- How to Avoid Paying Property Transfer Tax?
- Is 20% down required to buy an investment property?
- Can I Buy A Home With Less Than 20% Down?
- Do I have to be a First Time Home Buyer to put less than 20% down?
- When Will I Be Required To Put 20% Down?
- I’m swimming in High Interest Debt Payments – What do I do?
- What Is Equity?
- Is 20% required to buy an investment property?
- Can I Get A Mortgage On Probation?
- Do I Put 5% Down Today Or Wait To Put 20% Down?
- Is A Deposit The Same As A Down Payment?
- What Are Potential Closing Costs?
- What is the 90-day rule?
- What is the Home Buyers Plan?
- How do I get into a detached home?
- How does debt affect my mortgage application?
- How do I buy more homes with 5% down?
- How do I pay off my mortgage faster?
- What are the FOUR methods to making money in real estate?
- Do I pick a variable or a fixed rate mortgage?
- What does a Mortgage Broker provide that the bank does not?
- What is the difference between a fixed & variable mortgage?
- What is Alternative Lending?
- What is a Home Equity Line Of Credit?
- What is Private Financing?
- Is a low rate the most important factor in a mortgage?
- Will a larger down payment result in a better rate?
- Is it better to save 20% before buying?
- Can I get a mortgage on Bare Land?
- I’m Self Employed; do I need to be in business for 2+ years to get approved?
- I’m Self Employed, do I need to claim more in taxes to get approved?
- What are common mortgages for those who are Self Employed?
- What is the First Time Home Buyer Incentive?
- What is the First Time Home Buyer Program?
- What is the First Time Home Buyer Tax Credit?
- What is the Home Buyer Plan?
- How Do I Build My Credit?
- Can a credit check severally damage my credit score?
- What are some credit tips?
- What is a fixed rate mortgage?
- What is a variable rate mortgage?
- How long is a pre-approval good for?
- What is the difference between Insured, Insurable, & Uninsured?
- I have bad credit; will I get approved?
- How can consolidating my debt save me money?
- How do I apply for a loan?
- How much can I borrow?
- What is a conventional mortgage?
- What is the minimum down payment required to buy a home?
- What is mortgage loan insurance?
- What are the monthly costs with owning your home?
- What do closing costs look like?
- What are the benefits as a First Time Home Buyer?
There are generally TWO ways to avoid paying Property Transfer Tax in BC
- As a First Time Home Buyer, purchasing a resale home under $500,000
- Purchasing a pre-build home under $750,000
- As a First Time Home Buyer, purchasing a resale home between $500,001 - $525,000
- Purchasing a pre-build home between $750,001 - $800,000
If you are using rental income based off that investment property to qualify your application and immediately rent out that property, then yes you would require 20% down.
However, there is a way to put only 5% down.
While there is no time restraint at which you can move into the home and then eventually move out and rent the property, simply purchasing the property with the intention of moving in, you can qualify with as little as 5% in certain circumstances
You can buy a property with as little as 5% down, as long as it is
- Owner Occupied
- Second Home
**Must be under 1 Mil
Subject to qualifying, anyone can qualify at 5% down
Property must be an owner occupied or a 2nd home
- Purchase over 1Mil.
- 30-year amortization.
- B Financing.
- Private Financing (25%).
Consider consolidating that high interest debt into your mortgage.
For every $350 in monthly debt payments, you can access $100,000 in mortgage financing PLUS save interest
Equity is the difference between your homes current value and your remaining mortgage balance
Value - Mortgage = Equity
Lenders will allow you to access up to 80% of that built up equity in your home
How To Increase Your Equity?
- Home Appreciation
- Home Appreciation
- Sweat Equity
However, there is a way to put only 5% down
By turning your current property into a rental, you can buy your next home with as little as 5% down
There will be variables like your length of time in the industry, probation timeline, credit, income, & down payment
Let’s take a $500,000 home with the minimum 5% down ($25,000)
After subtracting loan insurance of $19,000, your home will appreciate a very modest $52,000 & have a balance of $414,000 after only 5 years
That’s a total of $139,000 in YOUR POCKET
Know your options - time in the market often sees a faster return than waiting & saving
A deposit is made by the buyer at the time of purchase to secure the property. That deposit is typically 5% & is held in your realtor’s trust account. This deposit will then go towards your total down payment at closing
- Home Inspection
- Appraisal Fee
- Legal Fee’s
- Property Transfer Tax
- Title Insurance
- Tax Adjustments
This rule was implemented as the new anti-money laundering act in 2018
It implies that all banks will require proof of down payment via a 90-day bank statement history on any purchase
This means all transactions will be reviewed
This program allows all home buyers to pull up to $35,000 TAX FREE from their RRSP to use towards a down payment on a home
You will have up to 15 years to pay back the loan tax free
HOUSE HACKING – Meaning you live in one part of the home while renting out the rest of the space
- Can use the rental income to qualify
- If done right, your rental income may offset your mortgage payment
- Eliminates strata fee’s & increases your ability to borrow
Remember a $350 monthly debt today equates to about $100,000 in borrowing power!
In today’s market, $350 in monthly debt payments will equate to a loss of about $100,000 on your mortgage
- $25,000 car loan
- $750 monthly payments
By consolidating this into your mortgage, that’s a savings of $75,000 & $400 in monthly payments
Step 1 - Buy a home with 5% down (this can be as little as $15k - $20k)
Step 2 - Eventually, convert that property to a rental
Step 3 - Purchase your next home, again with as little as 5% down
Rinse & Repeat
**You can even use the rental income to help qualify**
Two main methods
- Accelerated Bi-Weekly Payments
- This will turn your 25-year mortgage into 21-years
- Pre-Payment Privileges
- This option allows you to pay a specified amount towards your mortgage each year without penalty. Usually 15% - 20% of the mortgage balance
Also, consider the Sweet 16 Method - Increase your mortgage payment by 5% year over year (x 1.05) & you’ll be mortgage FREE in 16 years instead of 25
- Mortgage Pay Down - Think renters making those principal payments for you
- Appreciation - The Value in your home going up over time
- Cash Flow – Cash Flow is KING - That’s making income on your investment after expenses
- Sweat Equity – Adding value through renovations
On average, the typical increase in payment, (given rates id rise), is about $12 - $13 for every $100 borrowed
So, if your mortgage is in the $400,000 range, you should only see your payment fluctuate by about $48.
Also remember, that variable mortgages offer more flexibility, cheaper penalties, & allow you to switch to a fixed product should you decide
You should be able to compare different loan options, programs, rates, product types, terms, penalties & mortgage flexibility solutions from all lenders (not 1), to find your best fit
**Your broker will do all the work for you
A fixed rate typically has less flexibility & a slightly higher rate while a variable rate provides more flexibility and is often at a discounted rate
If market rates change, your fixed rate won’t fluctuate but your variable rate may
Historically, variable rates have proven to be less expensive over time, though 66% of Canadians tend to lock into a fixed
COMMON BORROWER’S ROWERS
- Self-employed individuals who have not claimed enough income to qualify with the bank
- Those with bruised credit
- New business owners
- WHAT’S THE STRATEGY?
- It’s a short-term solution, usually 1-3 years, to improve the borrower’s situation before transitioning to an “A” mortgage
AKA a collateral mortgage or readvanceable mortgage, meaning as you pay down your mortgage or your property value increases, your HELOC limit increases
This allows you the ability to access more of your equity without having to reconstruct or break your term
Common Use Are:
- Emergency fund
No income or credit requirements here.
Qualifications for private financing will be based off equity or a larger down payment.
Due to lenders incurring higher risk with no income or credit requirements, interest rates will be slightly higher
The lowest rate is not always the cheapest option when factoring in the total cost. Saving you $$ & mortgage flexibility is the #1 priority
With as little as 5% down, you will see the best available rate, but you will be required to pay mortgage loan insurance at 2.5% - 4%
With 20% down, your rate will be slightly higher with no insurance required
With 5% being the minimum down payment, by simply getting started today, you will capitalize on
Mortgage Pay Down – Principal Payments
Potential Cash Flow
It’s time in the market that builds wealth in real estate over time
Typically, a 50% down payment is required
There are options at 25% down payment with plans to build
There are alternative lenders that we work with that will provide additional options
Each situation will vary depending on individual factors
There are alternative lenders that will look at a 6-month history & business revenue
With a slightly higher interest rate, often the tax savings will far outweigh the slightly higher rate
- Traditional Financing – Net income
- Stated Income – Business revenue
- Bank Statements – Usually 6 months
- Net worth – Liquid assets
- Business Cash Flow – lot of money left in the company
This incentive is a shared equity mortgage with the government of Canada, where they will contribute 5% (on existing homes) or 10% (on pre-build homes) towards your down payment
- Lower payments
- Qualify for more
- Interest saving
- 25 years to pay back
** Must still have 5% down
A provincially regulated program that allows First Time Buyers to be exempt from paying Property Transfer Tax
Two ways to be exempt
Purchase under $500,000 (existing home)
Purchase under $750,000 (pre-build home)
**Partial rebates under $525,000 & $800,000
This is a non-refundable credit that allows FTHB’s to claim up to $5,000 in the year that you purchased your home
The claim can land you a max $750 come tax season
This program allows all home buyers to pull up to $35,000TAX FREE from their RRSP, to purchase a home
You will then have 15 years to pay back the loan tax free
Use the 2-2-2 rule
2 trade lines
$2,000 limit each
2 years each minimum
Use each credit line & try not to carry 40% or more of your limit month over month without paying it down
The more established your credit is, the less your score will be affected, if at all
When scores are slightly affected, it only temporary & bounces back quite quick
Make payments on time
Use less than 40% of your total limit
Increase your number of trade lines in which you can manage
Increase credit history length
Use different types of credit
Pay down high interest debt with low interest debt – I.E Your “Mortgage”
Within a fixed rate mortgage, you will have the security of knowing that your mortgage payment will not change throughout the contractual term, as your interest rate will remain the same. In exchange for a fixed rate term, your lender will apply a higher pre-payment penalty should you decide to switch lenders, refinance, or reconstruct your mortgage.
Unlike a fixed rate, a variable rate mortgage can fluctuate up or down throughout the contractual term. In exchange for a variable rate term, your lender will allow a much lower pre-payment penalty compared to the fixed rate product.
The variable rate mortgage is dictated by the Bank of Canada’s Prime Rate. The Bank of Canada meets 8 times a year to discuss the key interest rate and whether or not they will increase or decrease the prime rate. Typically, they will not change the rate, though when they do, historically it will be at a quarter precent increase or decrease.
Example - for every $100,000 you’ve borrowed in a variable mortgage, you should expect roughly a $12 change in your payment.
The variable mortgage will provide you with more flexibility as having a variable rate product will allow you to get out of your mortgage with a maximum penalty being 3-month interest.
Example – On a $500,000 mortgage, in a variable rate product, you can expect a standard $2,000 to $2,500 penalty regardless of the remaining months left in the term. In a fixed rate product, you can expect a penalty in the upwards of 5% of the remaining loan balance. In this case of a $500,000 balance at 5%, that penalty would be about $25,000.
Most mortgage pre-approvals are good for 120 days from the time of submission.
Pre-approvals are ultimately used as rate holds. Though a rate hold is not a true pre-approval unless you’ve sent documents in, it allows you to hold in place today’s rate, protecting you against any increase in market rates for up to 120 days.
Given you don’t increase any debt or change your job in those 120 days, it’s as simple as updating your documents when the time comes to get you approved. Click here to get your pre-approval started.
- Refers to when your down payment is less than 20%.
- The property purchase price must be less than $1,000,000.
- Must qualify at a 25-year amortization.
- Owner occupied or 2nd home purchases only.
- Can’t be a rental property.
Important to note on all insured mortgages with less than 20%, mortgage loan insurance is required.
Because your mortgage loan insurance premium is protecting the lender, you will qualify for the markets lowest interest rate.
- Your down payment will be greater than 20%.
- The property purchase price must be less than $1,000,000.
- Can’t be a rental property.
What makes an Insured mortgage different than an insurable mortgage is that you are now putting 20% or more down. In this case, the lender will now pay for the mortgage loan insurance. In this case, your interest rate will be slightly higher than an insured product, but lower than an uninsured mortgage.
- Your down payment will be greater than 20%.
- The property purchase price can be over $1,000,000.
- You can extend your 25-year amortization to 30-years.
- Can be a rental property.
Because the lender pays for private mortgage loan insurance, uninsured mortgages result in a slightly higher rate.
We at Riley Boychuk Mortgages, have a mortgage for everyone! Period. Not only do we work with conventional lenders, but we also work with private lenders to help situate our clients with less adequate credit into a mortgage that best fits their needs. Contact us to learn more on what options you may have today.
A debt consolidation loan allows you to pool together several high interest debts into one lump sum payment at a far lower interest rate. In turn, this option allows you to reduce your overall monthly payments by as much as two thirds.
Some high interest debt may include, but is not limited to:
- Credit Card Debt.
- Line of Credit Debt.
- High Interest Car Payment Debt.
- Medical Bills.
- High Mortgage Interest Rates.
In the process of debt consolidation, you will likely see your credit score improve greatly over the following 12 months.
A strong option to anyone who owns their home is using the equity in your home to refinance your mortgage. The equity in your home is ultimately determined by subtracting the amount owing from the current value of the home. Lenders will allow you to refinance up to an 80% loan-to-value, which means that you can pull out of your home any equity that exceeds 20% of your home’s value at that time.
While debt consolidation is not going to be for everyone, it plays as a strong option for anyone looking to lower their high interest debt, lower monthly payments, and increase your credit score over time.
Applying for a loan is a smooth and stress-free process from start to finish. As it takes less than a minute, simply begin by filling out the “Request A Free Consultation” form on the home page or alternatively, you can click “Contact Us” and fill in the form from there. From here, one of our mortgage specialists will contact you shortly after to discuss personalised mortgage options that best suit your needs. Click here to get started.
Where there is no general cap on what you can borrow, lending guidelines are based on your household income, debt ratios, credit scores, and your down payment. To find out more on how much you can borrow, contact us today at Riley Boychuk Mortgages for your free no obligation quote.
A conventional mortgage refers to any mortgage with a maximum loan-to-value of 80%. In other words, a conventional mortgage refers to any mortgage with a down payment equal to or greater than 20% of the purchase price and does not require mortgage loan insurance.
In Canada, the minimum down payment is 5% on the first $500,000 and 10% on the remaining $500,000 up to a maximum $1,000,000 purchase price. With that, you must also be able to show you can cover the potential closing costs such as appraisals, legal fees, discharges, title insurance, and where applicable, survey certificates.
A minimum of 5% of your down payment must be from your own personal savings. Alternatively, you may receive that minimum 5% down payment from other sources such as a gift from a family member. With all gifts from family members, lenders will typically require a signed gift letter. With newcomers to Canada or non-residents, lenders will usually want to see a minimum down payment of 10%. Lastly, a 20% minimum down payment will be required on any rental property.
It’s important to also note that any mortgages with less than a 20% down payment will require mortgage loan insurance, issued by either CMHC, Sagen, or Canada Guaranty.
Mortgage loan insurance, also known as mortgage default insurance, is an insurance premium paid by the borrower, to in which protects the lender for in the event that the borrower defaults on their mortgage obligations. Mortgage loan insurance is provided by one of three institutes, CMHC, Canada Guaranty, or Sagen. Mortgage loan insurance is implemented on any mortgage that has a down payment of less than 20% of the purchase price of a home. The insurance premiums range from 0.50% to 7.0% and can be added directly onto the mortgage amount.
While owning your own home can be a dream come true, it will also come with some financial responsibilities. Let’s take a look below at a few of those obligations that you can expect as a homeowner.
Your Mortgage Payment
In many cases, your mortgage payment will be the largest expense each month. Your mortgage payment may vary depending on a variety of variables such as your term length, amortization, down payment, & purchase price. While a portion of each payment will go towards interest, you will see the amount that goes towards your principal grow with every payment you make.
Home insurance is vital component for every homeowner. Ultimately, home insurance is the avenue in which protects your greatest investment, your home. Setting up a policy before completion is recommended and, in most cases, required with each transaction.
Strata fees, also known as maintenance fees, are subject to developments that run with strata management. You will typically see strata fees in condominiums, townhomes, and other detached homes that are considered bare land strata. These fee’s generally help with the overall maintenance of the common property and include a built-up contingency fund for any future repair’s or emergencies that may occur within the development.
As a homeowner, you’ll have general bills such as heating, electricity, gas, water, cable & internet.
Every homeowner in Canada will be required to pay their annual property taxes that are generally based off your property’s assessed value. Property taxes can be paid in one of two different ways – paid in one lump sum for the calendar year, or they can be incorporated right into your monthly mortgage payment.
Home Inspection Fee
Home inspections, while not mandatory, are highly recommended and are generally added into the offer as a condition. At a cost of roughly $500, a home inspector will do a thorough overview of the home then provide you a report based on the homes condition.
Generally following an offer on a home, you will be required to submit a deposit to confirm acceptance. The deposit is collected then placed in trust until completion and is then applied to the remaining down payment. It’s important to remember that making an offer is viewed as a contract of sale, therefore, if you are the reason the contract fails to complete, the seller may be entitled to that deposit as compensation for upholding their end of the agreement.
Appraisals are very common in today’s day and age with most lenders requiring this step prior to advancing funds. An appraisal is a current estimate of the value of the home and provides the lender with a basis on which they are lending on. This fee will typically cost about $300.
Legal fees are the final step to any real estate transaction for both the buyer and the seller. The solicitor will help finalize the sale, prepare mortgage documents, make any tax adjustments, allocate disbursements and protect your interest. The cost for the lawyer’s time will be roughly $1,200 - $1,500.
Land Transfer Tax
Land Transfer Tax is a provincial government tax placed on any purchase of property. You can download and use our FREE app to help estimate the amount you’ll need to set aside.
Most lenders will require you to cover the cost of title insurance. Title insurance aids as protection against any loss of property ownership should there ever be a dispute. This cost is roughly $150.
Property Tax Adjustments
Upon completion of sale, both the buyer and the seller will be responsible for paying their part of the annual property taxes. The seller will be responsible from January 1st to the adjustment date, and the buyer will take over from the adjustment date on.
Depending on how you set up your mortgage payment schedule, the closing date may not align perfectly with your first mortgage payment. It’s important to note that interest accrues on the mortgage principal from the date at which the mortgage funds were advanced, up until the date of your first mortgage payment.
All of these costs can add up to thousands of dollars at closing and is why it’s important to plan for these costs upfront. Typically, lenders will require you to be able to show 1.5% - 4% of the purchase price in excess of your down payment to help fund these closing costs.
As a first-time home buyer, you are entitled to a few options. Let’s review these options below
First Time Home Buyer Incentive
This incentive helps provide first time home buyers with a secondary means of down payment that results in either a larger down payment therefore, lower monthly payments, or the ability to save less for their overall down payment.
There are no additional monthly payments associate with this incentive and the first-time home buyer may repay the loan at any time without incurring pre-payment penalties.
With this incentive, the Government of Canada provides:
- 5% or 10% for a first-time home buyer purchase of a new build home.
- 5% for a first-time home buyer purchasing an existing home.
- 5% for a first-time home buyer purchasing a new or resale of a mobile/manufactured home.
Who is this incentive for?
- First time home buyers.
- Household incomes that do not exceed $150,000.
- The down payment must be greater than 5%.
- The down payment must not exceed 20%.
What is my max purchase price?
- The maximum purchase price under this incentive is 4.5x your annual household income (up to a maximum household income of $150,000).
- What this means is your maximum mortgage under this incentive will theoretically be $722,000.
How is this loan paid back?
- The loan must be paid back after 25 years or when the home is sold.
- The government will share in their 5% or 10% interest on the upside, as well as the downside, meaning the buyer is partially protected should the market drop.
First Time Home Buyer Program
This program helps first time home buyers reduce or even eliminate the cost of property transfer tax at closing when purchasing a first home. Upon qualifying for this program, a first-time home buyer may be eligible for either a full or partial exemption from paying this property transfer tax.
Do I qualify?
- Must be a Canadian citizen or permanent resident.
- Filed at least 2 income tax returns in BC in the past 6 years.
- Never owned an interest in property anywhere in the world at any time.
- Have not received the first-time home buyers program rebate.
- Property must be your primary residence.
- Must occupy the property within 92 days and live in the property for 1 year.
- Have a fair market value of $500,000 or less. Partial rebate up to $525,000.
What if one applicant does not qualify?
- If one applicant does not qualify, then only a percentage of the homes interest will apply to this rebate. If both applicants have a 50/50 ownership, then only 50% will apply to the property transfer tax exemption.
Home Buyers Plan
This program allows home buyers to pull up to $35,000 from their registered retirement savings plan (RRSP) to purchase a home. The Home Buyers Plan can also be used to build a qualifying home for yourself or a related individual with disability. It’s important to note that you have up to 15 years to pay these funds back TAX FREE.
Ultimately, we at Riley Boychuk Mortgages understand that the process can be tricky, and is why we are with you every step of the way; from your pre approval, to the purchase of your new home, closing with your lawyer, and throughout the life of your mortgage. This is why it’s important to speak to a professional to better understand what you are entitled to as a first time home buyer. Contact us today to learn more.