A
mortgage is a large debt and should be life
insured, for your family's peace of mind.
Some lenders include life insurance as part
of their cost; others will let you insure
the mortgage yourself. But VERICO always recommends
mortgage insurance in some form.
In
the Province of B.C., Mortgage Consultant
is the correct term for a Mortgage Broker.
How
much will it cost me to have a Mortgage Intelligence
Mortgage Consultant? TOP
First
of all the service is FREE!
We
are compensated from the lender, not you
the borrower. We are only paid when we have
successfully helped our clients obtain the
best possible terms, conditions and advice
based on their individual circumstances.
We
are therefore motivated to help you. Most
bank employees are paid a salary. We are
only paid when we have successfully placed
your mortgage. If creative or hard to place
mortgages are required, a consulting fee
will be disclosed to you up front. As our
client, you can choose from the widest range
of options, obtain the most competitive
rate and best product suited to your specific
needs.
Usually
the shorter the term the lower the rate. However
many people prefer the comfort of a longer-term
mortgage and as an example we have provided
a historical tracking of the five-year rates.
This is another area where your VERICO Not
a Penny Down Mortgage Consultant can help.
How
does my amortization affect the amount of interest I
pay? TOP
The
amortization period has a dramatic effect on the
amount of interest paid over the length of the
mortgage. Consider the example of a $150,000 mortgage
with an interest rate of 6.20%*
With
a 25 year amortization the monthly payments
are $977.61
With
a 20 year amortization the monthly payments
are only increased by $107.57 to $1085.18. The
savings in interest would be $32,843.40
With
a 15 year amortization the monthly payments
are increased by only $298.03 to $1,275.64.
The savings in interest would be $63,669.38
*
The example assumes the interest rate will remain
constant through the whole amortization period.
Most
mortgages have very flexible payment alternatives.
Weekly, bi-weekly, or monthly payments are most
common. These choices also have a great effect
on the overall interest payments.
Consider
the example of a $150,000 mortgage with an interest
rate of 6.20% over a 5 year term.
Payment
Remaining
balance at end of term
Weekly
$244.40
$129,285.80
Bi-weekly
$488.81
$129,327.89
Monthly
$977.61
$135,132.08
Is it true
that I can get a free 5% downpayment? TOP
To help first time buyers and those who do
not have sufficient down payment, CMHC and GE
have introduced a new program that allows for
Cash back scenarios that can be used as the
down payment.
Under
the 5% Down Payment Program, the minimum down
payment of 5% of the purchase price or appraised
value, whichever is less.
The
down payment can be borrowed or be a gift
from immediate relatives. If the minimum
equity requirement is being met by way of
a financial gift, the funds must be in the
possession of the borrower at the time of
application.
Borrowers
are also required to demonstrate at time
of application the ability to cover a closing
cost equal to at least 1.5% of the purchase
price..
Maximum
GDSR ~ 32% (Principal + Interest + Property
Taxes + Heating Costs must not exceed 32% of
Gross Income).
Maximum
TDSR ~ 40% (Principal + Interest + Property
Taxes + Heating Costs + Monthly Obligations
including Credit Cards & Loans must not
exceed 40% of Gross Income).
Minimum
loan term for CMHC is 6 months with loan qualification
based on the current 5 year rate.
GENCOR
(GE Capital) currently has no minimum term requirement.
The
mortgage loan insurance premium is 3.75% of
the mortgage amount. (Premium can be added to
the mortgage or paid separately).
Credit
history must be in good standing.
"The
stress that I expected never materialized!
So many people have expressed how stressful it is
to purchase a home.
With you in my court, there were no sleepless night!~ Anne S.
Can I use my RRSP's to help purchase
my home?TOP
How does the Home Buyers Plan (HBP) work?
Each purchaser may withdraw up to
$25,000 from their RRSP to buy or
build a qualifying home. If you
buy the qualifying home together
with your spouse or other individuals,
each of you can withdraw up to $25,000
to a combined maximum of: $50,000.
You must be a resident of Canada;
you may participate only once in
your lifetime and must be considered
a first time home buyer. You are
considered a first time home buyer
if you haven't owned a home at any
time during a specified period.
Generally, a five year rule applies.
The funds must have been in the
RRSP for at least 90 days prior
to withdrawal to be eligible under
the program. Nothing beats the RRSP
vehicle for 1st time buyer's. The
payback is over 15 years, with no
interest expense, plus you received
a tax deduction each year when making
the original contributions. A simple
and tax effective way to get your
$50,000.00 down payment into the
real estate market.
What
information is required to be Preapproved for a Mortgage? TOP
If
you are applying for a preapproved mortgage,
have the following information ready to give
to your VERICO Not a Penny Down Mortgage Consultant:
Have
your employer give you a letter on company letterhead
outlining your name, position, gross annual
income, and number of years employed with the
company.
If
you are self-employed, you will need three
years financial statements, and tax returns
(together with official assessment from
Revenue Canada). Conversely, If
you have good credit and at least 10% down,
you will not require the above. This program
is specially designed for individuals who
do not claim or have a high enough taxable
income to qualify through standard "Bank
Rules".
Social
Insurance Numbers.
At
least 3 years history of residences and employers.
Know
your banking information (i.e. institutions
name, address, type of accounts, account numbers)
Know
your assets and their value (i.e. cash
amounts, stocks, bonds, RRSPs, car).
Know
your liabilities (i.e. car loan, credit
card balances).
Also,
be sure and advise your Mortgage Intelligence
Mortgage Consultant about any past credit problems
you may have had.
Finally,
write down a list of questions you would like
to have answered.
If
there is 'one' thing that causes problems which
may delay the closing of your house it's verification
of the Down Payment. Here's why:
To
meet the Requirements of Canada Mortgage and
Housing Corporation, GENCOR (GE Capital) and
the Major Lending Institutions
On
or before the issuance of a lending commitment
you will be asked to provide "Confirmation of
Down Payment" from Non-borrowed funds in one
or more of the following forms.
Down
Payment from the Sale of an Existing PropertyYou will be required to provide a copy of
the unconditional "Purchase and Sale Agreement"
on your existing property. This needs to be
accompanied by a copy of the statement of "Mortgage
Balance" on any mortgages presently held against
the property. The difference between the sale
price and the mortgages owing will substantiate
the funds available for your down payment.
Down
Payment from a Gift All or part of the minimum
equity requirement may be provided by way of
a financial gift, as long as all of the following
conditions are met:
(a)
the
donor is an Immediate relative of the borrower;
(b)
the
Approved Lender has verified that the money is
a genuine gift; and
(c)
the
Approved Lender has verified that the funds
are in the borrower's possession prior to the
time of the application to CMHC or GENCOR for
mortgage loan insurance.
The
Approved Lender will verify the authenticity of
the gift by obtaining a written confirmation,
signed by the donor and the borrower, which
will include the following points:
(a)
the
money is a genuine gift from the donor and does
not ever have to be repaid;
(b)
no
part of the financial gift is being provided by
any third party having any interest (direct or
indirect in the sale of the subject property)
The
Approved Lender is not required to forward this
confirmation to CMHC, but is expected to retain
the Information in its paper or electronic loan
record.
Down
Payment from Your Own Resources You must
supply verification satisfactory to C.M.H.C.
or GENCOR and the lender of accumulated savings
from non-borrowed funds. This may be in the
form of a copy of your bank book confirming
a balance equivalent to your down payment including
the amount of deposit confirming the savings
of said amount for a period of not less than
3 months.
Should
a substantial deposit have been made recently,
the source of such funds, i.e. Bonds,
Stocks, G.I.C.'s or RRSP receipts will also
be required.
To
avoid any delay in funding your transaction
we suggest that you provide a form of the above
noted confirmation at least 14 days prior to
your closing date.
Is it true that I might Qualify for
Property Purchase Tax Exemption? TOP The property purchase
tax, (a tax of 1% of the first $200,000 and 2% of
the balance of the purchase price) is waived if
you are a first time buyer, Canadian Citizen and
the purchase price must not exceed $425,000.00 in
the Greater Vancouver, Fraser Valley and Capital
Region Districts.
I
need a Mortgage Broker. Can you help? TOP
For
most people, a Mortgage Consultant acts like a
Mortgage Broker. Mortgage Consulting is the correct
title for what most people think of as a Mortgage Broker.
The
Purchase Plus Plan lets you add the cost of upgrades
to your mortgage before you move in! Eligible
upgrades include a new electrical service, a new
roof, central air, a new furnace, new siding,
eaves, soffits, facia, doors, windows, a new kitchen,
carpeting... or any other renovation that would
increase the value of the home.
The
way it works is like this... Let's assume that
you are a first time buyer and have 5% down
payment. Before the mortgage financing
is arranged, written quotes are obtained from
licensed contractors for the repairs
and or the improvements to be done to the home.
When the application for mortgage financing
is made, the request is made for 95% of the
purchase price PLUS 95% of the cost to complete
the improvements.
Note:
The lender will "hold-back" on closing
the "improvement" portion of the mortgage
until the work has been completed, normally
within 30 to 60 days of closing. Once the work
has been completed, the lender will advance
the balance of the funds and the contractor
can be paid. What does this mean? . . let me
give you an example. . .
The
purchase price is:
$150,000 X 95% = $142,500
The
quote for the improvements is:
$
11,000 X 95% = $ 10,450
Total
Mortgage is:
$161,000 X 95% = $152,950
Therefore,
an application is made for a mortgage in the amount
of $152,950 which is 95% of the purchase price
plus 95% of the improvements.
On
closing this is what happens... The Mortgage
advanced to complete the purchase is $142,500
plus the original 5% from the purchasers down
payment ($7,500) sufficient funds to complete
the purchase of $150,000.
After
closing the contractor completes the improvements
(normally within 30 to 60 days after the closing)
the lender advances the hold-back of $10,450,
the purchaser pays the additional 5% of the
cost of the improvements ($550) and the $11,000
owed to the contractor can be paid as per the
original quote for the work.
And
you will get $11,000 of improvements done to
your home with a cash outlay of only $550 (the
balance was financed with your mortgage)!
To
avoid any surprises on closing, a good rule
of thumb is to set aside an amount equal to
2-3% of the purchase price to cover expenses like these:
The Offer
The Deposit: Part of your down payment,
a deposit is due upon acceptance of your offer.
Prior to Closing
Home Inspection: Prepared by a qualified
inspector to assess the property for defects and
poor maintenance.
Appraisal: Prepared by an appraiser
chosen by the lender, by CMHC or GENCOR if the
mortgage is insured by either company.
Closing Costs
Legal Fee/Disbursements: Your lawyer
will quote his fee for closing the purchase and
mortgage(s) plus an approximation for his disbursements,
which includes registration fees, courier costs,
photocopies, etc. Ask for an estimate.
Land Transfer Tax: See the chart enclosed
in this package to calculate the Land Transfer
Tax which is due on closing and reflected in the
"Statement of Adjustments" which your
lawyer prepares prior to closing day.
Interest Adjustment: Monthly mortgage
payments are due on the first of the month. Unless
the closing date is the first of the month, you
must prepay the amount of the interest accruing
up to the 1st day of the following month, the
Interest Adjustment Date.
CMHC or GE & PST: If your mortgage
is insured by CMHC or GENCOR the insurance premium
will usually be added to the mortgage so it is
not a cash requirement on closing. However, the
premium is subject to 8% PST, and the tax must
be paid on closing.
Prepaid Expenses: If the Vendor has
prepaid any other expenses such as utilities,
water and sewage taxes, oil in tank or taxes,
he must be compensated. This will be reflected
in the Statement of Adjustments.
Property Tax Hold-back: If the lender
is collecting and paying property taxes you may
be required to pay to the lender an amount to
ensure sufficient funds are available to pay the
next installment of property taxes when due.
Other Fees: Occasionally, a lender
or the broker will charge a fee for providing
the mortgage. If so, these costs should be disclosed
to you at the time the Statement of Mortgage is
issued to you.
