How
much can I afford to pay for a home?
To determine 'affordability' your Northstar Consultant will first need
to know your Taxable Income along with the amount of any debt outstanding
and the monthly payments. Assuming it is your principal residence you
are purchasing, they will then calculate 32% of your income for use toward
a mortgage payment, property taxes and heating costs. If applicable, half
of the estimated monthly condominium maintenance fees will also be included
in this calculation.
Second,
your Northstar Consultant will calculate 40% of your Taxable Income and
deduct all of your monthly debt payments, including car loans, credit
cards, lines of credit payments. The lesser of the first or second calculation
will be used to help determine how much of your income may be used towards
housing related payments, including your mortgage payment. These calculations
are based on Lenders' usual guidelines.
In addition
to considering what the ratios say you can afford, make sure you calculate
how much you think you can afford. If the payment amount you are comfortable
with is less than 32% of your income you may want to settle for the
lower amount rather than stretch yourself financially. Make sure you
don't leave yourself house poor. Structure your payments so that you
can still afford simple luxuries.
To calculate
how much of a mortgage you qualify for contact a Northstar Consultant.
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What
is a home inspection and should I have one done?
A
home inspection is a visual examination of the property to determine
the overall condition of the home. In the process, the inspector should
be checking all major components (roofs, ceilings, walls, floors, foundations,
crawl spaces, attics, retaining walls, etc.) and systems (electrical,
heating, plumbing, drainage, exterior weather proofing, etc.). The results
of the inspection should be provided to the purchaser in written form,
in detail, generally within 24 hours of the inspection.
A pre-purchase
home inspection can add peace of mind and make a difficult decision
much easier. It may indicate that the home needs major structural repairs
which can be factored into your buying decision. A home inspection helps
remove a number of unknowns and increases the likelihood of a successful
purchase.
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What
is the minimum down payment needed to buy a home?
Mortgages
with less than 20% down must have Mortgage Loan Insurance provided by
either the Canadian Mortgage and Housing Corporation (CMHC)or Genworth
Canada.
While most
Canadian homebuyers save for a down payment, with selected lenders the
minimum five per cent of the purchase price can come from sources other
than your own resources. These lending arrangements are subject to certain
restrictions based on income level and credit score.
The 5% down payment can come from borrowed funds (from a line of credit
or family member, for example). Keep in mind that the amount borrowed
for a down payment is factored into debt service ratios (which determine
how much you are eligible to borrow).
The 5% down payment can come from a cash back feature of the mortgage.
Keep in mind that in this case, the posted rate (that is, an undiscounted
rate) will be required by the lending institution.
In addition to the down payment, according to CMHC and Genworth rules
you must have 1.5% of the purchase price available to cover the applicable
closing costs (including, but not limited to, legal fees and disbursements,
appraisal fees and a survey certificate, where applicable).
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What
is mortgage loan insurance?
Mortgage
Loan Insurance is insurance provided by Canada Mortgage and Housing
Corporation (CMHC), a crown corporation, and Genworth Mortgage Insurance
Company, an approved private corporation. This insurance is required
by law to insure lenders against default on mortgages with a loan to
value ratio greater than 80%. The insurance premiums, ranging from .50%
to 3.10%, are paid by the borrower and can be added directly onto the
mortgage amount. This is not the same as Mortgage Life Insurance.
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What
is a high-ratio mortgage?
A
High-Ratio mortgage is one where the amount to be borrowed by way of
a mortgage is greater than 80% of the purchase price, or the appraised
value, whichever is less. High-Ratio mortgages generally require Mortgage
Loan Insurance provided by either Canada Mortgage and Housing Corporation
(CMHC) or Genworth, a private Insurer.
The Mortgage
Loan Insurance premium is paid to CMHC or Genworth and protects the
Lender in the event the mortgage is not repaid and the bank has to take
back the property. The benefit to the borrower is that it allows them
to purchase a home with less than 20% down payment. The insurance premium
is paid by the borrower and can be added directly onto the mortgage.
Mortgage
Loan Insurance premiums range from .50% to 3.10% of the mortgage amount
and are calculated based on the overall loan to value. For instance,
borrowers with a 5% down payment, a loan to value of 95%, would pay
a premium of 2.75% while those with a 20% down payment, a loan to value
of 80%, would pay an insurance premium of 1.00%.
Mortgage
Loan Insurance is not the same as Mortgage Life Insurance.
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What
is a conventional mortgage?
A
conventional mortgage is usually one where the down payment is equal
to 20% or more of the purchase price, a loan to value of or less than
80%, and does not normally require Mortgage Loan Insurance.
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Why
should I use a Northstar Consultant?
Financial Institutions sell only their own products to the public
through their own sales force. As a result, they are not able to provide
unbiased advice or selection since by doing so they risk losing your
mortgage to a company whose product may provide more value to you.
Northstar Consultants on the other hand, sell a variety of mortgage products
and services as they deal with many lenders, not just one. Because of
this they are able to search for product from a variety of lenders,
including banks, trust companies, insurance companies and credit unions,
for the one that offers the best product, rate and terms for your particular
needs. Thus, they can be totally objective in their recommendations
to you.
Northstar Consultants are also able to negotiate on your behalf, structuring deals
to meet the criteria of the lenders, and therefore getting you a mortgage
solution that works for you. Remember a Northstar Consultant works
for you!
To gain
market share from Mortgage Broker companies and individual brokers,
the majority pay a finder's fee for referred business. Due to the volume
of business done by and its Northstar Consultants, fees are paid
by the lender and Northstar Consultants receive fast approvals in
order to gain their business. This allows the Northstar Consultant
to shop among the various financial institutions for the mortgage rate
and product that best suits the needs of the client and, in almost all
cases, at no cost to you the client.
When you
deal directly with a Financial Institution and your mortgage is declined,
for whatever reason, you must begin the application process all over
again with another Lender. When you deal with a Northstar Consultant
the application can quickly be redirected to another Lender, or several
other lenders, for consideration.
For more
information on how can help you, contact a Northstar Consultant
today!
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How
much does it cost to use a Northstar Consultant?
The
vast majority of mortgage clients do not pay a fee for the services
of a Northstar Consultant. To gain a larger market share, the majority
of financial institutions pay a finder's fee to Northstar Consultants
and at the same time offer them their best discounted rates and fast
approvals in order to gain their business. This allows the Northstar Consultant to shop among the various financial institutions for the
mortgage rate and product that best suits the needs of the client and,
in almost all cases, at no cost to the client.
In situations
where traditional lenders will not approve a mortgage because of poor
credit, and where the application must be placed with a private or non-traditional
lender, a brokerage fee may be charged to the client. This cost must
always be disclosed to the client up front and must be authorized in
writing by the client before it can be charged.
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Does
paying my mortgage bi-weekly really cut years off my mortgage?
Payment
frequency is not the major factor in reducing the amortization period
of your mortgage. Principal reduction is! But what about all the talk
of bi-weekly payments taking five years off your amortization period.
Although you will save some interest making your payment bi-weekly,
ultimately it is the fact that your total payments each year are higher
that results in the significant reduction in amortization. For instance,
when a client chooses a bi-weekly payment of $500 over a monthly payment
of $1000, in fact they are choosing to pay an extra $1000 annually.
In most cases a bi-weekly payment is simply a monthly payment divided
by two. That means that instead of paying $12,000 in monthly payments,
you are now paying $13,000 in bi-weekly payments. That extra $1000 is
what ultimately cuts the years off your mortgage. But you can do close
to the same thing by increasing your monthly payment, if a monthly payment
frequency would be more convenient for you, or by taking an accelerated
semi-monthly payment. Most people find that a payment frequency tied
to how often they earn their income makes the most sense. And where
possible, increase your regular payment amount or make periodic lump
sum payments as both will help reduce the length of time it will take
to repay your mortgage fully.
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How
does bankruptcy affect my ability to qualify for a mortgage?
Depending on the circumstances surrounding your bankruptcy, generally
some lenders would consider providing mortgage financing. If you are
a previously discharged bankrupt the best way to determine whether or
not you qualify at this time is to discuss your situation with a
Northstar Consultant. has many lenders to approach based on your
circumstances. For more information on how can help you, contact
a Northstar Consultant today!
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How
will child support and alimony affect my mortgage qualification?
Where
child support and alimony are paid by you to another person, generally
the amount paid out is deducted from your total income before determining
the size of mortgage you will qualify for.
Where child
support and alimony are received by you from another person, generally
the amount paid may be added to your total income before determining
the size of mortgage you will qualify for, provided proof of regular
receipt is available for a period of time determined by the lender.
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Can
I get a mortgage to purchase a home and make improvements?
Subject
to qualification, yes. In fact, even purchasers with 5% down may qualify
to buy a home and make improvements to it. For high-ratio financing,
both Canada Mortgage and Housing Corporation and Genworth, insured mortgages
are available to cover the purchase price of a home as well as an amount
to pay for immediate major renovations or improvements that the purchaser
may wish to make to the property. This option eliminates the need to
finance the renovations or improvements separately. Some conditions
apply.
Where the
improvements are cosmetic, the Mortgage Loan Insurance Premium is unchanged
from the standard schedule. Where the improvements are deemed to be
structural, the Mortgage Loan Insurance Premium is increased by .50%
over the standard schedule. For information on Mortgage Loan Insurance
Premiums see High-Ratio Home Mortgage Financing.
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Can
I use gift funds as a down payment?
Most
lenders will accept down payment funds that are a gift from family as
an acceptable down payment. A gift letter signed by the donor is usually
required to confirm that the funds are a true gift and not a loan. Where
the mortgage requires Mortgage Loan Insurance, Canada Mortgage and Housing
Corporation requires the gift money to be in the purchaser's possession
before the application is sent in to them for approval. Where Mortgage
Loan Insurance is provided by Genworth this is not a requirement. See
'What is Mortgage Loan Insurance?' for further information.
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What
is a pre-approval and how do I get one?
A
pre-approved mortgage provides an interest rate guarantee from a lender
for a specified period of time (usually 60 to 90 days) and for a set
amount of money. The pre-approval is calculated based on information
provided by you and is generally subject to certain conditions being
met before the mortgage is finalized. Conditions would usually be things
like 'written employment and income confirmation' and 'down payment
from your own resources', for example.
The easiest
way to get a mortgage pre-approval is by calling your Northstar Consultant.
You will be asked some questions to determine your financial situation
and then your Northstar Consultant will calculate the size of mortgage
you qualify for, using this information. With your authorization, they
will then proceed with arranging a Pre-approved Mortgage for you if
you are planning to buy property in the near future. Most successful
Real Estate Professionals will want to ensure you have a pre-approved
mortgage in place before they take you out looking for a home. This
is to ensure that they are showing you property within your affordable
price range.
In summary,
a pre-approved mortgage is one of the first steps a Home Buyer should
take before beginning the buying process. Contact a Northstar Consultant
for further information.
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Should
I wait for my mortgage to mature?
No, have a Northstar Consultant begin shopping around for an
interest rate at least 90 days before your mortgage matures. Lenders
will often guarantee an interest rate to you as much as 90 days before
your mortgage matures. And, as long as you are not increasing your mortgage,
they will cover the costs of transferring your mortgage too. This means
a rate promised well in advance of your maturity date, thus eliminating
any worries of higher rates. And if rates drop before the actual maturity
rate, the new lender will usually adjust your interest rate lower as
well.
Most lenders
send out their mortgage renewal notices offering existing clients their
posted interest rates. The rate you are being offered is usually not
the best one. Always ask a Northstar Consultant to investigate the
possibility of a lower interest rate with the lender or another lender.
If you don't you may end up paying a much higher interest rate on your
renewing mortgage than you need to.
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