30 Apr

7 Steps To Buying A Home

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7 STEPS TO BUYING A HOME

To celebrate national new homeowners day, here’s a useful article on 7 steps to buying your home!

Grande Prairie Mortgage Broker at HT Mortgage Group want you to be a new homeowner too!

Let’s celebrate National New Home owners day with a post about the seven steps you need to become a homebuyer too!

It’s important to understand the home buying process, so here’s a 7-step checklist.

Step 1: Down Payment
The hardest part to buying a home is saving the down payment (a gift from the Bank of Mom & Dad also works).
• For purchases under $500,000 minimum down payment is 5%.
• Buying between $501-999,000 you need 5% on first $500,000-PLUS 10% down payment for anything over $500,000.
• Buying a home over $1 million you need 20% down payment.

For any home purchases with less than 20% down payment, you are also required to purchase Mortgage Default Insurance.

Step 2: Strategize, Define Your Budget and get Pre-Qualified
Unless you can afford to buy a home, cash in hand, you are going to need a mortgage.
You need to get pre-qualified, which should not be confused with the term pre-approved.
The big difference is that no approval is ever given by a lender until they have an opportunity to examine the property that you wish to purchase. The bank may love you… but they also must love the property you want to buy.
Pre-qualifying will focus on gathering documentation to prove the information on your mortgage application including credit, debt load, income/employment, down payment etc.

Mortgage brokers will make sure you get a great mortgage rate. Just as important as rates are the terms of your mortgage which should include:
• prepayment options (10-20%)
• penalties
• portability
We also discuss what type of mortgage fits your current situation
• fixed vs variable?
• life of the mortgage (amortization) 25 or 30 years etc.
• payments – monthly, semi monthly, accelerated bi-weekly

Step 3: Set Your Budget
Keep in mind that just because you’re pre-qualified for a certain amount of mortgage, doesn’t mean you can actually afford that amount. Prepare your own monthly budget to be sure.
Typically, your total home payments (including mortgage, property taxes, strata fees & heat) should not exceed 32-39% of your gross (pre-tax) income.

Step 4: Find the Right Property – Time to Engage a Realtor
Once you have been prequalified for a mortgage, based on your budget… you need to find a realtor.
Selecting the right real estate agent is a very important step in the home buying process. When you work with an agent, you can expect them to help you with many things, including:
· Finding a home
· Scheduling tours of homes
· Researching the market, neighbourhood and home itself
· Making and negotiating your offer to purchase, and counter-offers
· Providing expert advice on home buying
· Handling the offer, gathering documentation and closing paperwork
I recommend interviewing at least three realtors. You will quickly decide who has your best interests in mind. Do you want to deal directly with a realtor who’s going to work with directly when you go home hunting, or do you want to deal with a BIG name realtor, who has buyers & sellers realtors working under them? There are advantages to each – you need to decide what is the best fit for your situation.
Get referrals for realtors from friends and family… OR ask me, I have a group of realtors that I know and trust.

Step 5: Mortgage Approval
Once you have found the property you would like to call home, your mortgage broker will send your mortgage application and property information to the lender who is the best fit for your situation, based on your input.
If the lender likes your financial situation and the property, they will issue a “commitment” letter outlining the terms of the mortgage. The lender will send you a list of documents, so they can verify and validate all the information you told them on the mortgage application.

Step 6: Time for the Solicitor (Lawyer or Notary)
Once the lender has reviewed and approved all your mortgage documentation and the property documentation, your file will be sent to your solicitor (in B.C. you can use a lawyer or notary). They will process all the necessary title changes and set up a time for you to meet, review mortgage documents and sign.

Step 7: Get the Keys
On the closing day the documentation for your home purchase will be filed at the land titles office by your solicitor. Typically, the possession date is 1 or 2 days later, giving time for the money (down payment & mortgage) to get to the home seller. On possession day you set up a time to meet with your realtor to get the keys.
Congratulations you’re done – you now own your home!!

Mortgages are complicated, but they don’t have to be… speak to a Dominion Lending Centres mortgage broker!

Kelly Hudson

KELLY HUDSON

Dominion Lending Centres – Accredited Mortgage Professional
Kelly is part of DLC Canadian Mortgage Experts based in Richmond, BC.

More Posts –

6 Mar

What’s the difference between a broker and a bank in Grande Prairie?

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What’s the Difference between a Broker and a Bank in Grande Prairie?

Choice! Your mortgage broker will help sort through a variety of lenders, to find the lender that suits you best. Different lenders will accept different types of income, have different underwritting policies or different ways of lending. And of course, since we work for you, not the banks – we negotiate a better mortgage rate for you.

 

Different Lenders Accept different types of income

Getting the best mortgage in Grande Prairie, go to a mortgage broker to be given options

What’s the difference between a broker and a bank Grande Prairie? Well a broker gives you a host of different lenders and rates to choose from, the bank just offers rates itself. (And often not as good of a rate as they could offer – how do you get that bonus otherwise?)

Have you ever gong to a bank for a mortgage and heard, ” I’m sorry your dream home is out of reach given your income?”. Although you might be out of luck at that bank, it doesn’t mean you should stop trying! There are a variety of incomes that some banks will not use to qualify you for loans. Child tax benefit, rental income, vehicle allowances are just a few types of incomes that not every lender will accept.

Let’s look at rental incomes.

My Home in Grande Prairie has a $200,000 mortgage, so $1250 a month, and I have a lease for $1800 a month.

  1. Lender 1 – $1700-1250 = $450 x 50% = net rental income $225 a month
  2. Lender 2    – $1250 x 1.4 = $1750      $1700- $1750 = net rental income $-50 a month
  3. Lender 3 – Only considers rental income as a valid income with two years history of rental income on T1 general tax documents. You have a good accountant who has made it possible to record a capital loss both years. Averaging out the rental income reported to the govement over two years…. Net rental income $-100 a month.

Given a choice rental property owners would choose Lender 1.  “But how do I find out which lender has the best rental income formula?” Well that’s where calling your broker comes in. We spend all week, week after week understanding and learning which lender is best for various situations. Your banker… may be able to expain how they calculate rental income, but they will not have any indepth or accuate knowledge on how the competitors calculate rental income. So call a broker, they specalize in this sort of comparision.

Child Tax Benefit Income

Truthfully there are very lenders who will accept child tax benefit income, but if you need just a little more income to qualify for that dream home we know of a couple that lend in Grande Prairie. The same applies to how much overtime you can use to qualify, or if you can use a vehical allowance. Not every lender accepts ever income type, so trust your broker to find a lender that maximizes and makes use of multiple income sources.

 

Different Mortgage Types Between lenders

Fixed Rate or Variable? Reverse mortgage or a Home Equity Line of Credit? Manulife One account or a flex down mortgage? Interest Rate adjustible Penalty or three months interest? Open mortgage or closed? Portable? Able to end mortgage term without fee’s if I’m dead?

The Canadian mortgage space has many unique products. One great example is the CHIP Home Equity Reverse mortgage, which can help lower income seniors solve cashflow issue’s. (A senior with lowered income may not qualify under normal refinance programs.) We also have access to flex-down mortgages which can allow a portion of your mortgage to be interest only. Ideal for rental property owners trying to lower borrowing cost’s in the short term.

 

We work for you, not the banks!

 

Working hard to increase our website SEO in Grande Prairie

Jillian Napen, Office Manager at HT Mortgage Group, Part of Dominion Lending Centres in Grande Prairie

20 Feb

Total Cost of Buying a Home in Grande Prairie

Jillian Napen

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Cost of Buying a Home in Grande Prairie? Any hidden fees?

This week I will talk about the cost of buying a home in Grande Prairie.

Although I bought my home back in 2015, I’m lucky enough to work with new mortgages and purchase’s everyday here in Grande Prairie, so this will be as detailed as I can give you.  Here’s a breakdown of what I spent.

I’ve signed the purchase agreement for my new home here in Grande Prairie. My mortgage broker has verified that I have enough downpayment but….

What is the cost of getting a mortgage in alberta 2019?

“What other cost’s should I expect when buying my home?

Legal Fee’s

First I’ve called a lawyer for a quotes.

“Could I get a quote for legal fee’s on this $250,000 house I’m purchasing here in Grande Prairie?”

 I would expect legal fee’s for a home purchase to run around 0.5% of the purchase price.  So $250,000 home x 0.05% = $1250.  A $500,000 home will have a cost around $2500. This will vary between lawyers so call for quotes!

My lawyer will help me purchase title insurance, $160 for a $250,000 home in Grande Prairie, and roughly $300 for a $500,000 home.

Home Insurance

Next I’ve called a home & auto insurance company for a home insurance quote. If I’m lucky my new insurance company won’t make me do too much legwork. I’m prepared to answer questions like:

” How old is the roof of your new home? How old is the hot water heater? Is the basement carpeted or tiled?”

My current home insurance policy costs me $120 every month. You are required to have home insurance to get a mortgage. So expect to pay between $120 to $220 a month on homes priced between $250,000 to $500,000.

 Another insurance to get is for your personal protection- life & disability insurance. For me on a $250,000 home Life Insurance was $17 a month, and disability was $37 a month. These rates will change based on your health and age. I was 25 and darn healthy.

    • Mortgage Default Insurance:  if you put less than 20% down on your house, you are getting default insurance. You don’t have to worry about saving up, as every mortgage company in Canada just adds it to your mortgage.  The cost varies based on your downpayment vs purchase price. Check out this CMHC calculator to estimate it based on your next home purchase. ( 5% down on a $250,000 home – $11,400 for default insurance.)
    • If you avoid mortgage default insurance you may pay $200-$400 for an appraisal. (You also may need an appraisal if there’s something strange about your new home. Wood Foundation? Used to be a church?)
    • Watch this video to learn more about default insurance

Cleaning Supplies

This was an expense I never expected for my first home. You move into your lovely new house and then slowly realize…. I need a broom, kitchen scrubs, rakes, shovels! you need dish towels, disk racks, spoons, tea kettle, spices…. It adds up.

If you can try to negotiate for “Backyard Shed including contents” to avoid having to buy yard supplies. I’ve never seen a purchase agreement negotiate for the cleaning supplies closet to be left fully stocked, but I would have saved so much.

As well,Budget another $500 to stock your house up with all the cleaning supplies, brooms, mops, linens, pot and more that a house requires. You could of course spend way more than this…. Try to hold off purchasing the diamond crusted broom till month two.

Furnishing your New Home

This… you can spend so much on furniture so quickly!  The most subjective cost out of all the categories. My best advice is take it slow. Enjoy the freedom of having no furniture. Being minimalist is very chic for 2019. Budget $500 for the first two months and see how far you can stretch it.

 

Don’t go out and buy all new furniture with a monthly payment plan. Wait a year.

Utilities

Start calling at least two weeks in advance before your move-in date to get your services set-up.

Internet: $90/month

Heat & Electric on a combined bill: $228/month

Water & Garbage Removal: $80/month

Future Repairs

Start planning for the future. Now that you own your home, 10 years down the road you’ll need a new roof/fridge/hot water boiler/ new deck. Try to put aside $1000 a year to cover future repairs. One day you will need to replace the roof/ repaint the deck/ buy a new furnace / update the windows. Plan and set the money aside in advance, future you will be happy.

The Total Cost of Buying a Home in Grande Prairie

Cost of Getting a Mortgage on a $250,000 home in Grande Prairie with 5% down (Rough Numbers)

Lawyer $1250

Default Insurance: $11,400 – added to your mortgage

Title Insurance: $160 -Part of your legal cost’s

Appraisal $200-$400 – not always required for a purchase.

Household Goods $500

To Furnish your home –  $500 & be strategic for the first two months.

Monthly Add-on’s to the budget

  • Internet $90
  • Cable TV $90 (Netflix $13)
  • Heat & Electric on a combined bill $228
  • Water & Garbage $80
  • Home Insurance $120
  • Home Maintenance $84 (Save $1000 a year to start)

 

Getting a home is a big investment, and a major change to how you’ll budget and spend your money. For myself having a place of my own to decorate and host at was always worthwhile.

If this is starting to seem like too big of expense – We live here in Grande Prairie! Our rental market is thriving, and people are always looking for a room to rent. Rent a spare room out and net $600 a month. I’m renting two rooms for $700 a month right now in my house.

 

PS: please send me an email or message me on Facebook if you’d disagree with these numbers for a $250,000 home in Grande Prairie. Or if you think I’ve missed any of the cost’s associated with owning a home!

Working hard to increase our website SEO in Grande Prairie

Jillian Napen, Office Manager at HT Mortgage Group, Part of Dominion Lending Centres in Grande Prairie Article updated Feb 20th, 2019

 

 

16 Jan

Winter is here! Get a worry free mortgage!

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This time of year, there are a few less mortgage’s being done- not many people want to move into a new home in the snow. But if you want to get a worry free mortgage done in Grande Prairie, this is a great time to be shopping.

Scope out those potential neighbourhoods – how many snow shovels?

  • Will my new neighbours shovel their driveways?
  • Are there any super nice people on the street willing to snow-blow my sidewalk?
  • Can I walk around safely?
  • Are they using salt, sand or kitty litter to de-ice the walk?
  • How far is this house located from a bus route or major traffic route that will get plowed first when we have a lot of snow?

My top tip? Scope out that neighbourhood right after it snows – compare early morning snow levels to slightly after work snow levels. In some neighbourhoods like Hillcrest here in Grande Prairie, you can drive around and count how many people have shovels ready near their front door.

And if you closely examine sidewalks, try looking right between two homes – this can tell you if two people shoveled at different times – or if that super nice multiple driveway shoveler exists in this neighbourhood! That’s what I call a worry free mortgage!

What? You need more than just good neighbours with shovel’s to have a worry free mortgage?

You want the best interest rate, or to confirm that you’ve got a mortgage that let’s you pay it off faster? Well a local mortgage broker will help with that.  Give us a call to get those details in place! But really guys – in 2018 Grande Prairie had 49 inches of snow in December and another 49 inches of snow in March – trust me – a worry free mortgage is all about the snow shovels.

Article by Jillian – Doesn’t own a snowblower – Napen

Office Manager , HT Mortgage Group

Or good neighbours who own a snowplow

Snow shovels are the key to a worry free mortgage in Grande Prairie

12 Nov

The Downside to Downsizing

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On the surface, downsizing can seem like a logical financial move.

However, when we asked Canadian homeowners aged 55 and older what their thoughts on downsizing are, we learned that while many are faced with the downsizing dilemma they are considering other options.

Below we outline some of our key findings from the survey we commissioned from Ipsos.

In short, downsizing does not guarantee financial freedom.

Largely why this dilemma exists is because Canadians aged 55 and older are not aware of all of the financial products available to them – most notably, the CHIP Reverse Mortgage.

Best Regards,
Andrea Twizell
National Partnership Director, Mortgage Brokers

If you would like to learn more about how a reverse mortgage can be an alternative to downsizing, please contact us at HT Mortgage Group here in Grande Prairie, and ask to speak to one of our mortgage brokers at 780-513-6611 or 1-800-513-6611

 

15 Oct

WHY WE CHOSE A MORTGAGE BROKER – OUR HOUSE MAGAZINE

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WHY WE CHOSE A MORTGAGE BROKER – OUR HOUSE MAGAZINE

Spent months searching for a house
Lindsay Austin and her husband never imagined they could get a home with a lakefront view. Their real estate journey began in 2012, when the couple purchased their first place, a townhome in Kelowna B.C. with the help of a Dominion Lending Centres Mortgage broker. By 2017, they were ready for something bigger and better. So the couple reached out again to their mortgage broker, who was there to lend a hand. After months of searching, the couple found their home. A one-acre property just outside the city overlooking Okanagan Lake. They purchased the home for $618,000 and moved in just before the summer.
“It’s rural, a little out of town. It’s exactly what we need,” Austin said, noting her mortgage broker was patient and right by their side as they spent months searching for the right place.

Q: Why did you choose a mortgage broker?

A: We got connected with our broker in 2011. At the time, being our first home, we were financially lost. We were new to the market and my mom said reach out and try. And it just made the process so simple. She’s a one-stop-shop. She collects all of our information once, and I have this touch point and this person who I can trust. My brother and sister-in-law just went through the process, and they had appointments at all sorts of banks, and they sit down and do this and that, and then they do it again with another stranger. Our broker was able to get our information streamlined and out to all of the available lenders and get us the best rates and just simplify it for us. I think that was so key. She made the first process in 2012 so smooth and so easy for us. It wasn’t even a question that we would go with her again because it was so easy the first time.

Q: How was it working with a mortgage broker?

A: It was fantastic. I can say her customer service was so high, and she was always looking at every option. Even with the changes (to mortgage rules) in the last couple years, I’m sure mortgage brokers have had to learn a bunch of new things. She was such a good communicator, and it’s so easy having just one touch point.

Q: What advice would you give someone in your situation?

A: Ask lots of questions, and your mortgage broker will have all the answers. That’s their job and that’s why they make it so nice and easy. Ask lots of questions and be totally honest. Those, along with communication, and you’ll have a very pleasant experience.

Jeremy Deutsch
JEREMY DEUTSCH
Communications Advisor –  Dominion Lending Centres

 

9 Oct

CASH BACK AND DECORATING ALLOWANCES ON NEW BUILD OR PRE-SALE PURCHASES

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CASH BACK AND DECORATING ALLOWANCES ON NEW BUILD OR PRE-SALE PURCHASES

Decorating Allowances and cash back incentative are becoming a more popular option for home sellers and developers in the Grande Prairie region to offer. But be careful, too large of a decorating allowance can lower the amount of mortgage your approved for! Jillian Napen, Office Manager at HT Mortgage Group, Downtown Grande Prairie

As the market shifts, developers will increase their incentives to buyers with cash back and decorating allowances on new build or pre-sale purchases. It is very important to review those options with your real estate agent representative and vital to consult with your Dominion Lending Centres mortgage broker. Although these offers may seem attractive, they can impact your financing and could cost you thousands of dollars.

Before you write a contract on a new build or pre-sale, ensure you have set up your team including a real estate agent and mortgage broker. Always consult with them to ensure you have sound advice. Do not rely solely on the developer’s sales representative.

What happens when you sign a contract on a pre-sale?

When you visit the sales centre for the pre-sale and decide to write a contract you have a rescission period where you can back out of the purchase. The contract you sign is drafted by the sales centre and once you remove any conditions, you are locked into the purchase. Therefore it is essential you have your real estate agent with you at the time of signing or at a minimum, they review the contract. It is in your best interest you fully understand the terms, the disclosure statement, what you are buying, schedule to build, GST, deposit schedule and any incentives.

Once you remove any conditions, the deposit is paid to the developer and a schedule set for all other deposits till the building is complete. Those total deposits are typically 20% of the purchase price. That is money you will not receive back if for any reason you are unable to proceed with the purchase. Some contracts allow assignment to another buyer, but those must be approved by the developer and may come with restrictions. Your realtor can guide you on these matters.

How Will Cash Back or Decorating Allowances Impact Your Purchase?

When the market slows, developers will use incentives such as cash back and decorating allowances on new build or pre-sale purchases as a strategy to increase sales. Regardless if this is a cash back or a rebate for decorating, it will have an impact on the purchase price for the lender on the financing. This is a common misconception among buyers and even realtors who do not understand the process from a financing perspective.

For example: A purchase price plus GST is $800,000. The developer is offering a $20,000 decorating allowance. The lender will automatically deduct the $20,000 from the purchase price. Your new purchase price will be $780,000 for financing purposes. This does not change the actual purchase price. You still have to pay the developer $800,000 for the home. The lender will lend on the $780,000 only. Therefore you must pay in cash at the time of funding the $20,000 difference.

The developer has sold you the idea you are receiving decorating upgrades of $20,000. You are receiving the value of that allowance BUT make no mistake you are paying for it.

If the incentive is a cash back amount in the above example, you will receive the cash back from the developer at the time of completion. However, the lender will still only offer financing on the lower value minus the cash back amount.

Pauline Tonkin

PAULINE TONKIN

Dominion Lending Centres – Accredited Mortgage Professional

5 Oct

WHAT SHOULD COME FIRST, THE HOUSE OR THE CAR?

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WHAT SHOULD COME FIRST, THE HOUSE OR THE CAR?

So you just got a shiny new car, and now you want a shiny new home to go with it. Will that new car payment affect your mortgage pre- approval? The short answer… absolutely it will.
Recently, I have encountered many people looking to pre-approve for a home purchase that do not qualify. While it may be in part because of the mortgage “Stress Test” rules, a good portion is due to large debt obligations such as car loans. I have witnessed applicants that have brand new car loans/leases with huge payments and not one gave thought as to whether it would affect their ability to qualify for a mortgage.
Unless you have already done your home work with your mortgage broker by getting a mortgage pre-approval that factors the new car payment into it and your budget, you may be in for disappointment.
However, it doesn’t necessarily have to be one or the other. Here are some tips to get set for mortgage approval success.

1. Get pre-approved. Seek the guidance of your mortgage broker to know exactly what you qualify for before you start the house hunting process. Knowing what your maximum purchase price is, helps you and your realtor.
2. Be realistic with what you can afford. Start by looking at what you pay in rent now. That’s a good starting place to figure out what you can pay on a mortgage. However, you also must consider what you can get approved for.
3. Remember to save and budget for more than the mortgage payment. When you own a home, your monthly payment consists of more than just the mortgage payment. You will also pay property taxes, home owner insurance, and utilities on top of your other monthly debt obligations. Having emergency savings can help alleviate the stress of taking on the financial responsibility of a owning a home.
4. Clean up your credit. Paying off credit balances can not only help improve your credit score, it can also increase your buying power.
5. Avoid making big financial changes. This is the big one. Most lenders want to see that you’re a stable applicant. Doing things like buying a new car before you buy a new house does not establish you as stable. Similarly, opening new credit cards, or making a drastic change to your employment can also be detrimental to getting approved for a mortgage.

When in doubt always seek the advice of your Dominion Lending Centres mortgage professional.

Lynn Nequest

LYNN NEQUEST

Dominion Lending Centres – Accredited Mortgage Professional
Lynn is part of DLC Forest City Funding based in Kitchener, ONT.

2 Oct

The Pros and Cons of Co-signing for a Mortgage

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THE PROS AND CONS OF CO-SIGNING FOR A MORTGAGE

If you keep up on the news you know that qualifying for a mortgage is getting tougher and tougher. Someone who would have sailed through the application process 10 years ago could find themselves declined for a mortgage today.
Often I find applicants can afford the monthly payments but they can’t prove that their income is stable. If they waited another 6 months to a year, they could but they would miss out on a great opportunity to buy a home now. Buyers who have recently switched jobs, receive overtime or get a portion of their income from tips are the people who need co-signers to make the deal work. A strong co-signer can be more persuasive to a lender than offering to put more money down.

I also have found that people with “thin” credit are being asked for co-signers. These are applicants who have one credit card but no car loans or other credit facilities showing on their credit bureau report. Often they are recent university graduates who recently started work.
Rick Bossom, an accredited mortgage professional with Bayfield Mortgage Professionals in Courtenay, British Columbia, says that it’s an alternative to lenders just turning the deal down in cases where the borrowers are just on the edge of qualifying.

“They’re close but they just need a little bit more and that’s why the co-signing thing would come up. It’s not like they’re really, really bad, they’re just not quite there.”

What does a co-signer do? Their job is to continue payments in the event that the main applicant(s) default on the mortgage. In essence, they are saying that if you skip out on the payments, they will take up the slack.
As a result, lenders want to have co-signers on the application just as if they would be living in the home and making the mortgage payments. If they have mortgage payments of their own, they have to show that they can financially afford to pay both mortgages and any other monthly obligations that they may have like car payments.

One thing that surprises primary applicants as well as their co-signers is the amount of information required from the co-signers. They will have to provide an employment letter, recent pay stub, a credit bureau report at a minimum. If they are self-employed company income documents will also be required.
It’s always best for the primary applicant to have a conversation with the co-signer or co-signers to inform them of this in advance. The co-signers should also be aware that this will tie up their credit for the term of the mortgage. If they are planning on buying a vacation home or making a large purchase, they may be declined based on their financial obligation to your mortgage.

However, there is one feature that banks don’t tell you about but your Dominion Lending Centres mortgage professional will tell you. There’s the ability to remove the co-signer from the mortgage after 12 months of successful on time mortgage payments. Co-signers don’t have to stay on the mortgage for the whole term.

Make sure that you mention that you are interested in taking your co-signer off the mortgage in a year and your mortgage broker can pick a lender who will allow this. It’s really nice to be able to remove your co-signer and thank them for their help without tying up their credit capacity for 5 years.

 

David Cooke

DAVID COOKE

Dominion Lending Centres – Accredited Mortgage Professional
David is part of DLC Clarity Mortgages in Calgary, AB.

27 Sep

Rent, Own, Or Do Both?

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Grande Prairie’s Rental Market is hot: will you rent, own or do both?

Grande Prairie’s Rental market has very low vacancy rates right now. When a home goes up for rent, it can rent very quickly and sometimes the price isn’t cheap. Dominion’s Ryan Oake talk’s a little about what to consider when your making home buying decisions.

RENT, OWN, OR DO BOTH?

There are generally three different situations you can find yourself in when it comes to living situations; living with parents, renting, or owning.

A lot of the times the first decision someone will need to make is whether they buy a home to live in, buy a home to rent to someone else, or buy a home to live in while also renting out a portion of it. There are lots of pro’s and con’s to both. Below are some of the numbers and things to consider when looking at each of them.

Buying with The Intention to Rent

Buying a property for the purposes of renting it out to someone else comes with different qualifying criteria and different mortgage product options. The following are some of the important points to consider:

  • The minimum down payment required is 20% of the property price and this down payment must be from your own savings. It cannot be gifted from someone else.
  • Only a portion of the rental income can be used for the qualifying of how much of a mortgage you can afford to borrow. Some lenders only use 50% of the income and add it to yours. Others may look at taking 80% of the rental income and subtracting your expenses which can have a much higher impact on how much you can afford.
  • Interest rates usually have a premium on them when the mortgage is for a rental property compared to a mortgage being requested for a property someone plans on living in. This premium can be anywhere from 0.10% to 0.20% on a regular 5-year fixed rate.

The following is a typical scenario you can expect to qualify for in a rental situation:

$450,000 purchase price
$90,000 down payment (20%)
$360,000 mortgage
$1,665 monthly mortgage payment

$1,400 in monthly rental income
$66,500 a year in income
$0 month in consumer debt payments

Buying with The Intention to Own

Buying with the intention of living in the property as your primary residence is the most common and the guidelines are well known:

  • 5% minimum down payment from own resources or from gifted funds coming from an immediate family member.
  • Insurance premium for having less than 20% as a down payment
  • Lowest interest rates available for high ration purchases of home becoming owner occupied (Loan-to-value of more than 80%)
  • If first time home buyers, you may be able to utilize grants and avoid property transfer taxes which you will not receive on the purchase of a rental.

The following is a typical scenario you can expect to qualify for in an owner-occupied situation:

$450,000 purchase price
$22,500 down payment (5%)
$444,600 mortgage
$2,039.63 monthly mortgage payment

$97,000 a year in income
$300 in monthly debt payments

Buying with The Intention of Both

Owner-occupied properties with a rental are really the best of both worlds. Only issue is, it needs to be a self-contained suite. Therefore, second bedrooms in town-homes or condos do not qualify. It is typically only detached homes with rental suites that are allowed but the rate premiums and minimum down payments fall under the owner-occupied side. Below is a typical scenario you could expect with this kind of purchase:

$1,000,000 purchase price
$100,000 down payment (10%)
$927,900 mortgage
$4,256 monthly mortgage payment

$1,200 in monthly rental income
$175,000 a year in income
$750 month in consumer debt payments

Please reach out to a Dominion Lending Centres mortgage professional in Grande Prairie today if you would like to discuss the different options that are available to you and whether or not any one of these scenarios could potentially work for you given our local market.

 

 

Ryan Oake

RYAN OAKE

Dominion Lending Centres – Accredited Mortgage Professional
Ryan is part of DLC Producers West Financial based in Langley, BC