First time buyers in Ontario

Media wants you to believe that the only difference is interest rate. While that can be a factor, what is behind the rate is equally important. The lowest rate is often not the lowest cost mortgage.

Some lenders register different security against your mortgage. Prepayment penalties can be multiples higher with branch-based lenders. There are many no-frills mortgage products that remove features like portability between properties when you trade up or over or the ability to pay extra on your mortgage without penalty.

Our role is to help you avoid the quicksand and landmines in the market and to help you with a custom, personalized solution.

You have already done it. You have gotten a proven and experienced mortgage broker on your team. The immediate next step is to get pre-qualified.

You want to determine how much you qualify for, so you are not investing your time and emotion in a home outside your current price range. We also want to ensure your credit report will support your plans and, if not, to start working on solutions.

At the same time, if not before, you should look at your income and expenses. Decide how much mortgage and property tax would be comfortable without leaving you house poor.

All items on this page are worth reviewing together with my posts under Mortgages 101 (link to Learn)

It is your mortgage and it is your choice. When you are working with a Broker, we have access to dozens of potential mortgage lenders, maybe even your Bank. Our primary focus is your mortgage. It is not our job to cross-sell other products. We have no sales targets. We only get paid when we provide a solution that works for you. We are individually licensed by FSRA. Recent studies have shown that some two-thirds of first-time purchasers are working with the mortgage brokerage community. We have bank employees as clients.

Do you want an unbiased view of the options available to you? Do you want a specialist or a generalist? Do you want someone on your side until their next promotion or do you want a professional you can grow with over time?

It is your choice.

Brokers are paid by the lender that provides your residential mortgage, whether it be a branch-based lender like TD, Scotia or Meridian or a Canadian-based monoline (one-product) mortgage lender like First National, MCAP or Merix.

The exception is if you required a private or commercial mortgage. In that case, you would pay a broker fee. You will never be liable for a fee in our office without knowing well in advance and making an informed choice to proceed.

What you qualify for is based on some basic math – comparing debt and mortgage payments to your employment income.

What you qualify for is different than what you can afford. For that, you should look at where you spend your hard-earned income and decide what the maximum mortgage and property tax payment can be that will still let you meet your saving and lifestyle goals.

As you know, how much you qualify for depends on what your debt and mortgage payments are compared to your income. When you want to qualify for a bigger mortgage, or have bruised or thin credit, a co-signor can sometimes be a solution.

They become part owner to the property and a party to the mortgage. Their income and their financial obligations now are added to yours and if the math now works, youl could have a solution. Just make sure the proposed mortgage payments work with your budget.

If you are purchasing a home to live in, then you need minimum 5% of the purchase price for homes priced up to $500k – and 10% of any price above $500k and less than $1 million.

For example, the minimum down payment for $650k home would be 5% of the first $500k or $25k plus 10% on the remaining $150k or $15k – for a total of $40,000.

For properties priced at $1 million or higher, you need at least 20% down – it will depend on the lender.

For investment properties, 20% of the price is the minimum required down payment.

In all cases, lenders will also want to see you have an additional 1.5% of the purchase price as proof you can pay your legal fees and closing costs.

A Deposit is evidence that you are a serious Buyer and is provided when you make an Offer to Purchase. It will be held in a lawyer trust account and will become part of your Down Payment.

The Down Payment together with your mortgage add up to the Purchase Price of a home. Therefore, putting a $10k deposit on a property with a minimum Down Payment of $25k, you would have just $15k more to provide.

Yes, most lenders accept down payments that are gifted from immediate family members. The lender will have a custom Gift Letter to be signed as proof that funds are a true gift and not a loan.

Absolutely – assuming funds have been invested for at least 90 days. You are allowed to withdraw up to a certain maximum amount from your RSP without paying withholding taxes under the Government’s Home Buyers Plan. A quick online search for ‘RSP Home Buyer Plan’ will highlight the Government of Canada website where full program details are outlined.

What you may know as CMHC, it is a federal government-mandated insurance that protects the mortgage lender when lending more than 80% of the purchase price. When you have less than 20% down payment, a one time premium is charged to you and added to your mortgage balance.

This is not the same as mortgage life insurance or homeowner insurance.

A fixed mortgage rate is set for a certain period of time, called the mortgage term. This is the most common mortgage rate as the mortgage payment doesn’t change when rates increase. It makes budgeting easier and many people sleep better.

A variable mortgage rate moves when the lender’s prime rate changes – and therefore your mortgage payment changes as well. Prime rates can change at any point, in response to the Bank of Canada making changes to influence the economy.

Variable rate mortgages often offer lower rates but bring with them uncertainty and can change without notice. If there is room in your budget and you handle change well, then this could be a rate option worth discussing.

Closing costs is a term used to describe your legal fees, land transfer tax, title insurance, PST (8%) on your default insurance premium and other costs associated with purchasing a home. You should budget for 1.5% of the purchase price as an estimate of Closing costs.

Note – if you are a PWU member, there is a one-time benefit where they will pay your title insurance cost when purchasing a home. Ask your rep for details.

In short, yes. Lenders set a higher standard for people who have pursued relief from debts either through a Consumer Proposal or Bankruptcy.

Most lenders want the bankruptcy to be discharged or Proposal complete for a minimum 2 years and they’ll look for re-established credit. Re-established credit is usually described as 2 types of credit, in place for minimum 2 years, with combined limit great than $5,000.

You will need a minimum 10% down payment.

Any late debt payments after discharge or second bankruptcies make it very difficult to qualify for a mortgage from normal lenders.

If you are paying child or spousal support, it is like any other debt payment and will reduce the amount of mortgage you will qualify for.

If you receive child/spousal support, it is added to your income when comparing debt payments to income. It must be received on time per the Separation Agreement.

A Separation Agreement is required in both cases.