Planning Your Finances

Make your budget

Know how much debt you already have

Factor in the extra expenses (chart)

Find out how much you can afford to borrow for a mortgage

Determine how to responsibly manage and pay your living expenses

This is determined using two lending principals. Gross Debt Service Ratio (GDSR) calculation: This lending principle simply states that your monthly housing cost should not exceed 32% of your gross monthly family income. Total Debt Service Ratio (TDSR) calculation: This lending principle summarizes that your monthly housing cost and payments on all of your other debts (including loans, credit card and lease payments) should not exceed 40% of your gross monthly income. Our “What You Can Afford” calculator will help you estimate your maximum affordable mortgage payment of principal and interest. Just enter your monthly income and expense amounts, and the calculator will do the rest. Once you have used the “What You Can Afford” calculator to estimate your maximum monthly total, you can compare this number to the mortgage payments for specific loan amounts. Simply enter the loan amount in our mortgage calculator and the monthly principal and interest will be figured out for you.

Shop for a mortgage

Investigating all of your options is a wise and vital step to securing the buying power to purchase your home.

Who do you talk to?

Banks

Credit unions

Mortgage brokers

Other reputable lenders, etc.

Don’t be money or question-shy! Reliable people that can answer questions include:

Your realtor

Mortgage brokers

Financial advisors

Mortgage terminology you should know:

Mortgage term – the amount of time the bank has agreed to lend you the money; typically from six months to five years; at the end of the term, you

can renegotiate

Amortization - the length of time it will take to pay off the whole mortgage, often as long as 25 years. The longer your amortization, the lower

your monthly payments, but the more you pay in interest over time.

Interest rates – the cost of borrowing money

Using this mortgage calculator, check the difference between borrowing $100 000 at 6% and at 9% at the same amortization. That interest rate not only affects how much you pay, it also affects how much you can borrow. So keep searching for the best rate! What about the down payment? You want as small a mortgage as possible, which means making the biggest down payment you can afford. However, remember to set money aside for all the fees associated with buying a home. Not to mention moving, repairs, renovations, new furniture...think and plan ahead. The First-time Home Buyers’ Plan If you're a first-time homebuyer with an RRSP, you can withdraw up to $25,000 without paying any income tax. If your spouse is also eligible, that's $50,000. Ask your REALTOR® how to take advantage of this plan. Should you lock into an interest rate? For how long? It's a tough question because nobody knows the future. What if you “lock in” for five years and the rate goes into a period of decline? You could be stuck paying more than the going rate for a long time. But if rates steadily climb over the next five years, locking in now would be a great move. Your REALTOR® can provide great advice and work out these scenarios for consideration.

What you need to apply for a mortgage

Letter of employment confirmation – include your position, your pay, and how many years you’ve worked with the company

List of your assets – your car, stocks, bonds, GICs, etc.

List of your liabilities – car payments, student loans, credit card debt, etc.

Social insurance number

Bank account number

Your lawyer’s contact information

Proposed property for purchase details

Additional Costs

Application fee – sometimes charged to process your mortgage application; ask to see if it can be waived

Appraisal Fee – if the proposed home needs an appraisal, the cost is often passed on to you. Ask your lender if they will waive this fee as well.

Mortgage broker’s fee – s/he may charge a fee that is payable on the closing date. Check into it to avoid surprises.

Land survey fee – lenders may require a survey of your property, even if it's an existing one. Get your lawyer to take care of this.

Home inspection fee – because this is one of your biggest financial investments, avoid surprises and protect yourself with a proper home inspection

that looks for hazards and major problems

Home insurance – your lender will require fire and extended coverage insurance because your home is the security deposit on the mortgage.

Title insurance – not mandatory, but protects you from potential errors and/or fraud surrounding the land title. Ask your lawyer for details. Legal Fees – payment for your lawyer’s services and "disbursements" which are the costs involved in title searches, drawing up the title deed, and

preparing your mortgage.

Adjustments - the previous owner may have paid property tax or utilities in advance, and they want to be credited for those payments. Ask your

REALTOR® and lawyer what might come up on the closing date.

Maintenance and utility costs – when you buy a property, you are responsible for regular monthly payments in the form of property tax and utilities.

Property transfer tax – the tax amount varies from province to province

GST/HST and new homes – GST/HST does not apply to resale homes. However, new homes are subject to this tax. Consult your REALTOR® and/or lawyer for

more information.

Realtor commissions and/or fees – these are subject to GST/HST