From Coast to Coast, We Make Canadian Home Ownership a Reality!

Chances are, you're not the first person to ask. Take a look at answers to some of our more frequently asked questions.

  • How much can I afford to pay for a home?

    To determine mortgage affordability, assess your financial situation by calculating 32% of your income for housing expenses, including property taxes and heating costs, and 40% for overall debt payments. Prioritize a balanced budget to avoid financial strain. Next, calculate 40% of your taxable income and subtract all your monthly debt payments, encompassing car loans, credit cards, and lines of credit. The lesser of the two calculations will guide you in understanding how much of your income can be allocated to housing-related expenses, including your mortgage. These calculations adhere to standard lender guidelines. However, it's equally important to assess what you personally feel comfortable with. If your preferred payment amount is less than 32% of your income, consider opting for a more conservative approach to avoid financial strain. Prioritize a balanced budget that allows you to enjoy both homeownership and life's simple luxuries.

  • What is a home inspection and should I have one done?

    A home inspection is a crucial step in the home buying process. It involves a comprehensive visual examination of the property to assess its overall condition. During the inspection, the inspector meticulously examines all major components such as roofs, ceilings, walls, floors, foundations, crawl spaces, attics, and retaining walls, among others. Additionally, they assess vital systems including electrical, heating, plumbing, drainage, and exterior weatherproofing. The inspection results are provided to the purchaser in a detailed written report, typically within 24 hours of the inspection. This report is invaluable as it outlines the property's condition and any potential issues. A pre-purchase home inspection offers peace of mind and facilitates informed decision-making. It can reveal if the home requires major structural repairs, allowing you to factor these considerations into your buying decision. Ultimately, a home inspection eliminates uncertainties and enhances the likelihood of a successful purchase.

  • What is the minimum down payment needed for a home?

    When considering purchasing a home, it's essential to understand the financial requirements. A minimum down payment of 5% is typically required, with some restrictions on maximum property prices. In addition to the down payment, you should be prepared to cover closing costs, including legal fees, disbursements, appraisal fees, and a survey certificate if applicable. Regardless of the down payment amount, at least 5% of it must come from your own cash resources or a gift from a family member; borrowing this portion is not allowed. Lenders generally accept family gifts as an acceptable down payment, provided the donor signs a letter confirming that it's a true gift, not a loan. If you're seeking mortgage loan insurance from Canada Mortgage and Housing Corporation (CMHC), the gift money must be in your possession before submitting the application to CMHC for approval. For mortgages with less than a 20% down payment, mortgage loan insurance must be provided by either CMHC or GE.

  • What is mortgage loan insurance?

    Mortgage loan insurance is a crucial aspect of the home buying process. It is provided by Canada Mortgage and Housing Corporation (CMHC), a government crown corporation, as well as GE Capital Mortgage Insurance Company, an approved private corporation. This insurance is mandated by law and serves to protect lenders in cases where the loan-to-value ratio exceeds 80%. Borrowers are responsible for paying the insurance premiums, which typically range from .50% to 3.75% of the mortgage amount. These premiums can be added directly onto the mortgage principal. It's important to note that mortgage loan insurance differs from mortgage life insurance, as it primarily safeguards the lender against default and allows borrowers to access homeownership with a lower down payment.

  • What is a conventional mortgage?

    A conventional mortgage typically refers to a financing arrangement where the down payment equals 20% or more of the purchase price. In such cases, the loan-to-value ratio is 80% or less, making mortgage loan insurance unnecessary. This type of mortgage offers borrowers the advantage of not having to pay for mortgage loan insurance, provided they meet the specified down payment criteria.

  • How does bankruptcy affect qualification for a mortgage?

    Depending on the specific circumstances of your bankruptcy, there are lenders who may be willing to consider providing mortgage financing. It's important to consult with mortgage professionals to explore your options and understand the potential eligibility criteria based on your unique financial situation.

  • How will child support affect mortgage qualification?

    When it comes to child support and alimony, the impact on your mortgage qualification varies based on whether you are the payer or recipient. If you are paying child support and alimony to another person, the amount paid out is typically deducted from your total income before determining the mortgage size you qualify for. Conversely, if you are receiving child support and alimony from another person, the amount received may be added to your total income when determining your eligible mortgage size. However, this is contingent upon providing proof of regular receipt for a specific duration, as determined by the lender. Consulting with a mortgage expert can provide you with further guidance based on your unique situation.

  • Can I get a mortgage to purchase a home?

    Subject to qualification, it is indeed possible for homebuyers, including those with a 5% down payment, to purchase a home and fund improvements. High-ratio financing options are available, with both Canada Mortgage and Housing Corporation (CMHC) and GE Capital offering insured mortgages. These mortgages can cover the home's purchase price and provide additional funds for immediate major renovations or improvements, eliminating the need for separate financing. It's important to note that some conditions apply. When improvements are cosmetic, the mortgage loan insurance premium remains unchanged according to the standard schedule. However, for structural improvements, the mortgage loan insurance premium increases by 0.50% over the standard schedule. For detailed information on mortgage loan insurance premiums, please refer to the high-ratio home mortgage financing guidelines.

  • Can I use gift funds as a down payment?

    Many lenders are open to accepting down payment funds that are gifted by family members as a valid source of down payment. Typically, a gift letter, signed by the donor, is a requirement to verify that the funds are genuinely a gift and not a loan. However, it's essential to note that specific rules apply when mortgage loan insurance is involved. If your mortgage requires mortgage loan insurance from Canada Mortgage and Housing Corporation (CMHC), the gift money must be in your possession before submitting the application to CMHC for approval. On the other hand, when mortgage loan insurance is provided by GE Capital, this particular requirement is not mandatory. For more detailed information on mortgage loan insurance, please refer to the 'What is Mortgage Loan Insurance?' section for further insights.

  • What is a pre-approved mortgage?

    A pre-approved mortgage offers a valuable interest rate guarantee provided by a lender for a specified period, typically up to 120 days, and for a predetermined amount. This pre-approval is based on the information you provide and is generally contingent upon meeting specific conditions before finalizing the mortgage. Common conditions may include requirements such as 'written employment and income confirmation' and 'down payment from your own resources.' For successful real estate transactions, most experienced professionals recommend having a pre-approved mortgage in place before embarking on the home-buying journey. This ensures that you are viewing properties within your affordable price range, streamlining the process and enhancing your purchasing power. In summary, obtaining a pre-approved mortgage is one of the initial steps that every homebuyer should consider before commencing their home-buying journey.

  • Should I wait for my mortgage to mature?

    Lenders often extend the convenience of guaranteeing an interest rate up to 120 days before your mortgage matures. Additionally, if you're not increasing your mortgage amount, they typically cover the costs associated with transferring your mortgage. This proactive approach ensures that you secure a favorable rate well in advance of your maturity date, shielding you from concerns about potential rate hikes. Moreover, in the event that interest rates decrease before the maturity date, the new lender usually adjusts your rate downward. It's important to note that most lenders send out mortgage renewal notices offering existing clients their posted interest rates, which may not be the most competitive option available. Always take the time to explore the potential for a lower interest rate, either with your current lender or by considering alternatives. Failing to do so could result in paying a significantly higher interest rate on your renewed mortgage than necessary.

  • What is a down payment?

    When embarking on the journey of homeownership, it's essential to recognize that very few buyers have the cash available to purchase a home outright. Therefore, most individuals turn to financial institutions for a mortgage, marking the first step in what could become a long-lasting financial relationship. Even with a mortgage, you will still need to raise funds for a down payment. The down payment represents a portion of the purchase price that you provide from your own resources. It's crucial to determine the appropriate down payment amount well in advance of commencing your house-hunting endeavors. Keep in mind that the size of your down payment, which signifies your financial stake or equity in your new home, plays a significant role in your home's overall cost. A larger down payment results in a smaller mortgage, which in turn leads to lower interest costs. Over time, these savings can accumulate substantially, making it a financially prudent choice.

  • How can you acquire a home with as little as 5% down?

    In today's mortgage landscape, many lenders extend the option of insured mortgages for both new and resale homes, featuring lower down payment requirements, sometimes as low as 5%. These low down payment mortgages are typically insured to safeguard against potential payment default, which in turn results in slightly higher carrying costs compared to conventional mortgages, primarily due to the inclusion of the insurance premium. For all low down payment insured mortgages, the borrower assumes responsibility for several key expenses, including appraisal and legal fees, an application fee for the insurance, and the payment of the mortgage default insurance premium. It's worth noting that, in some cases, the premium amount can be added to the mortgage principal, providing borrowers with a convenient financing option.

  • How can you pay off your mortgage sooner?

    Accelerating the payoff of your mortgage is an excellent strategy to enjoy substantial savings. Here are some effective ways to achieve this: 1. Payment Schedule: Opt for a non-monthly or accelerated payment schedule that aligns with your financial goals. This can help you pay down your mortgage faster. 2. Payment Frequency: Increase your payment frequency, such as switching to bi-weekly or weekly payments. More frequent payments reduce the overall interest paid over the life of the mortgage. 3. Principal Prepayments: Whenever possible, make principal prepayments on your mortgage. This extra money directly reduces your outstanding balance and accelerates your path to debt-free homeownership. 4. Double-Up Payments: Consider making double-up payments when you have surplus funds. This approach significantly reduces the principal and interest on your mortgage. 5. Shorter Amortization: When renewing your mortgage, opt for a shorter amortization period. While this increases your monthly payments, it helps you pay off the mortgage faster and reduces the total interest paid. Implementing these strategies can lead to a quicker mortgage payoff and substantial long-term savings.

  • How can you use your RRSP to help you buy your first home?

    Today, approximately 50% of first-time homebuyers leverage their Registered Retirement Savings Plan (RRSP) savings to facilitate their down payment. For first-time homebuyers, the Home Buyers Plan (HBP) offers a valuable opportunity to withdraw funds from their RRSP tax-free to contribute to their down payment. The HBP program is administered by the Canada Revenue Agency (CRA), and certain eligibility conditions apply. How much can you withdraw? • You can withdraw a maximum of $25,000 from your RRSP. • If you purchase the home jointly with your spouse, partner, or another individual, each of you can withdraw up to $25,000, allowing for a total withdrawal of up to $50,000. • The withdrawn amount from your RRSP is not considered part of your annual income for tax purposes, and no tax is deducted from the withdrawn funds. What is the payback period? • Repayment of the withdrawn funds to your RRSP begins two years after acquiring the home. • The repayment must be completed within 15 years, with annual RRSP deposits starting in the second year following the withdrawal. The CRA will determine the minimum annual repayment amount and notify you accordingly. • Failure to repay the required amount in a given year results in its inclusion in your taxable income for that year, subjecting you to income tax on that amount. For more detailed information and eligibility criteria, please visit the Canada Revenue Agency (CRA) website at Source: Financial Consumer Agency of Canada.

  • What are the costs associated with buying a home?

    When embarking on the journey of homeownership, it's essential to plan for various upfront costs to ensure a smooth transition into your new home. Here are key financial considerations: 1. Down Payment: Ensure you have sufficient funds for the down payment, which is a percentage of the purchase price that you contribute. A conventional mortgage typically requires a 20% down payment, while low down payment insured mortgages may accept as little as 5%. 2. Closing Costs: Budget for closing costs, which can amount to up to 2.5% of the basic purchase price. These costs encompass various expenses, including legal or notary fees, land transfer tax (where applicable), and interest adjustment costs. 3. Home Inspection: It's highly recommended to hire a professional building inspector for a thorough home inspection. This service comes with an inspection fee but provides valuable insights into the property's condition and structural soundness. 4. Legal Fees: You'll be responsible for the fees and disbursements of the lawyer or notary who assists you in the home purchase. It's advisable to compare fees among professionals to ensure a competitive rate. 5. Property Insurance: Arrange for property insurance coverage before the closing date, as it is a mandatory requirement. 6. Moving Costs: Allocate funds for the cost of moving to your new home. Consider other initial expenses such as appliances, garden tools, cleaning materials, and any essential items you may need. By accounting for these expenses upfront, you can plan your home purchase effectively and avoid unexpected financial surprises.

  • What should the length of my mortgage term be?

    Choosing the right mortgage term is a significant decision in your homeownership journey, and it's important to align it with your financial goals and risk tolerance. Here are some key considerations to help you determine the most suitable mortgage term: 1. Short-Term Mortgage (e.g., 6 months to 2 years): • Consider a short-term mortgage if you plan to sell your home in the short-term without purchasing another property. • Short-term mortgages often have lower interest rates but may require more frequent renewals. 2. Medium-Term Mortgage (e.g., 3 to 5 years): • A common choice for many homebuyers, providing a balance between rate stability and flexibility. • Suitable if you believe interest rates have stabilized and are unlikely to drop significantly. 3. Long-Term Mortgage (e.g., 7 to 10 years): • Opt for a long-term mortgage if you value security and want to budget for consistent monthly expenses. • Ideal for first-time homebuyers seeking financial stability. 4. Interest Rate Expectations: • Consider your outlook on interest rates. If you believe rates have hit bottom, a long-term mortgage may be appropriate. Conversely, if you think rates are high, consider a shorter term with the hope of lower rates upon renewal. 5. Risk Tolerance: • Assess your willingness to monitor and manage interest rates closely. Short-term mortgages may involve more rate monitoring and potential payment adjustments. Ultimately, the choice of mortgage term should align with your unique financial situation and objectives. Consulting with a mortgage professional can provide personalized guidance to help you make an informed decision.

  • What are the monthly costs of owning a home?

    Owning a home comes with various financial responsibilities that should be carefully budgeted for. Some of these expenses may not be billed monthly, so it's essential to calculate and allocate them into manageable monthly costs. Here's a breakdown of these expenses: 1. Mortgage Payment: • Typically the largest monthly expense for most homeowners. • The actual mortgage payment amount can vary based on factors like the mortgage term and amortization. 2. Property Taxes: • Property taxes can be paid in two ways: directly to the municipality by you (with proof of payment provided to your financial institution) or as part of your monthly mortgage payment. 3. School Taxes: • School taxes may be integrated into property taxes in some municipalities or collected separately as a lump sum payment, often due at the end of the school year. 4. Utilities: • Homeowners are responsible for utility bills, including heating, gas, electricity, water, telephone, and cable. 5. Maintenance and Upkeep: • Budget for ongoing maintenance expenses such as painting, roof repairs, electrical and plumbing work, driveway maintenance, lawn care, and snow removal. • Maintaining your property enhances its market value and the overall neighborhood. It's crucial to plan and budget for these expenses to ensure your financial stability as a homeowner. Proper financial planning and maintenance can contribute to the long-term value and enjoyment of your home.

  • Should you go with a short or long-term mortgage?

    Selecting the right mortgage term is influenced by your lifestyle and financial preferences. Here are some factors to consider: Longer-Term Mortgage (e.g., 4, 5, or 7 years): • Suitable if you have a busy life and prefer not to closely monitor mortgage rates. • Offers the advantage of locking in today's rates for an extended period, providing long-term rate certainty and financial security. Shorter-Term Mortgage: • Ideal if you want to keep your mortgage flexible and have the ability to take advantage of lower rates. • Shorter-term mortgages often come with lower rates, allowing you to potentially save on interest costs. Your choice of mortgage term should align with your current financial situation and your future plans. It's essential to consult with a mortgage professional to determine the most suitable option for your needs and goals.

  • What is a fixed rate mortgage?

    A fixed-rate mortgage provides the reassurance of a predetermined interest rate for a specified term, typically ranging from 6 months to 25 years. This stability allows you to budget with confidence, knowing exactly what your mortgage payments will be during the chosen term.

  • What is a variable rate mortgage?

    An open variable rate mortgage offers a unique payment structure where the payments remain fixed for a short term, typically one to two years. However, the interest rates on this type of mortgage may fluctuate on a monthly basis, depending on prevailing market conditions. In the event that interest rates decrease, a larger portion of the monthly payment is applied to reducing the principal balance. Conversely, if interest rates rise, a greater share of the payment is allocated to covering the interest. One key advantage of open variable rate mortgages is the flexibility they offer in terms of prepayment. Borrowers can make prepayments of any amount (subject to certain minimums) on any payment date, allowing for greater control over the mortgage balance.