Saving for a Down Payment

down payment minimum

Mortgage Down Payment

Today’s mortgage market allows potential homeowners to purchase their dream property in Canada with as little as five per cent down.

Any down payment that totals less than 20 per cent of the property value will require mortgage default insurance, and is considered to be a high ratio loan.

A conventional mortgage is defined as a mortgage loan where 80 per cent or less of the property value is financed through a lender. The percentage of your home value that is financed, or not paid for by the down payment, is defined in a Loan to Value ratio (LTV) (loan amount divided by property value). The LTV has a large influence on the mortgage product you will be eligible to qualify for on the purchase of your new property.

The greater the down payment you can accumulate, the greater the contribution you are making toward the principal value of your home, and thus the less of the mortgage loan amount you will be paying interest on over time.
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New Canadians make excellent market for mortgage brokers

Moving to a new country can be a challenge. There can be language barriers, new ways of life and important necessities to figure out. One of those is securing housing.

Statistics Canada said that immigrants account for more  than one in five Canadians and that by 2055, immigrants will make up 90 percent of Canada's population growth.

According to a recent poll, 87 percent of new Canadian immigrants didn't know how to apply for a mortgage in their first three months in Canada. In addition,  58 percent don't know how to apply for a credit card and 47 percent don't know how to open a bank account.

The poll also noted that 24 percent of immigrants were surprised by the credit rating system and 23 percent were shocked to not have access to credit immediately.

This lack of knowledge when it comes to getting a home creates an opportunity for mortgage brokers, said Mortgage Broker News. These immigrants are resources for brokers to work with and develop a level of trust with as they help the newcomers navigate the Canadian home market. Continue reading

Avoiding homebuying mistakes

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Everyone makes mistakes, but when it comes to buying a home, those mistakes can be costly. According to data from the Royal Bank of Canada's 20th Annual Homeownership Poll, most Canadians admit to make some kind of mistake during the homebuying process. While 40 percent said everything went smoothly, 60 percent said there was some type of error on their part.

The following are the most common homebuying mistakes according to the RBC poll, as well as ways to avoid them. Continue reading

First-time homebuyers opt for fixed rates

New data from the Bank of Montreal is shedding light on homebuyer habits, particularly those concerning first-time homebuyers.

Figures from the BMO First-Time Home Buyer's Report, which surveyed 2,000 Canadians 18 years old or older between February 25 and March 5, shows that first-time homebuyers are twice as likely to choose fixed-rate mortgage over variable rate mortgages. In fact, many first-time homebuyers who believe mortgage rates will decrease over the next five years still plan on opting for fixed-rate mortgages.

"Buying a home is one of the most important financial decisions one can make," said Laura Parsons, mortgage expert at the BMO. "It's crucial that those planning to enter the market are well prepared – not only to manage their costs, but also to pay off their mortgage as soon as possible. Determining what your mortgage payments and overall costs of homeownership will look like, and then living in that financial reality for a year before entering the market, can be an effective strategy." Continue reading

Financing options exist for savvy buyers

Many Canadians, especially those who belong to the so-called Generation Y, are less than confident when it comes to their chances of financing a home purchase.

Data from real estate firm Royal LePage shows that more than 72 percent of survey respondents born between 1980 and 1994 said they were pessimistic about their chances of becoming homeowners due to housing prices.

In addition to young homebuyers, 66 percent of baby boomers who took the survey also said they were worried about being able to afford a home.

"Baby boomers have built homes for themselves," said Phil Soper, CEO of Royal LePage. "It's their children that are seeking to create a similar atmosphere of their own, even though new impediments exist for this younger generation." Continue reading

Canadian homeowners comment on the mortgage process

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The results of a new survey among Canadian homeowners reveals that finding a mortgage can be a time-consuming process for some. However, resources exist to make the process easier and more affordable in the long run.

The survey, commissioned by ING DIRECT, revealed that 67 percent of Canadian respondents who currently carry a mortgage said the process is complicated (31 percent), difficult to figure out (16 percent) or confusing (20 percent).

"Whether you're a first-time home buyer or shopping around for a new mortgage, applying for a mortgage doesn't have to be a confusing or complicated experience," said Peter Aceto, president and CEO at ING DIRECT. "Choosing a bank that provides a great rate up front and offers flexible terms means saving both time and money over the long run. We're committed to making the process of getting into your home easier and giving clients the option to pay off their mortgage faster." Continue reading

Understanding mortgage insurance

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When it comes to home loans, there's plenty of talk about mortgage rates, but far less about mortgage insurance. While not as exciting as fluctuating interest points, mortgage insurance is still a vital part of the homebuying process for most Canadians. It's with this in mind that prospective homeowners should do all they can to understand what mortgage insurance is and how it works.

What is mortgage insurance?
Typically, if a homebuyer takes out a mortgage loan with less than a 20 percent down payment, mortgage insurance is required. This insurance protects lenders in case a borrower is incapable of making mortgage payments and defaults on a loan. It's important to remember that this coverage is only for lenders, not homeowners. In most cases, if a homebuyer is able to pay a minimum of 20 percent on a down payment, mortgage insurance is not required. Continue reading

Financing for first-time buyers

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Changes to amortization lengths and gross debt service ratios for insured mortgages have taken their toll on many Canadians, but none more so than first-time home buyers. Since these consumers are often younger, with less money saved up and shorter credit histories, any obstacle to property affordability was inevitably going to affect them more.

According to a RE/MAX’s recent Canadian Home Buying Trends Survey, only 30 percent of home buyers in 2013 and 2014 will be first-time home buyers. 

“There’s no question that first-time buyers are experiencing a period of readjustment,” said Gurinder Sandhu, executive vice president and regional director at RE/MAX Ontario-Atlantic Canada. “While affordability took a hit in 2012, homeowners with considerable equity remain confident and well-positioned.  They will be the driving force fueling the bulk of home sales in the months ahead.”

That’s well and good for homeowners with high amounts of equity, but what about first-time home buyers looking to take advantage of low mortgage rates? Fortunately, there are a couple of programs intended to make homeownership easier for this demographic. Continue reading

Programs for affordable housing

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Regardless of how low mortgage rates remain, buying a home is still a large financial responsibility. Between the expense of home loans and closing costs, not to mention renovation and maintenance, it’s important to make sure you’re taking advantage of every opportunity to save. Fortunately there are a number of programs geared toward helping Canadian home buyers find an affordable deal.These are not the only programs available to home buyers looking to save money, but they are some of the most popular. For Canadians looking to make the home buying process more affordable, the smart move would be to research all your options when it comes to qualifying for special programs and rebates. Finding one that suits your needs can result in significant savings.

Home Buyers’ Plan
The Home Buyers’ Plan allows Canadians buying their first home, people with disabilities, or people buying on behalf of someone with disabilities, to take money out of their registered retirement savings plans in order to buy or build a qualifying home. The amount that can be withdrawn goes up to $25,000 per calendar year. This program allows borrowers to take out the money without having to pay tax at the time. Typically, the money must be repaid over the course of no more than 15 years, with a certain amount repaid into the savings plan each year until the balance is zero. Continue reading

What can real estate agents offer?

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Purchasing a home can feel overwhelming at times. Comparing mortgage rates, deciding whether to use a broker, filling out paperwork – sometimes prospective homeowners need a helping hand to smooth out the process.

While hiring a real estate agent to help with the buying process can cost extra money, the education and experience these market professionals offer can more than make up for any additional expenses. However, before you hire a real estate agent, it’s important to know exactly what they can do for you.

Neighborhoods
If you’re interested in a certain property, the right real estate agent will be able to tell you all about the neighborhood it’s located in. They should be able to provide you with data concerning crime, demographics, schools and anything else you might want to know about your future surroundings. Continue reading