306-789-1700 RE/MAX Joyce Tourney Realty

Family Drawing

MORTGAGES

It is likely you will need the services of a lender when purchasing your home. Once your RE/MAX agent understands you and your home purchase requirements they will recommend that you talk to a lender to determine your price range. Your lender will begin the process to pre-approve you for a mortgage, which will include verification of income and down payment (among other details).


Searching to find the right home is a process you should undertake thoroughly and carefully, and you should be just as diligent in sourcing the best loan for you.


The past few years have seen historically low mortgage interest rates — the lowest in decades — leading some to call them “once-in-a-lifetime rates.”


Consider, for example, that in the late 1980s, five-year, fixed rate mortgages were more than 12%, and even in the late 1990s, they were almost 7%. In 2009, you could get the same mortgage for about 4.5%, a five-year variable rate mortgage at 2.25%, and a five-year fixed rate at 3.99%.


Perhaps these rates really are opportunities of a lifetime.


This, of course, raises an important question for home buyers: should they lock in at these rates, or is a variable rate the better option?


This is an excellent question, but it is not easily answered. It depends on your comfort level with rate fluctuations.


If the bank rates decrease, then it’s in your favour. If the bank rates increase, your cash flow will be restricted.


The importance of pre-approval 


Taking the important step of getting pre-approved affords you knowledge and confidence: you’ll know in advance exactly how much financing you qualify for, and you’ll be confident during your search knowing where you stand.

This is also likely the time when you will first be introduced to the often intimidating and complex world of mortgages. It’s critical you understand your options so you can make an informed decision that suits your personal circumstances.


When you meet with your financial representative, if there’s anything you don’t understand, ask. Ask lots of questions. If you still don’t get it, ask again. This is not an area to take chances or to be shy, since how you structure your mortgage could amount to tens of thousands of dollars over the term of your loan.


If during this process you sense your lender representative isn’t patient in answering your questions, move on. The financial services industry is very competitive and, assuming you qualify for a mortgage, if one company doesn’t want your business, someone else will.


Fixed or variable 


A fixed mortgage involves a fixed rate of interest over a specified period of time, known as the term. This provides a certain level of peace of mind, since you’ll know exactly what your monthly payments will be, which allows you to budget accordingly.


A variable mortgage, on the other hand, is just like it sounds: the interest rate fluctuates based on the market rates. This can be a good arrangement if rates are on the way down, but it also tests one’s nerves if rates begin to rise.
With rates being as low as they have been over the last couple of years, more and more home buyers are locking into fixed mortgages to take advantage of the low rates.


Long versus short term 


The term of the mortgage refers to the life of the mortgage contract, typically anywhere from one to five years. At the end of the term, the mortgage becomes due and payable. In most cases, however, the lender and borrower negotiate a renewal for a new term, which also provides you the opportunity to change the terms of the mortgage if your circumstances change.


So, long versus short term is pretty self-explanatory. Generally speaking, if rates are low it might be a good idea to lock in for a long term. If rates are high, it may be advisable to choose a shorter term until you know how the rates are trending. If they begin to rise, you can consider locking in for a longer term.


Open versus closed 


This refers to how much flexibility you have to repay the mortgage, in full or with large lump-sum payments, at any time over the term without penalties.


However, you do pay for the flexibility. For example, open mortgages are usually available only for short terms, and the interest rate is often higher. The benefit is you have the freedom to make a large payment when you can.
Closed mortgages, on the other hand, often have lower rates, but you don’t offer the flexibility to make large one-time payments.


Amortization 


This is the period over which your mortgage is paid in installments. In June 2012, the Canadian government outlined new rules limiting the maximum amortization period at 25 years. For many first-time buyers, the period is usually 25 years. Generally speaking, the shorter your amortization, the less interest you have to pay, but the larger your monthly payments will be. Most first-timers go for a long amortization to keep payments as low as possible, since it’s their first experience with a mortgage.


With all of the above mortgage considerations, what you choose really depends on your own personal circumstances, preferences, and comfort level. Your mortgage specialist can walk you through a number of different scenarios with these variables, so you can see exactly what each change will cost you.


There are many products and services available in the industry today, so be sure to take your time and explore all your options.

RE/MAX Realtor

OWNERSHIP COSTS

Determining how much you can truly afford involves meeting with a mortgage representative at a financial institution. Most financial institutions, as well as Canadian Mortgage Housing Corporation, have online mortgage affordability calculators that allow you to plug in your basic numbers to see how much of a loan you might qualify for.

 

Consider these calculations an estimate — a mortgage representative will take your preliminary calculations and see if they hold up to further scrutiny. It's important to be honest with yourself when you do your own financial review. If you underestimated your household expenses to make your financial picture look brighter than it actually is, your mortgage representative will probably expose a more realistic view.

 

The mortgage representative will then come up with some close-to-final numbers, presenting you with a preliminary figure for pre-approval. Now you should prepare a thorough and realistic checklist of your current household budget, say, if you're renting an apartment and your expected budget in your prospective new home. You'd be surprised how some new items — such as additional insurance or costs for general repairs — can add to your expenditures as a homeowner. Make sure you take all of these items into consideration when calculating your mortgage affordability.

 

The importance of not overspending 

 

Real estate experts cite overbuying as one of the most common mistakes first-time home buyers make. Whether they got caught up in a bidding war or fell in love with a home they just had to have, many people spend more on their new home than they can afford. Months later they may realize that their purchase has left them "house poor" with no money left to contribute to savings, other necessities, or even rainy day funds. This further underscores the need to be honest and realistic with your mortgage calculations, as well as the importance of getting pre-approved for a mortgage, since it can actually protect you from going overboard.

 

Costs of Home Ownership 

 

From deposits to moving expenses, and everything in between, buying your first home involves more than just saving for a down payment. That may be the largest cost, but there are other things you'll need to plan and budget for.

 

DepositDeposit

 

This is the step you take when you're ready to make an offer to purchase. Let's say you've viewed a selection of properties with your RE/MAX agent, found one you like, and are ready to get serious about purchasing the property. At this point, you might need to put down a deposit; the amount depends on your area, the purchase price of the home, and your situation. If a deposit is required, it will be held in trust and will be deducted from your total purchase price and is considered part of your down payment.

 

Down payment

 

Generally speaking, the larger a down payment you're able to make, the better, because that means you'll have to borrow less. But you also don't want to leave yourself so cash-poor you can't cover all of the other costs that come with closing a sale.

 

The minimum amount you can put down is 5% of the purchase price, assuming that you have made an offer to purchase and all conditions have been met. For example, a $300,000 property would require a minimum down payment of 5%: $15,000; however, if your down payment is less than 20%, which is the case for many first-time homebuyers, you will also need mortgage loan insurance.

 

Mortgage loan insurance

 

If your down payment is less than 20% of the purchase price of your home, you are required to have mortgage loan insurance, also known as high-ratio mortgage insurance. It protects your lender — not you — in case you default on your mortgage. Premiums are calculated as a percentage of the amount you put down, changing at the 5%, 10% and 15% thresholds but there is no break for anything in between. Premiums range from 0.5% to 3% and increase if you are self-employed.

 

So, to buy a $250,000 condo with a 5% down payment of $12,500, a premium of 2.75% on the borrowed amount of $237,500 would total about $6,500. You can pay this in one lump sum or, as many first-time buyers choose to do, you can add it to your mortgage loan amount. This type of insurance is mandatory for high-ratio mortgages, and is only offered through two carriers: CMHC and Genworth Financial.
One important note is that in Ontario and Quebec, the premiums are subject to provincial sales tax, which cannot be added to the loan amount. So, to buy that $250,000 condo in Ontario, it is your responsibility to pay the 8% sales tax on the $6,500 premium, or about $520.

 

Land transfer tax

 

Most provinces have such a tax, though it may have a slightly different name (such as property purchases tax), and the rates vary. Alberta, Saskatchewan, and parts of Nova Scotia do not have Land Transfer Tax (LTT) at all, while other provinces use a tiered system. In the tiered systems, the rate varies depending on the purchase price of the house. Your RE/MAX agent or your lawyer can advise what the rate would be for the area you're considering buying in.

 

Appraisal fee

 

Your mortgage lender will likely require an appraisal to ensure the property is worth what you are offering. The reason is two-fold: it prevents you from borrowing more than a property is actually worth, which might apply in cases where multiple would-be buyers enter into a bidding war; and it protects the lender from lending out more than the home's value, which becomes critical should you default on the mortgage. If a lender has to foreclose, they want to be able to recoup the entire loan amount, as well as the costs of foreclosing. The fee for such an appraisal is typically between $250 and $350.

 

Home inspection

 

You wouldn't buy a used car without having a trusted mechanic perform an inspection for you, and a house is no different. Don't even think about buying a home without first having a proper inspection done. In fact, your lender may insist on one to verify the condition of the home.

 

It's an excellent way to learn as much as you can about the various systems in the home, from the furnace and plumbing to the electrical and roofing. The inspection may identify some repairs that are essential, which you and your RE/MAX agent can either negotiate into the purchase price or insist be completed before you proceed with the deal.

 

The cost of an inspection starts from $350.00 and depends on the size, condition, and age of the property. But this is money well spent, and is an expense that you simply cannot, and should not, avoid.

 

Property insurance

 

Your mortgage lender will require you to have property insurance in place on closing day. Since the property is actually the security against the loan amount, the lender wants to make sure insurance is in place to cover the cost of replacing the home, and its contents, should something happen.

 

The fees for insurance vary widely, since they depend on the value of the property. Insurance has become a very competitive business in recent years, with new companies entering the market, offering different products and options. Consider using the services of a broker, whose job is to find customers the best deal possible among the companies they represent. You may also be able to get a discount if you use the same company you have your other insurance policies with.

 

Mortgage life insurance

 

Mortgage loan insurance should not be confused with mortgage life insurance, which protects you in the event something happens to you. This type of insurance might be suitable for a young couple or family where there is only one breadwinner, for example. Costs are usually much cheaper than loan insurance. Obtaining life insurance instead of mortgage life insurance is the best bet.

 

Legal fees

 

Legal fees for buying real estate range in price, depend on your situation, and must be paid upon closing. When purchasing brand new condos, since such deals can involve more paperwork, the cost might be higher. Your RE/MAX agent can provide you a local lawyer if you don't already have a relationship with one.

 

Title Insurance

 

Title insurance is yet another type of insurance you will require. Your lawyer will advise you of this type of protection, which insures you against any defects of title to the property. For example, if the previous owners undertook major renovations of the property without proper permitting, you would be protected against any costs required to bring the house up to code.

 

Typically, this one-time premium costs less than $500.

 

Moving expenses and services connections

 

When you're totaling up all the costs of buying your first home, don't forget to include moving expenses and connection fees or deposits for services, such as phone, electricity, and other utilities.

 

Moving expenses vary widely, depending on your personal circumstances and possessions. As a first-time homebuyer, perhaps you're moving from an apartment, or even your parents' home. If this is the case, you may not need the services of a moving company. You could choose the do-it-yourself route and enlist the help of family and friends. If so, ask them or your RE/MAX agent for a referral for a truck rental company they trust, as this is an area of your move that you want to go smoothly. Don't be fooled by the price! Reliability is key.

 

If, however, you do contract a moving company, do your homework well in advance; get referrals from your RE/MAX agent and friends and do your own research. Rates and levels of service can vary widely among moving companies, as can insurance coverage, so give yourself lots of time to look into these matters.

 

Often overlooked are the costs of making sure your services and utilities — such as your phone, electricity, cable TV, and other connections — are up and running for move-in date. Make sure you call well in advance to make these arrangements, and ask about all associated fees. For example, some utility companies require deposits, or charge other fees for new customers with whom they have no billing history.

 

Mortgage lending is a highly competitive field. Information on mortgage rates, which can change daily, is available in local newspapers, through mortgage brokers, from individual lenders and of course through conventional financial institutions. When you are shopping for a loan, interest rates tell just part of the story. You will also need to study the various fees lenders charge and many mortgages today are almost custom-tailored to individual needs with many options available.

Ask your Agent

Your RE/MAX agent can recommend lenders to check with prior to beginning any serious house hunting so you will know exactly what you can afford.

For further information, please contact TD Canada Trust.

Back To Listing
Loan Information

Canada Mortgage Rate
(compound semi-annual)
US Mortgage Rate
(compound monthly)

Loan Amount ($)

Annual interest rate (1-30%)

Mortgage Amortization (years)

Mortgage Term (years)
Based on the assumptions you have input:

Hide Graph

Your estimated monthly payments are $0, including Private Mortgage Insurance and you will pay $0 in interest over the life of the loan.

(Notice: the payments are rounded to the nearest dollar amount)

Year Beginning Balance Payment Principal Interest Cumulative Principal Cumulative Interest Ending Balance
  • Previous
Step 1 - Income

Combined monthly household income
$

Target House Value
$
Step 2 - Debt Obligations

Monthly auto payments
$

Monthly credit card payments
$

Current utilities expenses
$

Any Other Expenses
Step 3 - New Loan Assumptions

Canada Mortgage Rate
(compound semi-annual)

US Mortgage Rate
(compound monthly)

Annual interest rate on new mortgage
1-30%

Term of new mortgage:(years)

Funds available for a down payment
$
Results

GDS (Gross Debt Service Ratio):
Monthly gross income $0
Gross Debt Service Ratio 0%
Calculated payment for GDS $0

TDS (Total Debt Service Ratio):
Debts and obligations $0
Percent of gross income 0%
Maximum percentage available for mortgage payment 0%
Calculated payment for TDS $0

Payment Calculation
Maximum allowed payment $0
Calculated mortgage amount $0
Down payment $0

Home value you can afford $0
Page 1

Legal Fees

Legal Disbursements

Lawyer's Fee

Land Transfer Tax*

*Not applicable in all provinces and territories.

Total Closing Cost:
Page 2

Appraisal Fee

Home Inspection

Mortgage Broker's Fee

Prepaid Property Taxes

Total Closing Cost:
Page 3

Utility Bill Adjustments

Property Insurance

Survey or Certificate of Location Cost

Title Insurance

Misc Fees

Total Closing Cost:
Legal fees such as mortgage registration, title transfer, tax certificates, land titles searches.
This includes disbursements such as couriers, photocopying, and faxing.
Fees charged by the lawyer who prepares and reviews the purchase documents.
Provinicial or municiple tax payed when purchasing the home. It is also commonly called Land Registration Fee, Deed Registration Fee, Tariff or Property Purchase Fee. It is between 0.5% and 2.0% of the purchase price, depending on your province.
Charged by a licensed appraiser. Many mortgage lenders require that the home be appraised at the buyer's expense. This usually costs between $250 and $500.
Charge to have the home inspected by a professional. A home inspection report usually costs between $250 and $500.
A fee charged by the mortgage lender for preparing and evaluating the loan. Sometimes called the Loan Origination Fee. Usually less than 1% of the loan amount.
Property taxes prepaid by the seller that you will have to reimburse.
Utility costs prepaid by the seller that you will have to reimburse.
Required by the mortgage lender to cover the loss of the house and its contents. Generally between $250 and $650
Payment for an up-to-date survey or certificate of the land, should the seller not have one available. It is used to determine if trees, plants and fences are on the property. Typically costs between $350 and $2000
Insurance protecting the ownership rights to the property. Sometimes purchased in lieu of a land survey. Typically around $200.
Miscellaneous Fees
Mortgage Information

Length of Mortgage (years):

Interest Rate (%):

Down Payment:

Estimated Closing Costs:
House Information

Listed Price:

Negotiated Price:

Annual Appreciation:

Annual Property Tax:

Annual Maintenance Costs:

Annual Insurance:
Renting Information

Monthly Rent :

Annual Rate of Increase (%):

Damage Deposit:
Other Information

Annual Return on Investment (%):

Selling Cost (%):

Years Before Selling:
Results

Buying Results

Your Monthly Loan Payments Will Be:
Gained Equity From Appreciation:
Closing Costs:
Selling Expense:
Total Propery Tax:
Total Maintenance:
Homeowner's Insurance:

Net Gain:

Renting Results

Your Expected Rent Payment:
Your Total Cost of Buying:
Your Total Cost of Renting:
Savings:
Savings With Interest:

Net Gain:

Net Gain from Buying Net Gain from Renting
The length of your mortgage.
The Canadian nominal interest rate for your mortgage
Your down payment on the property
The total estimated closing costs NOT including your down payment
The listed price of the property
The final purchase price of the property
The expected annual increase in the value of the property expressed as a percentage
The total property tax payed on the property annually
The total cost of maintaining the property (not including Tax or Insurance) for the period of one year
The cost to insure the property to the period of one year
Your monthly rent payment
The expected yearly rate of increase for your rent as a percentage
Your initial damage deposit
The expected rate of return on savings invested during the time period
The estimated cost to sell the propery expressed as a percentage of home value
How long will you keep the property
No Tooltip Available
No Tooltip Available
No Tooltip Available
No Tooltip Available
No Tooltip Available
No Tooltip Available
No Tooltip Available
No Tooltip Available
No Tooltip Available
No Tooltip Available
No Tooltip Available
No Tooltip Available
No Tooltip Available
No Tooltip Available
The data included on this website is deemed to be reliable, but is not guaranteed to be accurate by the Association of Regina REALTORS® Inc.. The trademarks REALTOR®, REALTORS® and the REALTOR® logo are controlled by The Canadian Real Estate Association (CREA) and identify real estate professionals who are members of CREA. Used under license.