A: To determine ‘affordability’ you will first need to know your taxable income along with the amount of any debt outstanding and the monthly payments. For example, if it is your principal residence you are purchasing; calculate 35% of your income for use toward a mortgage payment, property taxes and heating costs. If it is a condominium you are purchasing, include half of the estimated monthly condominium fees.

Second, calculate 44% of your taxable income and deduct all of your monthly debt payments, including car loans, credit cards, and lines of credit payments. The lesser of the first or second calculation will be used to help determine how much of your income may be used towards housing related payments, including your mortgage payment. These calculations are based on lenders’ usual guidelines.

In addition to what these calculations imply you are able to afford, make sure you calculate how much you think you can afford.
If the payment amount you are comfortable with is less than 35% of your income you may want to settle for the lower amount rather than have the burden of stretching yourself to thin. Be sure that you will still be able to afford simple luxuries, and have access to money in an emergency.

A: A minimum of 5% or more is recommended. However, a minimum down payment of 0% is possible in order to purchase a home, subject to certain conditions on qualification
In addition to the down payment, you must also be able to show that you can cover the applicable closing costs (i.e. legal fees and disbursements, appraisal fees and a survey certificate, where applicable). Estimate approximately 2% of the total purchase price for closing costs.

The down payment cannot be borrowed. It must come from your own resources, or a gift from a family member, provided a letter stating it is a true gift, not a loan, is signed by the donor.

If the mortgage loan insurance is to be provided by Canada Mortgage and Housing Corporation (CMHC), the gift money must be in your possession before the application is sent in to CMHC for approval.

Mortgages with less than 20% down must have mortgage default insurance provided by either CMHC, Genworth or GE.

A: A home inspection is an examination of the property to determine the overall condition of the home. In the process, the home inspector should be checking all major components of the home (roofs, ceilings, walls, floors, foundations, crawl spaces, attics, retaining walls, etc.) and mechanical systems (electrical, heating, plumbing, drainage, exterior weather proofing, etc.).
The results of the inspection should be provided to the purchaser in detailed written form, typically within 24 hours of the inspection.

A pre-purchase home inspection can add peace of mind and make a difficult decision much easier, or it may also stop you from making a regrettable purchase. An inspection may indicate that the home needs major structural repairs which can be factored into your buying decision.
A home inspection decreases unpleasant surprises, and increases the likelihood that you will be satisfied with the purchase of your new home.

A: Mortgage default insurance is insurance provided by Canada Mortgage and Housing Corporation (CMHC), a crown corporation, or an approved private corporation, like GE Capital Mortgage Insurance Company.

This insurance is required by law to insure lenders against default on mortgages with a Loan-To-Value (LTV) ratio greater than 80%.

The insurance premiums, ranging from .50% to 3.75%, are paid by the borrower, however, payments and can be incorporated into the mortgage amount.

Mortgage default insurance is not the same as mortgage life insurance, which is optional.

A: A conventional mortgage is usually one where the down payment is equal to 20% or more of the purchase price. A conventional mortgage does not normally require mortgage default insurance. A mortgage is classified a high ratio mortgage when the down payment is less than 20%.

A: A pre-approved mortgage provides an interest rate guarantee from a lender for a specified period of time (up to 120 days) and for a set amount of money. The pre-approval is calculated based on information provided by you and is generally subject to certain conditions being met before the mortgage is finalized. Conditions would usually be things like ‘written employment and income confirmation’ and ‘down payment from your own resources’, for example.

Most successful real estate professionals will want to ensure you have a pre-approved mortgage in place before they take you out looking for a home. This is to ensure that they are showing you property within your affordable price range.

In summary, a pre-approved mortgage is one of the first steps a home buyer should take before beginning the buying process.

A: A longer-term mortgage is worth considering if you have a busy life and don’t have time to watch mortgage rates. Durations of 4, 5 and 7-year mortgages let you take advantage of current rates, while enjoying long-term security knowing the rate you sign up for is a sure thing.

If you want to keep your mortgage flexible right now, you can explore a shorter-term mortgage that usually allows you to save by taking advantage of rate decreases.

A: The interest rate on a fixed-rate mortgage is set for a pre-determined term – usually between 6 months to 25 years.

This offers peace of mind in knowing what you will be paying for the term selected.

A: A mortgage in which payments are fixed for a period of one to two years although, depending on market conditions, interest rates may fluctuate from month to month.

If interest rates go down, more of the payment goes towards reducing the principal; if rates go up, a larger portion of the monthly payment goes towards covering the interest.

A: While it depends on the circumstances surrounding your bankruptcy, there are a variety of lenders that provide mortgage financing for all different needs.

A: There are several ways to reduce the number of years to pay down your mortgage, including:

• Selecting a shorter amortization at renewal
• Selecting a non-monthly or accelerated payment schedule
• Making principal prepayments
• Making Double-Up Payments
• Increasing your payment frequency schedule

A: The most important cost will be the down payment, as this is the portion of the purchase price that you must pay yourself.

Also, you will need money for closing costs (up to 2.5% of the basic purchase price).

Additionally, if you choose to have the home inspected by a professional building inspector – which we highly recommend – there will be an inspection fee. Always be sure to receive a written report from the home inspector.

You will be responsible for paying the lawyer’s fees incurred in purchase of your home. As fees for these services vary significantly, we recommend that you shop around before choosing a lawyer or notary.

There are closing and adjustment costs, interest adjustment costs between buyer and seller and (depending on where you live) land transfer tax – a one-time tax based on a percentage of the purchase price of the property and/or mortgage amount.

Finally, you will be required to have property insurance in place by the closing date. And you will be responsible for the cost of moving.

Don’t forget to factor household item expenses into your initial costs. You may need to purchase new appliances, furniture, cleaning materials, or garden tools upon moving in.