REMEMBER: Obtaining a mortgage is ensuring your finances align with the lenders' requirements. The smaller the down payment, the bigger the mortgage, which means the higher the income. The bigger the down payment, the smaller the mortgage, which means the lower the income!
Your credit score will impact your mortgage's interest rate. The higher the score, the lower the rate.
Poor: Less than 500-619
Average: 620-679
Good: 680-769
Excellent: 770-900
Mortgages can be designed to fit your lifestyle, specifically your income frequency. Ultimately a buyer would like to pay off their mortgage as soon as possible because the quicker they pay it off, the less they pay in interest. Lender's make money off the interest paid.
Open Mortgages gives the homeowner the flexibility to pay off their mortgage at any time. Because of this option, interest rates are higher and generally variable rates. If at anytime you would like to change your mortgage to a closed mortgage you are able to do so.
Variable: Interest Rates fluctuate which ultimately means your mortgage payments will fluctuate. This is primarily a result of the Bank of Canada
A closed mortgage provides less flexibility in terms of paying off the mortgage ahead of schedule, however rates are lower in comparison to an open mortgage. If you choose to break the mortgage or pay the mortgage off ahead of schedule, this may result in a penalty. Lender's usually provide an option to homeowners to pay above the minimum mortgage payment amounts.
Fixed: Interest rates remain the same for the entire term (usually 5 years), regardless if the market interest rates fluctuate.
FYI: A closed variable mortgage is when your interest rate changes but your payment amount remains the same. The amount applied to the interest and principal will change.
Insured: Down Payment is less than 20% and the owner must pay mortgage default insurance. The purchase price for these properties are under $1,000,000
Insurable: Buyer has 20% or more for a down payment for a home however the lender insures the property themselves on a 25 year amortization schedule.
Uninsured: Buyer has 20% or more for a down payment.
If your down payment is less than 20% of the home's purchase price, you must purchase mortgage insurance
This insurance is not for you, but to protect the lender (bank) in case you're unable to make your mortgage payments
Buying your first home can be both exciting and stressful at the same time. It's also very expensive. You'll need to start saving for a down payment and the costs that go along with purchasing a home. However, as a first-time home buyer, there are several incentives offered to first time buyers.
One great source of funding for your mortgage down payment is a Registered Retirement Savings Plan (RRSP). The Canadian government's Home Buyers' Plan (HBP) allows first time home buyers to borrow up to $35,000 from your RRSP for a down payment, tax-free. If you're purchasing with someone who is also a first-time homebuyer, you can both access $35,000 from your RRSP for a combined total of $70,000.
However, since the HBP is considered "borrowed", it must be repaid within 15 years.
Similarities with an RRSP account along with the TFSA account, the First Home Savings Account allows potential buyers to save $40,000 on a tax free basis. The Maximum contribution amount is $8,000 per year. Contributions will be tax deductible, and withdrawals including investment growth will be non-taxable.
The First-time Home Buyers' Tax Credit is designed to help recover closing costs such as legal expenses, inspections, and land transfer taxes. The Home Buyers' Tax Credit, at current taxation rates, works out to a rebate of $750 for all first-time buyers. After you buy your first home, the credit must be claimed within the year of purchase and it is non-refundable. If you are purchasing a home with a spouse, partner or friend, the combined claim cannot exceed $750.00 To receive your $750 claim, you must include it with your personal tax return under line 369.
If you live in Ontario, you're eligible for a rebate on some of the land transfer tax you paid when purchasing your house. The amount of the rebate varies depending on where you live. The City of Toronto also offers a land transfer tax rebate to first-time buyers ($4,475) You may receive this in addition to the rebate available to those in Ontario ($4,00).