Harmony Mortgage Group understands this and all the excitement and apprehension that comes with first time home buyers. As we walk you through the process we can answer your questions and help put your mind at ease.
1. How do I save up enough money for a down payment?
There are many ways to save for your first home. You can save in the most traditional way, by putting money aside each month. This can be done through automatic savings accounts or even better is to put your savings into a Tax – Free Savings Account (TFSA). All earnings and withdrawals from your investment are tax-free and you can contribute up to $5000 a year without penalty. We work with Financial Planning Partners and can happily put you in touch with a planner to assist you with your down payment savings.
Another option is using your RRSP’s as a place to boost your savings by using contributions to benefit your Personal Tax Return and re-investing that return into your RRSP contributions as well as taking advantage of any work related benefits that may be available through your employer.
First Time Home Buyers can withdraw up to $25,000 from RRSP’s tax free to use as a down payment, This plan then allows you to pay back the withdraw contribution over 15 years, starting the second year after the withdrawal.
For more information on this plan you can visit www.cra.gc.ca
2. How much can I afford?
This varies for everyone and every situation. Getting a pre-approval is a good place to start (apply here). You can even use a mortgage calculator to get an idea of how much of a down payment you would need on a home you would like to consider. The mortgage calculator does not take into account other debt like car payments or student loans that you may be carrying, but it is a great tool to give you an idea of where you are at.
3. What does pre-approval mean & should I be pre-approved?
Pre-Approval is a great idea, especially for a first time home buyer. Being pre-approved means that your lender has reviewed your earnings, assets and liabilities and has determined how much money you should be able to borrow. This does not guarantee the mortgage amount, as each property needs to be assessed on it’s own merits and of course you will be required to formally confirm your income and down payment. But a pre-approval is a great tool to assess how much you should spend on a home comfortably and many realtors prefer their clients to be pre-approved so that they too can avoid showing you homes that might not suit your budget requirements. A pre-approval also means you can shop with confidence knowing exactly what you should be looking at and knowing what you can afford. At Harmony Mortgage Group we offer an on-line application that can give you peace of mind while you shop. You don’t need to make an appointment, just fill out the application and submit it to us and we will get back to you in 24 hours
4. Are there any other expenses I need to be aware of buying a home?
Yes there are a some other costs that you need to be prepared for when you purchase a home. Closing costs are additional expenses that come with completing the purchase of your home;
Conveyancing Fees
You will need to hire a Lawyer or Notary to perform a title search on the property to ensure their are no liens pending on the property you are purchasing and of course that the vendor is the legal owner of the property. The Lawyer or Notary will then make sure all documentation has been completed and then register the mortgage and you as the new owner of the property you are purchasing. We have Conveyancing partners as well that we can refer you to to help make the process easier.
Land Transfer Tax
Most Provinces and even some municipalities charge a document fee with a change of ownership on real estate. Your Notary or Lawyer will inform you if this applies to your purchase.
Disbursements
The Notary or Lawyer you have hired will walk you through your disbursements. These are things that the seller has paid in advance such a property taxes and utilities. You will be required to reimburse the seller for these pre-payments as they will come into effect after you have taken possession of the home. These cost vary depending on the home you are buying and how far in advance the pre-payments have been paid.
HST
HST may apply to the home you choose and again you need to be aware of which homes you will be required to pay HST on and which homes will be exempt. A new home usually requires you to pay HST. A home that has been lived in for more than six months will not. Be prepared to ask your realtor to have this information available so you are prepared to pay HST on any home that requires it.
Home Inspections
You may want to take advantage of hiring a home inspector to inspect the home prior to purchase and in fact your lender may require it depending on the property. Harmony Mortgage Group has networking partners that we work with for home inspections and can point you in the right direction.
5. Why do I have to pay mortgage insurance?
If you are buying a home with a down payment less than 20% of the purchase price you will require a mortgage that’s insured against default. The insurance protects the lender in the event that you default on your mortgage and it is mandated by law in Canada for all mortgages with less that 20% down. The cost of this insurance will vary, but a good rule of thumb is anywhere between 0.5% to 3% of the total amount you are borrowing. The amount can be added, and usually is, to your mortgage and calculated into your regular payment schedule.
6. How do I know I am getting the best mortgage for my situation?
At Harmony Mortgage we understand that not every lending situation is the same and after reviewing your lifestyle, income and budget we will work to find you the best mortgage based on your needs. As part of the Dominion Lending Centre, unlike a bank Harmony Mortgage Group has access to over 230+ lenders. Each offering mortgage products that are suited to individuals and their needs. Not a single product like the banks offer that are suited to the banks needs.
While a bank only offers the products from their particular institution, licensed mortgage professionals send millions of dollars in mortgage business each year to Canada’s largest banks, credit unions, trust companies, and financial institutions. That means Harmony Mortgage has options that traditional bank mortgage lenders don’t. This gives our clients the opportunity to purchase the mortgage that is best suited to their needs, not the needs of their lender.
