself in financial trouble.

Real estate home financing tips – tip number two: Know your credit. Request your credit report from Equifax. It is really important to know what's on your credit so that you don’t make an offer on a home only to find out that there is an issue with your credit that will prevent you from getting a mortgage.

Real estate home financing tips – tip number three: Consult a mortgage broker. Consulting with a local mortgage broker will enable you to find out all the deals being offered by the different banks and a mortgage broker can even pursue a mortgage pre-approval on your behalf so that when you go out to buy your home you have the security of knowing that: 1) you can get a mortgage 2) how much of a mortgage you qualify for 3) what will be required for you to get your mortgage.

Real estate home financing tips – tip number four: Be realistic about the cost of buying a home and budget accordingly. Outside of your down payment there will be many other expenses that come up as it relates to buying your home. These expenses include property tax hold back, property tax and interest adjustments, land transfer tax, insurance fees, legal fees, moving costs and more. Expect to have an additional $5,000-$7,000 budgeted for your closing to cover these expenses if you want to have a stress free mortgage closing.

Buying a home is a complicated process with many considerations. Keeping these real estate home financing tips in mind will help you to prepare to purchase in the smoothest manner possible and make for an enjoyable and exciting home buying experience.

For more information about real estate home buying tips or to apply for a low rate mortgage please call Paul Mangion at 416-204-0156 or visit www.gtamortgagematters.com.

Ontario Mortgage Amortization Calculator – How to Use Them Effectively

If you are thinking about buying a home in Ontario the best way to figure out how much of a home you can afford to buy is to use an Ontario mortgage amortization calculator. There are many mortgage amortization calculators available online on various websites including the banks websites. 

Before using the Ontario mortgage amortization calculator to calculate your payments, first consider how much of your income can be allocated towards a mortgage payment. In Canada, any time a purchaser wants to purchase a home with less than a 20% down payment and finance their mortgage through the bank, CMHC must approve their mortgage for high ratio insurance. CMHC guidelines state that no more than 32% of the home buyers gross income can be consumed by housing payments. Housing payments are comprised of the new mortgage payment, the property taxes and include $100 for heat.

If you take your gross monthly income, multiply it by 32% and then subtract an estimated monthly amount for property taxes and heat, the amount left over is your maximum allowable mortgage payment under CMHC mortgage guidelines.

Now when you open an Ontario mortgage amortization calculator you will see 6 fields. You will be prompted to enter the amount of the mortgage, interest rate of the mortgage, interest compounding period, payment frequency, term and amortization. Enter a mortgage amount, interest rate and choose monthly for your payment frequency. When indicating how the interest will compound; if you plan to take out a variable rate mortgage select “monthly compounding”, if you plan to take out a fixed rate mortgage select “semi-annually compounding”. CMHC will high ratio insure a maximum amortization of 30 years, so that is the maximum amortization you can place in the amortization field.

Next you will click calculate on the Ontario mortgage amortization calculator. Compare the monthly payment to the monthly payment you calculated based on CMHC lending guidelines. If the payment is lower than the one you calculated based on CMHC lending guidelines then this indicates that you can either obtain a higher mortgage or if the amount you indicated was based on the amount you want to spend already you can reduce your amortization to see how much faster you can get paid off.

If the payment on the Ontario mortgage calculator is higher than the one you calculated based on CMHC lending guidelines then to obtain the size of mortgage that your calculation was based on will mean that you have to make a larger down payment.

Some websites offer an Ontario mortgage calculator that is called a “maximum mortgage estimator”. This Ontario mortgage calculator enables you to input the amount of monthly payment that you can afford to pay and then will tell you the maximum mortgage that you qualify to finance again based on CMHC guidelines.

The reason Ontario mortgage calculators are important is because they enable you to get an idea of what you actually qualify to finance before you go out shopping for a home. There is nothing worse than finding your dream home only to learn that you can't afford it.

For more information about how to use an Ontario mortgage calculator or to see if you qualify to be pre-approved for a mortgage please contact Paul Mangion at 416-204-0156 or visit www.gtamortgagematters.com.