Tag Archive for mortgage amount

Laurin Jeffrey | May 15, 2011
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How mortgage insurance can help buy a house

By Krystal Yee – Toronto Star Moneyville

For many  first-time home buyers, coming up with the 20 per cent down payment required to qualify for a mortgage without paying extra for insurance is tough. So most first-timers end up having to pay for the insurance, which can cost anywhere from  half a per cent  to 2. 9 per cent of the total mortgage amount.

The Canada Mortgage and Housing Corporation (CMHC)  provides the insurance which protects your bank against from a default. This means, if you can’t pay and the bank can’t get its money back after it has sold your property, the insurance will cover the lender’s expenses.

Here are a few more things you should know about mortgage loan insurance:

Self-employed people pay more
Homebuyers who have a stable income will have a lower insurance premium than those who own their own business or are self-employed. For example, a homebuyer with a stable job who puts down 10 per cent on a property would have to pay 2 per cent mortgage loan premium. If a self-employed person without income validation put the same 10 per cent down on a property, they would have to pay 4.75 per cent. That’s a huge difference!

What this means is, if you have a stable job and were to buy a $500,000 house with a $50,000 down payment (10 per cent), you would pay $9,000 for the insurance. But, if you were self-employed without income validation and put the same $50,000 down, you would have to pay $21,375.

25-year or 30-year amortization
Homebuyers who choose a 30-year amortization will pay what is called an Extended Amortization Surcharge. This adds an additional two-tenths of a per cent to the insurance premium. On a $100,000 home with 5 per cent down and a traditional 25-year mortgage, you would pay $2,612.50 as a premium. With a 30-year mortgage, you would pay $2,802.50.

There are payment options
The mortgage loan insurance can be paid in cash, or the homebuyer can choose to blend the premium into their mortgage payments. Most borrowers blend the payment because even though they will be charged interest on the premium, it allows them to pay the amount off over the life of the mortgage, instead of incurring a large one-time fee.

Get environmentally friendly
CMHC offers an incentive to purchase environmentally features. If you use CMHC insured financing to buy an energy-efficient home, purchase a house and make energy-saving renovations, or renovate your existing home to make it more energy-efficient, you might be eligible for a 10 per cent refund of your mortgage loan insurance premium. You could also have the added flexibility of an extended amortization (up to a maximum of 30 years) without a premium surcharge. This is a great incentive that will allow you to save money and help the earth.

In order to qualify for mortgage  insurance:
• The home is located in Canada.
• You must have a down payment of at least 5 per cent of the price of a single-family or two-unit dwelling.
• You must have a down payment of at least 10 per cent for a three or four-unit dwelling.
• Your total monthly housing costs should not exceed 32 per cent of your gross household income.
• Your total debt load should not exceed more than 40 per cent of your gross household income.

Please visit the CMHC website for more information.

Mortgage insurance allows homebuyers who cannot come up with a 20 per cent down payment to purchase a home of their own. For many first-time homebuyers, it seems to be worth the cost of the premiums compared to the idea of potentially never getting into the housing market.

I am trying everything that I can to avoid paying   mortgage insurance,  although I must admit, saving 20 per cent of the cost of a home in Vancouver is a pretty daunting task. And, while the premium might not seem like a lot of money when compared to the size of a mortgage, rolling it into the life of a mortgage will end up costing you much more in the long run once interest over 25 or 30 years is calculated.

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Contact the Jeffrey Team for more information  -  416-388-1960

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Category: Ajax Real Estate, Buying Real Estate, First Time Buyers, Mortgages, Pickering Real Estate | Tags: , , , , , , , , , , , , , , , , , , , , ,
Laurin Jeffrey | February 5, 2011
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How The Buyer’s Down Payment Affects The Home Seller

Why Should The Seller Care How Much Cash The Buyers Put Down?

Recently, a listing received eight offers, all for more than the list price. Two of the offers were for much higher prices than the others. But the seller was reluctant to accept either of these because in each case the buyers were only making a 5 percent down payment.

The listing agent phoned the agents who represented the two buyers with the highest offers to find out if either buyer would agree to put more cash down. One buyer was cash-strapped and had to say no. The other buyer agreed, and the house was sold.

What difference should it make to a seller how much cash the buyer puts down? The difference is that low down payment financing can be risky. When buyers have little or none of their own money invested in a property, the lender focuses more attention on the buyer’s credit-worthiness and on the appraisal of the property when deciding whether or not to make the loan.

Lenders usually have the right to take over the property if the buyers stop making their mortgage payments. This is the last thing a lender wants to do. A large down payment serves as a strong incentive for the borrowers to keep the mortgage payments current rather than risk losing their investment in a foreclosure.

The reason the appraisal is so important is that it provides confirmation that if the buyers default and the lender has to go power of sale on the property and resell it, the property will sell for enough to cover the mortgage amount. On low down payment deals, there’s little margin for error.

Some buyers make low down payment offers because they have no choice. They have limited liquid assets. Other buyers are capable of making larger down payments. But, they prefer not to for personal reasons such as for other business investments.

One such buyer wrote an offer, in a multiple offer competition. She offered to make a 10 percent down payment. After closing, the seller’s agent was told that the buyer actually put nothing down. She financed the purchase with 100 percent financing. However, she was contractually obliged to put 10 percent down, if the lender required. Fortunately for her, she didn’t have to.

Low down payment financing can be a tough sell to old school sellers who believe that buyers should put 10 percent or 20 percent down. In competitive situations, it may even be difficult to get a seller to accept a 10 percent down payment offer. You stand a better chance of having your offer accepted if you do your homework.

Make sure that you have your financing lined up before you make an offer. If you have a high credit score, ask your mortgage lender to include this fact in your pre-approval letter. Give the sellers, or their agent, permission to contact your lender directly to confirm that your loan won’t be a problem.

The sale price can be driven up in a multiple offer situation. This makes low down payment financing even more precarious. Ask your agent to provide comparable sales information that confirms that the property should easily appraise for the purchase price.

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Contact the Jeffrey Team for more information  -  416-388-1960

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Category: Ajax Real Estate, Buying Real Estate, General Real Estate, Mortgages, Pickering Real Estate, Selling Real Estate | Tags: , , , , , , , , , , , , , , , , , ,
Laurin Jeffrey | January 25, 2011
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Seven Common Mistakes For Move-Up Buyers To Avoid

1) Evaluate your current situation

Why are you planning to sell your existing home? Are you moving up to a larger house? Do you need the money out of this property to make your move? One thing you need to do is to get a realistic idea of exactly how much cash you will be getting out of this home when it sells. Are you going to move locally? What mortgage amount can you really afford with new payments including higher taxes and insurance? Can you afford a house significantly better than the one you already have? Are you moving down to a smaller property? What are you going to do with your furniture and other things that you have collected over the years? Will be comfortable in a smaller place? Are you retiring? Moving locally or out of province? Are you going into a retirement community? What activities do you expect to be involved in after your working days are over? Are you moving out of the area because of employment? How fast do you have to be in your new location? Are housing costs higher there, or lower? Is your employer helping with sales costs, moving costs, temporary housing, etc? How does your family feel about the move? One reluctant teenager can seriously undermine the entire process. Are you the executor of an estate? What is the time schedule for your plan?

2) Failing To Take A Hard, Serious Look At The Condition Of The House

Homes have normal wear and tear, paint gets dull and shabby, landscaping can become overgrown, and roofs deteriorate. Often times as we live with minor inconveniences that we intend to fix “some day”.

It is not unusual to not notice conditions that are glaringly obvious to a buyer. How old is your roof? An average lifespan is 15-20 years. How old is your furnace? An average lifespan is 20-25 years. How old is your hot water heater? An average lifespan is 15 years. Is there asbestos insulation covering your heating pipes in the basement? Is there any obvious water damage from old leaks either on your ceilings or in the basement? Have you had any improvements done to the house without permits and inspections? Are your hardwood floors scuffed and scratched? Are your carpets worn?

Any of these conditions that are noticed by the buyer may make him bypass your house and buy another, or make him want to pay thousands less. If any found during the home inspection, they might cause the buyer to cancel the sale. It is best to have someone with fresh eyes take a hard critical look at your house. A good Realtor will do this and make his or her recommendations.

3) Failing To Properly Screen Your Realtor

It’s likely that you don’t often interview people. Yet, in order to find the Realtor who is right for you, you may interview several. The quality of your home buying experience is dependent upon your skill at selecting the best-qualified person.

It’s interesting that in the real estate business someone with many successfully closed transactions usually costs the same as someone who is inexperienced. Bringing that experience to bear on your transaction could mean a better price at the negotiating table, selling in less time, and reducing the number of hassles. Your agent should be a skilled, win-win negotiator!

4) Failing To Get Pre-Qualified For Your Mortgage On The Next House Or Condo

Don’t waste hours searching for a home that is not in your price range! Save time and money by getting pre-qualified for your new mortgage. Before you go shopping for a home, you need to determine how much you can afford. Once you are pre-qualified for a mortgage, you will know your buying power and you will then save time by looking only at homes in your price range.

This process is simple. A lender will ask you basic questions concerning your history, run a credit report, and determine your buying power.

Imagine for a moment that when you and your Realtor initially draft your offer for the home you select, you are already approved for the loan in advance. No stress, no worrying about qualifying, no concern whatsoever about your ability to qualify would stand between you and the home of your dreams.

In today’s market, a pre-approval can be a powerful negotiating tool. Many owners will not accept an offer without the buyer having a pre-approval. If there is more than one offer on the same house, the pre-approved buyer has the advantage. You deserve peace of mind and negotiating power by getting an approved loan before you make an offer.

5) Pricing The House Incorrectly

Whether a house is priced too high or too low, it can cost you thousands of dollars. Obviously a house priced too low will net you less cash at closing. However, a house priced too high will take longer to sell.

The homebuyer today is an educated consumer. On average a buyer will view lots of homes first on the internet and then physically inspect 4-12 homes before purchasing. The house or condo that sells today will be the best one on the market in the price range. The sale of a house is a competitive enterprise.

Ask your Realtor to show you what homes you are competing against. Some people will say, “I can always lower my price later.” Both Realtors and buyers are looking for new listings. Rarely do they notice a reduced price. The saddest sign anyone can put on their home is “Price Reduced.” That means the house was not priced right in the first place. The buyers will ask, “If the price was wrong, what else is wrong?”

6) Failing To Obtain A Home Inspection From A Qualified Inspector

The job of a professional home inspector is to look over every major part of a home and write a report that judges the home’s quality and condition. A home inspector reports on the structural and mechanical condition of the home. A well-qualified inspector who has the proper training can spot problems that you might not be able to see.

Expect problems to be clearly explained, repair expenses closely calculated, maintenance costs estimated, and a written report delivered on the spot. Most offers are conditional upon the outcome of the home inspection, which will include such things as: wood-boring insects, roof, structural soundness, and the condition of the heating, electrical, and plumbing systems.

If major problems are found, the buyer can either cancel the contract or go back and negotiate with the seller to get a credit on closing.

7) Not Knowing Your Rights And Obligations

Real estate law is extensive and complex; the Agreement of Purchase & Sale is a legally binding document. An improperly written contract can cause the sale to fall through or cost you thousands of dollars for repairs and remedies for title defects. If there are defects in the title, or if the property is in conflict with local restrictions, you must remedy them. Buying Title Insurance can often help here.

However, all lawyers are not real estate specialists. Your Realtor should be able to recommend several good lawyers. It is your Realtors job to know the laws governing real estate transactions. They are involved in an ongoing training program to keep up to date with these laws.

You deserve to have an agent who is not only knowledgeable about the transaction but is also willing to educate you throughout the process so you will feel more comfortable.

It’s also very wise to get an expert opinion before spending on fix-ups in an attempt to increase the sale value of your home. More often than not, expensive repairs are done in place of much simpler and more cost efficient ones. And the seller expects to regain their expenditures in the sale price, which rarely works out. Instead of entering fix-ups and repairs blindly, take advantage of our review – a walk through of your home where advise you on what can (or should) be fixed for maximum buyer appeal.

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Contact the Jeffrey Team for more information  -  416-388-1960

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Category: Buying Real Estate, Real Estate Investment, Renovation and Maintenance, Selling Real Estate | Tags: , , , , , , , , , , , , , , , , , , ,
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