1.
What can a mortgage specialist do for you?
Buying a home is
probably one of the largest investments you'll ever make. That's why Sukhdip Matharu has specialists to help you make your dreams a reality.
Sukhdip Matharu mortgage specialists will guide you through your
purchase - whether you are buying your first home, your second home or
refinancing.
They'll look at your purchase from every angle to help you
choose the best mortgage for your financial situation and your goals. A
mortgage customized with the right combination of options and features.
Mortgage specialists are aware of ever-changing market conditions. They
have extensive knowledge of the various options , including HomeProtector®
Insurance and Skip-A-Payment®.
They can help you find ways to pay
down your mortgage as quickly as possible, like Double-Up® options and a
full range of flexible prepayment options.
Mortgage specialists are
committed to making your dreams a reality. They can offer you valuable
assistance with things like home appraisals, realtors, lawyers and anything
else that has to do with the purchase of your home.
When it's time to
renew, they are there to guide you through the entire process. If you're
refinancing, they'll help you determine what the best option is for you -
exploring all the possibilities available, including using your personal line
of credit or your home as equity to purchase another property.
2.
What is a down payment? Very few home buyers have the cash
available to buy a home outright. Most of us will turn to a financial
institution for a mortgage; the first step in a potentially long-standing
relationship. But even with a mortgage, you will need to raise the money for a
down payment.
The down payment is that portion of the purchase price
you furnish yourself. The amount of the down payment (which represents your
financial stake, or the equity in your new home) should be determined well
before you start house hunting.
The larger the down payment, the less
your home costs in the long run. With a smaller mortgage, interest costs will
be lower and over time this will add up to significant savings.
Compare
how an average homeowner saves over $25,000 in interest costs on a $100,000
home by making a down payment of 25% versus a down payment of 5%.
Total
Purchase Price: $100,000
| |
Down Payment Amount |
Mortgage
Principal |
Total
Interest Paid* |
| 5%
|
$5,000 |
$95,000 |
$122,512 |
| 25%
|
$25,000 |
$75,000 |
$96,717 |
3.
How can you acquire a home with less than a 25% down payment? Very
few home buyers have the cash available to buy a home outright. Most will turn
to a financial institution for a mortgage. If you have a down payment of 25% or
more, you will have a conventional mortgage.
If you have less than a
25% down payment, you will need a low down payment or no down payment insured
mortgage. Lenders now offer insured mortgages for both new and resale homes.
Low down payment and no down payment mortgages must be insured to cover
potential default of payment. The mortgage default insurance premium can be
added to your mortgage amount or paid upfront.
4. What will my
mortgage payments be? What you pay each month for your mortgage
will depend on several things: the size of your mortgage (total purchase price
minus down payment amount), the amortization period and the interest
rate.
You can use this handy calculator to determine your mortgage
payment. Mortgage Calculator
5. How can you pay off your mortgage
sooner?There are ways to reduce the number of years to pay down
your mortgage. You'll enjoy significant savings by:
Selecting a
non-monthly or accelerated payment schedule:
- Increasing your
payment frequency schedule
- Making principal
prepayments
- Making Double-Up
Payments
- Selecting a shorter
amortization at renewal
In fact, using all
flexible payment options to the fullest may enable you to prepay as much as 20%
or more of your original mortgage balance each year.
6. How can you
use your RRSP to help you buy your first home? Today, about 50% of
first-time home buyers use their RRSP savings to help finance a down payment.
With the federal government's Home Buyers' Plan, you can use up to $20,000 in
RRSP savings ($40,000 for a couple) to help pay for your down payment on your
first home. You then have 15 years to repay your RRSP.
To qualify, the
RRSP funds you're using must be on deposit for at least 90 days. You'll also
need a signed agreement to buy a qualifying home.
Even if you have
already saved for your down payment, it may make good financial sense to access
your savings through the Home Buyers' Plan. For example, if you had already
saved $20,000 for a down payment - and assuming you still had enough
"contribution room" in your RRSP for a contribution of that amount you could
move your savings into a registered investment at least 90 days before your
closing date. Then, simply withdraw the money through the Home Buyers' Plan.
The advantage? Your $20,000 RRSP contribution will count as a tax
deduction this year. Use any tax refund you receive to repay the RRSP or other
expenses related to buying your home.
While using your RRSP for a down
payment may help you buy a home sooner, it can also mean missing out on some
tax-sheltered growth. So be sure to ask your financial planner whether this
strategy makes sense for you, given your personal financial situation.
7. What should the length of my mortgage term be? The
length of mortgage terms varies widely - from six months right up to 25 years.
As a rule of thumb, the shorter the term, the lower the interest rate the
longer the term, the higher the rate.
While four or five year mortgages
are what most home buyers typically choose, you may consider a short-term
mortgage if you have a higher tolerance for risk, if you have time to watch
rates or are not prepared to make a long-term commitment right now.
Before selecting your mortgage term, we suggest you answer the
following questions:
- Do you plan to sell
your house in the short-term without buying another? If so, a short mortgage
term may be the best option.
- Do you believe that
interest rates have bottomed out and are not likely to drop more? If that's the
case, a long mortgage term may be the right choice for you. Similarly, if you
think rates are currently high, you may want to opt for a short to medium
length mortgage term hoping that rates drop by the time your term expires.
- Are you looking for
security as a first-time home buyer? Then you may prefer a longer mortgage
term, so that you can budget for and manage your monthly expenses.
- Are you willing to
follow interest rates closely and risk their being increased mortgage payments
following a renewal? If that's the case, a short mortgage term may best suit
your needs.
8. What is a fixed
rate mortgage? The interest rate on a fixed-rate mortgage is set
for a pre-determined term - usually between 6 months to 25 years. This offers
the security of knowing what you will be paying for the term selected.
9. What is a variable rate mortgage? A mortgage in which
payments are fixed for the term although interest rates may fluctuate from
month to month depending on market conditions. If interest rates go down, more
of the payment goes towards reducing the principal; if rates go up, a larger
portion of the monthly payment goes towards covering the interest.
