We sat down with Terri Gulliver of CIBC to ask some general questions that first time mortgage holder may have. As well as some other questions which we were just curious about. Here's what we learned:
Will I have to pay closing fees?
1.5% of pp, (550,000= $2250, lawyers and adjustments)
What is pre-qualification?
Getting the banks approval that they will in fact give YOU a loan- which is the first step, before you even look at a house you need to make sure you can get the funds for it- the second step is qualifying the HOUSE for the loan- this takes TIME, so you need to be PRE-QUALIFIED in order to give the bank enough time to review you and the house you are looking for BEFORE even looking, or else you will not be able to make an offer. Other buyers are Pre-Qualified and ready to go.
documents from jobs, employment contracts and letters, bank statements, loan statements, appraisals, property risks - all things that happen before you can officially BUY a house.
What’s required more than just your yearly salary?
1) your current monthly Income
2) job details- where you work, why, for how long, the details of the future, job docs, pay stub, employment contracts
(documents that haven’t been submitted on PRE APPROVALS can be requested by the bank days before closing… If they documents don’t match the requirements of the banks, they could deny the loan- So make sure ALL Boxes are checked before you offer on a property)
3) credit check - does not affect your credit score unless you are using it TOO much. Multiple credit inquiries in 12 months will lower your score and affect your preapproval, but shopping around to 1-2 banks will not lower your score or affect your pre-approval.
4) Savings amount- TFSAS, RSP ( can pull up to $30,000 and not get taxed and have to pay back in 15 years), Savings + chequing accounts. Banks will make sure you have enough money for a down payment, closing costs, monthly mortgage payments, utilities, etc.
5) Liabilities- DEBTS; credit cards, car payments, loan payments
All of these details approve you for a loan in general- and then they
AFFORDABILITY - Monthly income total/ ALL current debt payments, the potential max mortgage payment, interest, heat and taxes.
What is refinancing and how can I use it?
Refinancing is used for renos, paying off debt, buying a new home
- you are “breaking” your current term and there will be a financial penalty, unless its at the end date of the term you signed up for when you bought.
Some banks have flexibility on processing a mid -term blend which avoids a penalty and blends the rate .
Are mortgage rates going to increase and we see a potential crash?
Actually no! People CAN afford houses, and they are NOT maxing themselves out and making them house poor, generally. People’s mortgage amounts are not the same as their purchase prices- they are putting cash down, getting approved for interest rates much higher than their actual interest rates (approvals currently are of 4.79%, and the actual rate they would pay is 3%). If rates go up the majority of people would not be impacted much, and if they are going to be impacted, it would take many years to feel that impact. Especially because when most people buy, the are leveraging their other debt with their mortgages, so they are actually in a BETTER financial position than before they bought.
Less than 20% down rates are currently 3.04% (PLUS CMHC premium) with 20% down or more rates are 3.14 %
Higher down payment, Higher interest rate
> on a $600,000 CHMC premium is approximately $23,000 over the life of the loan
500,000 or less- 5% down
500,000-1,000,000- 10% down
This is for primary purchases, not just first time buyers.
Any secondary home purchase 5% down ( a home for yourself, a vacation property, a home for your family, etc)
Any RENTAL 20% down .
To obtain a $650,000 Mortgage, you need a household gross income of at least $130,000 with ZERO debt.
If you are purchasing a rental or properties that has a secondary unit, you can use 50% of the rental income (if using 5% down) or 80% of the rental income if putting 20% down.
Amortization: how LONG you will have to pay off your mortgage
Term: the amount of years before renewal
Variable: the rate has a possibility of changing over your term- it is a lower interest rate but can go up or down
Fixed: rate will stay the same over the life of the term regardless if interest rates go up or down: yours will stay the same until the end of the term
Bad credit VS good credit: bad = under 620, average = 650-700, The best= 900 (rarely if ever seen)
More questions? Reach out to us and we will dig deep to find the answers. Keep in mind everyone's situation is different and you should speak some a professional regarding you specific financial standing.
Photo by Holly McMurter Photographs