Q: How much can I afford to spend on a house or condo?
A: This is a question for you and your banker or mortgage Broker. Getting pre-approved for a mortgage and knowing exactly how much you should spend is your first order of business. Do not forget to set aside funds for closing costs and moving expenses. Often lenders will approve you for an amount that exceeds your expectations, but be cautious about over extending yourself. Taking on too much credit may end up turning your dream into a nightmare later on. Searching for a home in your price range confident that the funds are there when needed will provide you with confidence and security right from the start.
Q: How long will it take for me to pay off my mortgage
A: Again this is a question better tackled by your mortgage broker or banker. There are ways to gradually lower your mortgage outside of simply paying the monthly payments. Paying bi monthly or even weekly can shave years off of the life of your mortgage. Make sure your agreement allows you to pay off lump sums when you have extra cash, lowering your principle amount by even seemingly small amounts in first years of a mortgage can result in dramatic long term savings.
Q: How much of a down payment do I need?
A: You can buy a home with as little as 5% as a down payment but you will need to purchase CMHC or Gencor insurance. The government requires that people who put less than a 20% deposit down must have their mortgages insured. This can add between 1% to 3.75 % to the total mortgage amount, or between $1,000 and $3,750 added to every $100,000 dollars borrowed. Again, your lender can advise you. The larger the down payment, the lower the monthly mortgage payments and the sooner your mortgage can be paid off. Remember if you can put 20% or more down you will not be required to purchase the additional insurance which can add considerably to the price of the home.
Q: How do I decide between a 6 month open variable mortgage and a 10 year closed mortgage or the possibility of everything in between?
A: The answer to this question depends upon the amount of risk you are able to accept and your financial ability to weather changes in interest rates. If you take a variable mortgage you are vulnerable to the whims of the financial markets. If interest rates suddenly go up then so do your mortgage payments. If you take a fixed rate mortgage your payments remain the same for the length of the term you agree upon with your lender regardless of what happens in the financial markets. There are many different types of mortgages available with varying degrees of risk and varying lengths of term. Your lender should be able to give you a mortgage tailored to fit your needs.
Q; Does it really matter where I get my mortgage from?
A: For most people, the purchase of their home will be the biggest single purchase of their lives. Getting the right mortgage for you at the best possible rate will have a dramatic impact on what you will ultimately pay for your home and it can provide you with innumerable financial benefits throughout the life of the mortgage. It is important to understand all aspects of your mortgage including any fees to take on a mortgage as well as any fees you will incur should you need to cancel your mortgage at any time, for example if you need to or decide to sell your house before the mortgage term is up for renewal. A good lender will explain this clearly. The lender is actually selling you something and will have a long business relationship which could span many years. It is in the lenders best interest that you be a satisfied customer. SHOP AROUND and never accept the first mortgage offered, just a quarter of a percentage point difference can add up to big savings over the long term.
Q: Should I buy a house or a condominium?
A: The difference between a house and a condominium comes down to lifestyle. In a house you are the King or Queen, you own everything the moment you step onto the property. In a condominium you share ownership of the common elements ( and share in the costs to maintain those common elements) but own everything once you enter your own individual suite. That is changing now with new developments which mimic the rights of home ownership but still contain common elements for which expenses are shared. As with the evolution of everything, the lines can sometimes be blurred.
Home owners are responsible for their own gardening and lawn maintenance including shoveling snow in the winter and making repairs to the building or anything else that breaks down. In a condominium there may be many amenities available such as a swimming pool, exercise area or gym, Party rooms available for celebrations or even additional guest suites available for out of town visitors to rent. All of these extras are possible because the ex pence of operating and maintaining these services is spread out over many people. All of that work is done by someone who is paid to do it allowing you to enjoy a relatively worry free lifestyle.
Q: What about condominium rules?
A: Another very big difference between buying a house and a condo is that when you purchase a condo you are also agreeing to abide by the rules of the condominium corporation. This can affect your ability to have a pet, the co lour of your drapery that can be seen from the outside of your suite and any number of other things. it is important that you educate yourself about the building you are considering. All of this is clearly spelled out in a document called the status certificate.
Q: How can I get a copy of the status certificate?
A: This document is available through the property manager and will cost $100 Plus HST. If you have your heart set on buying in this particular condominium building then getting this document is imperative. This will give you a breakdown of all the costs and rules that apply to living in the building including the state of the reserve fund.
Q: What is a reserve fund?
A: A reserve fund is an amount of money required by the condominium corporation to have on hand to cover the cost of any large or unexpected repair work needed on the building. Some condo buildings were far short of funds needed to deal with the unexpected and individual owners were required to contribute additional funds, for several years in some cases, to bring the amount up to required levels. This information can be found in the status certificate.
Q: Where is the best place to buy a condominium.
A: One of the benefits of a condominium over a house is that it allows you to live in places where the cost of building a house would be out of reach for all but the very wealthy. Again the decision about where to buy is dictated by lifestyle. Location, amenities and maintenance costs all factor into the equation. Prime locations will cost more than buildings in the suburbs, but larger buildings in prime locations can be somewhat more affordable as the costs are spread out over more owners. This same principle is true when it comes to maintenance fees, the more units in the building the larger the number of people to contribute to the costs and thus the smaller the monthly fees. Lastly, the number and kind of amenities can have dramatic impact on the monthly cost of living in a condominium.