Know what you can afford – get a mortgage pre-approval.
When it pertains to securing a mortgage, people would like to be aware of the amount of money they are able to borrow. The following are a few quick formulas to assist you to determine exactly what you are able to afford.
Loan to Value (LTV)
Lenders will only allow you to borrow a certain amount of the property value. This borrowing amount is known as the Loan to Value or LTV. LTV (%) = (the amount of mortgage loan) / (the value of the property).
You may borrow as much as 80 % of your property value (80 % LTV) without fretting about low mortgage rate default insurance fees, or as much as 95 % with default insurance fees. Whether you are obligated to pay CMHC or not, your mortgage rate loan insurance depends on your LTV.
Total Debt Service (TDS) Number
Your TDS number is the percentage of your gross annual income that is required to cover payments associated with your new home, plus costs linked with your other debts.
TDS = (Home expenses + Car Loans + Credit Card Debts + Other Loans) / Gross Income.
Your total debt service number (TDS) should not exceed 40 %. This provides you with a cushion in the event of a financial emergency.
Gross Debt Service (GDS) Number
Your GDS number is the percentage of gross annual income necessitated to cover payments connected with housing, including best mortgage rate payments, interest, property taxes, and heating.
GDS =(Annual Mortgage Payments + Property Taxes + Interest + Condo Fees + Heating) / Gross Annual Income.
Your gross debt service number (GDS) should not surpass 32 %.
Are calculations not your forte? Contact a mortgage broker today for personalized help.
Think you are ready to be a homeowner? Here’s exactly how you can tell!
1) You have a budget
Factor in homeowner’s insurance coverage, property tax, fees, upkeep costs, and the best available home mortgage rate.
2) You have a sizeable down payment.
Generally, you’ll need a down payment worth 20 % of the house price.
3) You have a reliable source of income.
Getting a home is a long-term financial dedication, so you’ll require a steady income to cover those month-to-month mortgage payments.
4) You have an emergency savings fund.
If you have enough money to cover three to six months of your living expenses, you’re one step closer to being prepared.
5) You have your financial obligations under control.
Lenders like to ensure you’ll have more than enough money each month to pay your living expenses. Before they’ll give you a low mortgage rate, they take a look at your debt-to-income ratio.
6) Your credit report is in good condition.
You don’t have to have best credit to become a homeowner; however a good history can help you lower the interest payments on your Canadian mortgage rate.
7) You can make a long-term commitment.
Are you prepared to stay put for a minimum of three to five years? Normally, that’s how long you’ll have to keep the house in order to recoup your trading expenses.
8) You are prepared to become your own property owner.
Don’t buy simply because you can. You have to ensure you’re ready.
Improve the chances of having your offer accepted.
When you and your real estate agent locate what you think is the perfect home and Canadian mortgage rate, there’s no time to waste – it’s time to make an offer to purchase!
When you put an offer in to purchase a house, you are also expected to provide a deposit. The deposit assures the seller that you will actually go through with the sale when closing day arrives. Please note that the deposit and the down payment are not the same thing. A deposit may be as little as a few hundred dollars. It is important to note that, if your deal falls through, you may lose your deposit. Speak with your mortgage broker to get more information.
Chattels and Fixtures
Some sellers will entice buyers by offering them chattels or fixtures. Since it is not always clear what chattels and fixtures will stay, be sure to specifically list items that you’re unsure of. The last thing you want is an unpleasant surprise on closing day.
At this point, if your offer has been accepted, it’s time to close the deal. At closing, both parties must agree that all legal and financial obligations have been met. This includes any and all conditions that were written into the offer. If everyone agrees, ownership and possession will be transferred to you.
Compare Mortgage Rates
Before you make an offer, make certain you have the best mortgage rate locked down. Get pre-approved for a low mortgage rate online now. Not sure which mortgage product is right for you? Ask a mortgage broker to provide you with more information on fixed, variable, open, and closed rates for the best low mortgage rate.
Understanding the housing market
Have you ever wondered who decides how much a house is worth and how they do it? The market is influenced by a variety of factors, all adding to the final asking price. A few of the factors include:
- Tempo of the market– the speed at which homes are currently selling
- Confidence in the economy– prices have the tendency to go up when confidence is high
- Competition within the market– a packed market tends to result in lower prices
- Financial Institutions– a professional appraiser will determine the property’s lending value
- Insurance Companies– a broker will calculate the property’s replacement value
- The buyer and the seller– ultimately, buyers and sellers decide the final purchase price, which in turn influences the market
Seller’s Market vs. Buyer’s Market
Instability in the market scares people– sometimes right out of moving. A better understanding of the market will help you choose the best time to sell.
Cycles in the market are strongly influenced by the economy. The economy can produce both a shortage and a surplus of housing. In a seller’s market many buyers are competing for a limited number of houses. Prices on houses tend to be higher in a seller’s market. Conversely, in a buyer’s market there are plenty of houses to choose from. This surplus of housing can slow rising prices, as well as cause price reductions, which can ultimately impact your low mortgage rate.
Knowing the market is an important factor when selling or buying a home. Be sure to research the current market and best mortgage rate, or hire a real estate professional who is aware of the complexities.
Canadians take, on average, 11 months to plan their Canadian mortgage rate home purchase and 88 percent indicate that they have a good sense of how much they can afford. (Source: CAAMP).
Buy First, or Sell First
This is one of the biggest concerns for sellers. Unless you time both the purchase and sale perfectly, you could end up in one of two scenarios: living in a motel temporarily, or paying two mortgages at the same time. Neither sounds very appealing. Here are a few things you can do to avoid this dilemma:
Make it ‘conditional’ that your offer to purchase stands only if your current home sells. However, in a hot market (i.e. seller’s market), the seller could reject your offer for a more suitable one.
If you receive an offer, negotiate the closing date until the sale of your home is complete. Again, this could lead to a withdrawal of the offer if it does not work with the potential buyer’s schedule.