Financing Your New Home Purchase—It's Never Been Easier
Buying a brand new home is a major investment. Whether it's your first home or your next home, you will probably need to finance your purchase with a mortgage. When you sit down with a lender to discuss mortgages, you will be pleasantly surprised at the choices and options available to you.
Home buyers' financing needs have changed, and so have mortgages. Today's mortgages can easily be adapted to fit each individual home buyer's lifestyle and priorities.
Find out what you can afford before you start looking at homes. Lenders encourage you to get pre-approval for a mortgage loan, so that you will know the amount you are qualified to borrow, the interest rate you will be charged and the payment amounts. That way, you know exactly what you can afford and can negotiate arrangements with your builder in full confidence. Most pre-approvals are guaranteed for a minimum of 90 days, and sometimes longer.
Concerned about your downpayment? This is not necessarily a problem. Today, you can buy with as little as 5% down. If you provide a downpayment of less than 20%, the mortgage must be insured against default; however, the insurance premium can be added to the mortgage.
First-time home buyers could take advantage of the Home Buyers' Plan, which allows you to withdraw up to $25,000 from your Registered Retirement Savings Plan (RRSP), tax-free, for use as a downpayment or to cover other purchase-related costs. Your spouse or partner can do the same, for a combined total of $80,000. The funds must be repaid to your RRSP account within 15 years, but you don't have to begin repayments for two years. For complete details, contact your local Canada Customs and Revenue Agency office.
"Circumstances could change in the future. How do I avoid being stuck with the wrong mortgage?" Lenders know that change is the norm. That's why the flexibility of today's mortgages is so important. If interest rates go down, you may be able to renegotiate your existing mortgage at a lower rate. If your financial situation changes and you want to pay the mortgage off faster to save money, there are prepayment options such as increased regular payments and lump sum prepayments.
On the other hand, if you need to skip a mortgage payment or two, lenders may allow you to do so. Options may vary from one lender to another, so make sure you know what's available to you before you make a final decision.
Shop around for the best mortgage advice. Your relationship with your lender should be based on confidence and personal comfort. You want to get your mortgage from someone who clearly knows the mortgage business. Someone who takes the time to understand your needs and can answer all your questions, and who is committed to helping you during all stages of your mortgage application until you move into your new home. Don't hesitate to visit several lenders in your community for information. You might also ask your builder for advice; many builders have established business relationships with one or more lenders and may be able to assist you with the financing process.
Whether you are a renter wanting to make the move to homeownership or an existing homeowner looking for your dream home, solid financing information is an important stepping stone. The right advice and the right mortgage can help put you in your brand new home sooner than you may think possible.