Residential Mortgages in Edmonton
We answer the question ‘How much can we afford?’ and offer reasons to get pre-qualified before you go house-hunting.
Buying a Home in Canada
Making the right choice when it comes to purchasing a home is a matter of good planning. There is so much to learn, especially on your first purchase, that it’s essential to surround yourself with qualified professionals throughout the process. Even with the help of qualified professionals, you’ll need to understand, in a general sense, how the process works. Our hope is that this article we be a very helpful introduction to the process of buying a home and qualifying for a mortgage in Canada.
Why Get Pre-Qualified?
1. It saves you time from looking at homes outside your price range.
2. We can get you an interest rate locked in for up to 120 days. This protects you from any rate increases that can happen after you have written and offer but before you close on the purchase. This could save you thousands of dollars in interest.
3. It makes your offer more appealing to a seller, if they know you are a qualified buyer. This means they will look at your offer more seriously which can even result in a lower purchase price.
This pre-qualifying stage is also a good time to find out about the differences between conventional mortgages and high ratio insured mortgages. Ask about assistance for first time the federal government’s “RSP Homebuyer’s Plan” letting you use funds from your RSP to purchase a home and the option of using a gifted down payment to help you qualify.
Make House Hunting Fun!
By taking care of your mortgage needs first you can focus your attention on the details of the home you are buying. Take the guesswork out of shopping for a home by taking advantage of all the professional resources available to guide you through the many choices available when purchasing your first home.
Mortgage Life Insurance
You should look at mortgage life insurance, disability and critical illness insurance, especially where two incomes are involved. Just like fire insurance, you will sleep better knowing that you are covered for those curve balls that life throws at us.
Selecting the Right Mortgage
The basic choices to look at in selecting a mortgage include:Portable and Assumable Mortgages
Another option to consider is portability. If later, you decide to sell your home and buy another, you should be able to take your mortgage with you or transfer it to the buyer of your home without penalty. This can turn out to be a major advantage if your mortgage rate is below current market rates.
•Conventional or high ratio mortgages
•Closed or open mortgages
•Fixed rate vs. variable rate
A conventional mortgage is a loan for less than 80% of the appraised value or purchase price of the property, whichever is less. A high ratio mortgage is usually for more than 80% of the appraised value or purchase price. This type of mortgage is often referred to as an NHA mortgage because it is granted under the provisions of the National Housing Act and must, by law, be insured through CMHC, GE or a private insurer for which the borrower pays the insurance premium, application, legal and property appraisal fees.
The term you select is important. Short term mortgages can be appropriate if you believe interest rates will drop come renewal time, but in many of these circumstances, they are inferior to a variable rate mortgage. Long term mortgages are suitable if you feel rates will rise in the next few years, they also provide you with the security of knowing what your payments are for a long term. This can be especially important for first time homebuyers. The key is to choose a mortgage that fits your tolerance to risk.
A closed mortgage usually offers a lower interest rate than an open one of the same term, but the open mortgage lets you pay off as much as you want, any time, without penalty. This is a feature many consumers pay for and do not use. The pre payment options that come with most closed mortgages are usually sufficient.
You can choose a fixed or variable interest rate. A fixed rate mortgage allows you to budget precisely for whatever term you select anywhere from six months to 35 years. A variable rate fluctuates with the market and allows you to follow the rates as they drop. These mortgages are very useful in a falling interest rate market.