During our initial meeting, it's important that we discuss your budget and financial goals. Budgeting and planning ensures;
By discussing your finances I can help you narrow down the type of mortgage product that meets your current needs, and your anticipated needs further down the road.
Can you afford to purchase a home now?
The difference between renting and owning.
Your maximum affordable purchase price, not just what you qualify for.
Budgeting to save your down payment.
A pre-approval is leverage. It can be used to your benefit when negotiating with a seller. Why? Because a fully underwritten pre-approval means someone at the financial institution, along with your mortgage professional, has fully reviewed your file and credit to confirm you qualify for a mortgage. They have secured funds for you at a prescribed rate and should no changes to your financial situation change, you would be approved based on them also approving the house of your choice.
Having a pre-approval from a reputable mortgage professional can give the seller confidence that you can meet your conditions and close on the purchase with no hassles or delays. It also gives you confidence that all your financial ducks are in a row so that you can negotiate knowing exactly what you can afford.
A pre-approval will help determine:
The maximum loan amount you qualify for
A monthly mortgage payment that is affordable to you
Protect you from rising interest rates
Provide leverage when negotiating with the seller
There are a few specific incentives that are available to first time home buyers as well as other programs that can benefit home buyers, subject to some qualifying guidelines for eligibility.
Land Transfer Tax Credit:
When purchasing a property or land, you are responsible for paying the Land Transfer Tax or Levies to the Province at the time the transaction closes. In Alberta and Saskatchewan, the transfer fee or levy is much smaller, whereas in other provinces the amount can be rather significant as they are based on a percentage of the property value. To help the first time home buyers offset this expense, there are credits available in Ontario, British Columbia, Prince Edward Island and the city of Toronto. All credits are applied a the time of closing through your lawyer. You will be required to sign an affidavit at the lawyers confirming you qualify for the first time home buyer land transfer credit.
Home Buyer RRSP Withdrawal:
The Home Buyers Plan allows home buyers to withdraw up to $25,000 per buyer (proposed to be increasing to $35,000 as per 2019 Federal Budget release), from an RRSP to purchase a home without having to pay tax on the withdrawal. (Note this amount will need to be repaid within 10 years of the withdrawal). Remember, the $25,000 per buyer does not have to be used solely for a down payment it can be used for:
Paying off some debt
Or even a vacation to celebrate!
You qualify if you or your spouse have not owned and occupied a home as your principal residence in the preceding 4 years, or you are buying or building a home for a disabled person who is related to you.
Home Buyer Income Tax Credit:
The federal government introduced this tax credit (up to $750) to help with the purchase of either your first home, a qualified home, or if you haven't owned a home in the last 4 years. Its purpose is to help with closing costs associated with buying a home. In order to qualify for this tax credit either:
To claim this credit, make sure you complete line 369 that is incorporated into Schedule 1 of your Federal Tax Return. This credit can be claimed in the year in which you acquired the home.
Your or your spouse must have acquired a qualifying home; and
You did not line in another home owned by you or your spouse or common-law partner in the year of the acquisition or in any of the four proceeding years, or
You are a person with a disability or are buying a house for a related person with a disability, you do not have to be a first time home buyer.
Your down payment is your 'skin in the game'. How much and where your down payment comes from can impact your ability to qualify for a mortgage. Most common sources of a down payment are:
Savings & Investments
3 months statements will be required to verify.
Sale of a Vehicle or Other Assets
Bill of sale, copy of old registration, and proof of deposit of funds into your bank account.
You must provide a copy of the divorce papers and confirmation of the deposit of funds.
Requires a signed gift letter indicates that the money does not have to be re-paid along with a snapshot of the gift being deposited into your bank account.
The Home Buyers Plan allows home buyers to withdraw up to $25,000 per buyer, from an RRSP to purchase a home without having to pay tax on the withdrawal.
Provide a copy of the legal documentation and proof of deposit and we recommend that you do not put an offer in on a home until you have the funds in your bank account.
Borrowed Down Payment
With an excellent credit rating and income, some lenders will allow you to borrow your down payment. Borrowing from a line of credit, credit card, personal loan, or family memeber.
Cash Back Mortgage
When a lender provides you with a percentage of the mortgage amount on closing. Currently, these range from 1% to 3% of the mortgage amount.
Financial Gift From Family
Legal Fees & Disbursements
A lawyer will charge a fee for their professional services. The disbursements are out-of-pocket expenses the lawyer's office incurred.
A highly recommended report that you as the buyer orders. It involves a detailed inspection of the home to verify the condition of the property prior to 'firming up'.
Land Trasfer Tax
Land transfer tax is charged on closing when the property is transferred to your name and it can vary depending on the price of the home, whether you are a first time home buyer and qualify for the credits, and which city you live in.
Mortgage Default Insurance Premium
Anytime you put less than 20% down payment a default insurance policy is mandatory. The costs of this premium is added to your mortgage amount. This gets paid back over the life of your mortgage. You may be required to pay provincial tax on this insurance premium as part of your closing costs.
If your lender requires an appraisal report to be completed, which is very typical if you have a 20% down payment or more, it will have to be done before they hand over any mortgage money. The lender wants to be assured that the property is worth what you are paying for it, or valuing it for.
If you arrange to make your mortgage payments monthly on the first day of the month, and your transaction closes after the first day of the month, your lender may charge you an interest adjustment on closing, up to the first theoretical payment date, called the Interest Adjustment Date (IAD).
Remember, that all mortgages are paid in arrears so if your possession date is June 1st, and you choose to pay monthly, then your first payment will be July 1st. In this example, there is no Interest Adjustment payable.
However, if you moved in on May 29th, with your first payment on the first of the month, your first payment would still be July 1st, but there will be a three-day Interest Adjustment (from May 29th to the "official start date" of June 1st).
Property Tax & Unpaid Utilities
At the time of a sale, your lawyer must confirm that local property taxes have been paid up to date. If they are, a Tax Certificate is issued, from which any adjustments can be made. Typically requiring you, the buyer, to pay the seller for any prepaid property taxes.
Default (CMHC) Insurance
If you have less than 20% down payment a default insurance policy (CMHC, Genworth or Canada Guaranty) is mandatory and the premium or cost of this is added to your mortgage amount. This gets paid back over the life of your mortgage. However, in some provinces, you also are required to pay provincial tax on this insurance premium, and this will be added to your closing costs. For example, if you live in Manitoba (7%), Ontario (8%) or Quebec (9.975%), you need to pay the provincial sales tax (PST) on your CMHC insurance and that amount is due on closing day. If your default insurance premium amounts to $6,200 and you live in Ontario, the PST on your default insurance premium would be $496. This is included in the 1.5% (of your purchase price) of closing costs we recommend you have prior to purchasing.
You are required by the lender to have home and fire insurance coverage prior to taking possession of your home.
Obtaining a mortgage is often the largest financial obligation you are going to undertake. Should something happen to you or your partner, making sure there is sufficient coverage to pay off or cover the cost of your mortgage. There are two types of insurance coverage which are typically offered:
This provides a lump sum to the amount you insured yourself for that is paid directly to your beneficiary and they decide how to utilize the funds. This is often referred to as income protection. You can add a critical illness and/or a disability component to this coverage that will pay the mortgage payments under specific circumstances.
Title insurance is an insurance policy that protects residential or commercial property owners and their lenders against losses related to the property's title or ownership. There are two main types of title insurance policies:
Owner's Policy - Protects the property from various title-related losses that are listed in the insurance policy, for as long as the property is owned. An owner's policy sets a maximum amount of coverage.
Lender's Policy - protects the lender from losses in the event that the property's mortgage is invalid or unenforceable. A lender's policy usually provides coverage for the amount of the property's mortgage.
This pays off the balance of your mortgage and is often referred to as creditor protection. You can add a critical illness and/or a disability component to this coverage that will pay the mortgage payments under specific circumstances.
Rates: Getting the best rate and term you qualify for is, of course, a top priority. One of the many benefits of working with a licensed professional is that they know that every lender is able to offer you, right across Canada. I'll fit you with the right lender that will work hard for the privilege of having your mortgage.
We understand you want to save as much money on interest as possible, but there are a few key points to keep in mind when it comes to interest rates. Rate is not the only component to consider when selecting your mortgage. There are certain features and benefits that may outweigh differences in rates!
Penalty to break
Sales on clauses
Introductory periods of low rates
Credit: The higher your credit score and the strength of the content within your credit report determines the amount you can borrow as well as the interest rate. To qualify for the best options and lowest interest rates you'll need a credit score of at least 620 with no blips for the last two years, but preferable over 680.
Depending on your employment situation, required documents may differ. Below are common categories and the required documents to help you prepare for your mortgage application.
All situations require:
Application Form filled out in as much detail as possible
Down Payment with 3 months of bank statements with your complete name and account numbers.
Proof of Income
A job letter on company letterhead dated within the last 30 days outlining your position, gross salary start date, and contact name and phone number of the individual preparing the letter,
Last 2 year's Notice of Assessment from Revenue Canada
Copy of your business license
Self Employed (Sole Proprietor)
A paystub dated with the last 30 days that have the year to date earnings,
Last year's Notice of Assessment from Revenue Canada,
We may require the previous 2 Years T4 Statements
Previous 2 years Full T2 General Corporate Tax filling,
Articles of Incorporation to confirm ownership structure,
Previous 2 years of financial statements for your corporation.
Self Employed (Corporation)
Previous 2 Years Full T1 General forms including a statement of business activity and statement of rental operations (if applicable),
Latest mortgage statement showing the property address, outstanding balance, payment and frequency,
Property tax statement
All current lease agreements If applicable),
Property Management agreement if leases are not in your personal/corporate name
Own a Home or Rental (Require each of the following for each property)
"Michelle helped me finance my new house. She made the process simple and got me the best available rate. She's also responsive and explains things clearly. I'll be using her services next time I move. Thanks so much!"
"Michelle was very knowledgeable and patient with me as a first time home buyer. I had lots of questions and she never made me feel that I was wasting her time. She was also available via text almost always which was very helpful and convenient! It was a great experience!"