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I am a first time home buyer, how much can I afford to pay for a home?

To determine 'affordability' a member of the Royal International Team 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, we will calculate 40% of your taxable income and deduct all of your monthly debt payments, including car loans, credit cards, and 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 member of the Royal InternationalKahkesh Group team.



What is a home inspection and should I have one done?

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.



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).



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.



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 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 0.50% 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.Back to Top



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.



Why should I use a Royal International mortgage 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. A Royal International Consultant, on the other hand, sells 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 mortgage options 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.

Royal International 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 Royal International Consultant works for you!


Due to the volume of business done by Royal International Consultants, fees are paid by the lender and Royal International Consultants receive fast approvals in order to gain their business. This allows the Royal International Mortgage 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 Royal International Mortgage Consultant the application can quickly be redirected to another Lender, or several other lenders, for consideration.



How much will it cost to use a mortgage consultant?

The vast majority of mortgage clients do not pay a fee for the services of a Mortgage Consultant. To gain a larger market share, the majority of financial institutions pay a finder's fee to Mortgage Consultants and at the same time offer them their best discounted rates and fast approvals in order to gain their business. This allows the Mortgage 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.



Appling online — how secure is it?

Very. Your private personal and financial information is not sent anywhere without your express permission. And all information you provide online is encrypted for the greatest possible security.



Does paying my mortgage bi-weekly accelerated 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 payments 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. A bi-weekly payment is made every two weeks, which means that instead of paying $12,000 in monthly payments per year, you are now paying $13,000 in bi-weekly payments. That extra $1000 is what ultimately cuts the years off your mortgage, over 4 years in the example of a mortgage with original amortization of 25 years. 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 making an accelerated semi-monthly payment.



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 Royal International Mortgage Consultant. The Royal International Financial Group has many lenders to approach based on your circumstances.



How will child support and alimony affect my 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.



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.



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.



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 a Royal International Mortgage Consultant. You will be asked some questions to determine your financial situation and then your Royal International Mortgage 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.



Should I wait for my mortgage to mature?

No, have a Royal International Mortgage Consultant begin shopping around for an interest rate at least 120 days before your mortgage matures. Lenders will often guarantee an interest rate to you as much as 120 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 Royal International Mortgage 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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