MIKE BONIFERRO - Mortgage Broker
MIKE BONIFERRO
Mortgage Broker

FirsT Time Home Buyer Guide

Purchasing Your First Home is an Exciting Step in Your Journey!

 
Whether you’re looking at a condo, townhouse, bungalow or a two-story property, there is nothing quite like your first home! However, the mortgage process can be intimidating – and that’s where I come in.
 
As your Mortgage Broker, I will work with you to arrange your mortgage financing. My pledge is to provide you with friendly, informed and amazing service, clear and timely communication, and unbiased advice to ensure you are on the right path – now and into the future.
 
Not only will I shop the entire mortgage market to find you the most competitive rates and ideal product solutions, I can also be your source to connect with a team of high qualify professionals to make your home purchase journey as smooth and cost effective as possible.

Realtors

A Realtor helps you find properties within your budget and needs, negotiates your purchase price and terms, and makes sure you understand the characteristics of your potential new home and neighbourhood to ensure a perfect fit.  Not to mention, a great Realtor generally doesn’t cost you anything as a buyer (they are paid directly by the seller), while protecting your interests and saving you money during negotiations.  Let me understand your priorities and introduce you to someone who may be a great fit!

Financial Planner

A Financial Planner can help you take advantage of the Federal Government’s incredible new First Home Savings Account (FHSA) where you can trigger tax refunds (Just like RRSP contributions), and then use the money toward your down payment tax free with no need to pay it back!
Or, utilize RRSP funds toward your down payment through the Home Buyer’s Plan where you can now use up to $60,000 ($120,000 for a couple) from your RRSP toward the purchase of your first home.

Insurance Provider

Once you have confirmed the purchase of your home, you will need to purchase home insurance in order for the home to close. Partnering with a good insurance provider can make all the difference and ensure you receive the right coverage for your contents and space!

Lawyer

Once you find your dream home and secure financing, you will need the expertise of a lawyer/notary to draw up the mortgage documents and register them for you. This is the last step in the home buying process, but it is vital that it is handled with care. I would be happy to make an introduction with one of my partners when the time is right.

 
Determining Your Budget
One of the most important factors in home ownership is understanding your budget and determining how much you can afford to ensure you find the perfect home in your price range. When talking about budget, it is important to consider the purchase price budget, as well as your cash flow budget.
 
Take into consideration monthly funds that go beyond just your mortgage payment, such as:
• Property Taxes
• Home Insurance
• Condo or Strata Fees
• Heat
• Maintenance, and more!
 
Being house rich and cash poor can limit your ability to enjoy not only your home but experience life outside its four walls. The home you can comfortably afford may be dramatically different once you make a cash flow budget. You should always make sure you are comfortable with the monthly fees based on your situation today.
 
To help determine your budget, download the My Mortgage Toolbox app from Google Play or the Apple iStore.
This handy tool will help you calculate mortgage payments, affordability, income required to qualify and even estimate your closing costs! It also allows you to connect directly with me through the app so that I can answer any questions you have right in the palm of your hands!
 
Another feature of my app is the ability to get pre-qualified within 60 seconds! This is a great next step to getting you on the road to homeownership as it ties into your budget, and will confirm what you can afford by providing you with an estimate on your maximum purchase price.
 
Remember, this is only an estimate and we will need to perform a full application for a full pre-approval.
 
Down Payment
Your down payment is the amount of money you need to put down on your new home. Once you have determined your budget, you will have an accurate idea of the final cost of the home you can afford. This will allow you to estimate your down payment and start saving!
 
The conventional down payment for purchasing a home is 20%. However, I know in today’s market that it’s not always possible. Therefore, if you have less than 20%, you must account for mortgage default insurance and you are limited to a purchase price below $1,000,000.
Did you know?

If the purchase price is less than $500,000, the minimum down payment is 5%. If the purchase price is between $500,000 and $999,999, the minimum down payment is 5% of the first $500,000, and 10% of any amount over $500,000. 

 
For properties valued at over $1M, you must have a minimum down-payment of 20%. (This limit will increase to $1.5M on Dec 15, 2024)
 
Sources of Down Payment 
You have several options when it comes to your down payment:
  • Your bank account
  • Your personal investment accounts or TFSA
  • Your RRSP’s –  Thanks to the Federal Government’s Home Buyer’s Plan, first-time homebuyers are able to leverage up to $60,000 from your individual RRSP’s (maximum of $120,000 for a couple)
  • Your FHSA – Under the Federal Government’s First Home Savers Account, you are able to contribute $8,000 per year into this account and benefit from a tax deduction, and then use the funds (Tax free) toward the purchase of your first home!
  • A gift from a related family member
NOTE: If your down payment comes from a savings account, TFSA or RRSP, the bank will want 90 days of statements to ensure the funds are accounted for. Gifted funds rarely require 90 days of proof. It is always a good idea to check with me for qualifying criteria and availability to ensure your source of down payment is eligible.
 
Mortgage Default Insurance (Less than 20% down payment)
Mortgage default insurance, applies to “High Ratio” or low-down payment mortgages.  It’s commonly referred to as a “CMHC Fee” and is designed to protect the lenders against losses if the mortgage goes into default.  
 
Purchasing a home with less than 20% down means you will need default insurance. This amount is calculated based on your loan-to-value ratio (mortgage loan amount divided by the purchase price). The insurance premium is typically added to your regular mortgage payment meaning there are no out of pocket expenses (HST on the insurance premium is payable to your lawyer at closing). 
If preferred, the premium can also be paid as a single lump sum. 
 
For more information on the three Canadian providers, click on the websites below: 
 

CMHC

Canada Mortgage and Housing Corporation

Sagen 

Private default mortgage insurance provider

Canada Guaranty 

Canadian-owned mortgage insurer

 
Closing Costs
The following is a list of closing costs to help you calculate the true expense of purchasing your new home.
 
LAND TRANSFER TAX: A tax that is charged whenever a property is purchased. These taxes vary by province, but the average is 1% for the first $200,000, 1.5-2% for $200,000 up to $2 million and 2.5-3% for over $2 million. For those properties over $3 million, a further 2% tax will be applied to the residential property value. If the property is over $3 million and a mix of residential and commercial, then the additional tax will only be applied to the residential portion. NOTE: Ontario, British Columbia, Prince Edward Island, and the City of Toronto offer land transfer tax rebates for first time homebuyers.
 
GST/HST: This tax is only charged on brand new homes or substantially renovated homes. If a property is valued at $450,000 or less, and will be your primary residence, you may be eligible for a partial rebate but certain conditions may apply. Contact your lawyer for more detailed information.
 
LEGAL FEES: Your lawyer will charge you a fee for drawing up the mortgage and conveyance of title. Your lawyer will also conduct a property title search to examine public records on the property and confirm the property’s rightful legal owner. The title search should also reveal if there are any claims or liens on property that can affect your purchase. The amount of the fee will depend on the individual that you use. The typical cost is $1,500-$2,500. This includes: Land Title Registration, Title Insurance, courier fees, etc.
 
PROPERTY TAXES: Depending on your municipalities billing cycle, and whether the previous owner has already paid this year’s taxes, you may be responsible for your share of the paid taxes upon closing.  The amount varies based on location and time of closing; however a good rule of thumb is that you may need to credit, or ‘pay back’ the seller for up to 10-15% of the annual property tax amount.
 
CONDO/STRATA FEES: It is important to note that if you are purchasing a condo, townhouse or another property with condo/strata fees that you will need to account for your portion during the month of possession. For example, if your monthly amount totals $304.65 and you close four days prior to month end, you would owe $39.31. These fees are something that your lawyer will include in your purchasers’ statement of adjustments – a document that breaks down all the fees and owing balance prior to signing the final paperwork.
 
INSURANCE: There are various insurance costs to consider when purchasing a home, such as default insurance, general home insurance and title insurance.
  • Title Insurance is required by most lenders to protect against losses should a property ownership dispute arise. This insurance is done through your lawyer/notary and typically runs $100-$300.
  • Default Insurance is explained on page 11 of this handbook, and is only required if you purchase a house with less than a 20% down payment.
  • Mortgage Protection Insurance is an optional debt replacement that provides protection for your family should anything happen in the future. Many homeowners believe they are covered through their life insurance policy, but MPP is different. Before closing, it’s important to look at the costs and coverage for you!
  • Property & Fire Insurance is mandatory and needs to be arranged prior to your closing appointment. Not sure how much to budget for? Get quotes from various insurance companies! Your lawyer or I can provide recommendations.
 
To get help with estimating your closing costs, download my app today!
 
After You Buy
Now that you have finished signing your mortgage paperwork and getting the keys to your first home, there are a few things to keep in mind after you buy to protect your investment and ensure future financial success!

Maintaining your home and protecting your investment

Becoming a homeowner is a major responsibility. It’s up to you to take care of your home and protect what is likely your biggest investment. 

Make your mortgage payments on time

There are many options when it comes to mortgage payment frequency. Whichever schedule you choose, always make your payments on time. Late or missed payments may result in charges or penalties, and they can negatively affect your credit rating. If you’re having trouble making payments, please contact me asap. 

Plan for the costs of operating a home

You will have several ongoing costs besides your mortgage, property taxes and insurance. Maintenance and repair costs are at the top of the list, along with expenses for security monitoring, snow removal and gardening. If you own a condominium, some of these costs may be included in your monthly fees. 

Live within your budget

Prepare a monthly budget and stick to it. Take a few minutes every month to check your spending and see if you’re meeting your financial goals. If you spend more than you earn, find new ways to earn more or spend less. 

Save for emergencies

Your home will need some major repairs as it ages. Set aside an emergency fund of about 5% of your income every year so you’ll be prepared to deal with unexpected expenses.

 
Seven Steps to Mortgage Financing 
Congratulations, you’re ready to buy your first place! Now you understand all the important information when it comes to securing your mortgage, we can get started. 

1.BE PREPARED 

Having the following information on hand before meeting will help me determine what you qualify for. 
• Contact information for your employer and your employment history (such as a T4 or recent paystub) 
• Proof of address and your address history 
• Government-issued photo ID with your current address 
• Proof of income for your mortgage application 
• Proof of down payment (amount and source) 
• Proof of savings and investments 
• Details of current debts and other financial obligations

 

2.GET A RATE HOLD 

This is an integral step to the mortgage process as it determines price range and monthly costs, guarantees the rate for up to 120 days, and allows you to put in a competitive offer with a short subject to financing requirement. 
NOTE: Pre-approval does not mean that a lender has fully reviewed your documentation and you may still need the approval of a mortgage insurer. 
 

3. SHOP THE MARKET & MAKE AN OFFER 

Once you have found the property that meets your needs, you’ll put in an offer that’ll be accepted or countered. This may go back and forth until you reach an acceptable price with the seller. 
 

4. OFFER IS ACCEPTED 

Once your offer is accepted with the condition of financing, you will need to do a few things to finalize the sale: 
• Introduce me to your realtor 
• An appraisal may be required, which will be determined and arranged by myself 
• Send in any remaining documents required for financing (income confirmation, down payment confirmation, etc). 
• Arrange a home inspection 
• Receive the lender’s approval on property and final approval letter
 

5. REMOVE CONDITIONS

 At this stage, I will send you an email confirming your financing is in place and that you’re ready to proceed with the purchase of the property. This will require some final initials and signatures on the offer paperwork and is something your realtor will send to you.
 

6. PURCHASE HOME INSURANCE 

In order to close your home purchase, you must obtain home insurance, including fire protection. This is a great time to reach out to your insurance provider to start the process!
 

7. LAWYER’S OFFICE 

At this stage, you will be asked to provide your remaining down payment, as well as payment for the closing costs (Usually 1.5-4% of the purchase price). This is done in 1-2 days prior to the completion date.

 

Glossary of Terms
 
AMORTIZATION: The period of time required to completely pay off a mortgage if all conditions are met and all payments are made on time. 
 
APPRAISAL: An estimate of the current market value of a home. 
 
APPRECIATION: An increase in the value of a home or other possession from the time it was purchased. 
 
CLOSED MORTGAGE: A mortgage that can’t normally be paid off or renegotiated before the end of the term without the lender’s permission and a financial penalty. Some closed mortgages allow for extra or accelerated payments, but only if specified in the mortgage agreement. 
 
CLOSING DATE: The date when the sale of the property becomes final and the new owner takes possession of the home. 
 
CONVENTIONAL MORTGAGE: A mortgage loan equal to or less than 80% of the value of a property (that is, where the down payment is at least 20%). Conventional mortgages don’t usually require mortgage loan insurance. 
 
DEFAULT: Failing to make a mortgage payment on time or to otherwise abide by the terms of a mortgage loan agreement. If borrowers’ default on their mortgage payments, their lender can charge them a penalty or even take legal action to take possession of their home. 
 
DEFAULT INSURANCE: This insurance protects the lender in the event that the borrower defaults on their mortgage. EQUITY: The cash value that a homeowner has in their home after subtracting the amount of the mortgage or other debts owed on the property. Equity usually increases over time as the mortgage loan is gradually paid. Changes in overall market values or improvements to a home can also affect the value of the equity. 
 
FIXED INTEREST RATE MORTGAGE: A mortgage with a locked-in interest rate, meaning it won’t change during the term of the mortgage. 
 
GROSS DEBT SERVICE (GDS) RATIO: The percentage of a person or household’s gross monthly income that goes to pay the mortgage principal and interest, property taxes and heating costs, plus 50% of any condominium maintenance fees or 100% of the annual site lease for leasehold tenure if applicable. To qualify for a mortgage, the borrower’s GDS ratio typically must be at or below 35 or 39% (depending on the lender). 
 
HIGH-RATIO MORTGAGE: A mortgage loan for more than 80% of the value of a property (that is, where the down payment is less than 20%). A high-ratio mortgage usually has to be insured against default with mortgage loan insurance provided by CMHC or a private company.
 
HOME INSPECTION: A thorough examination and assessment of a home’s state and condition by a qualified professional. The examination includes the home’s structural, mechanical and electrical systems. 
 
LAND TRANSFER TAX: A tax charged by many provinces and municipalities (usually a percentage of the purchase price) that the buyer must pay upon closing. 
 
MATURITY DATE: The last day of the term of a mortgage. The mortgage loan must either be paid in full, renegotiated or renewed on this day. 
 
MORTGAGE LIFE INSURANCE: Protects the family of a borrower by paying off the mortgage if the borrower dies. 
 
MORTGAGE TERM: The length of time that the conditions of a mortgage, such as the interest rate and payment schedule, are in effect. At the end of the term, the mortgage loan must either be paid in full, renewed or renegotiated, usually with new conditions. 
 
OPEN MORTGAGE: A flexible mortgage loan that lets a borrower pay off or renegotiate their loan at any time, without having to pay penalties. Because of this flexibility, open mortgages usually have a higher interest rate than closed mortgages. PITH: An acronym that stands for mortgage “Principal and Interest Payments, Property Taxes and Heating Costs”. All the main costs paid by a homeowner on a monthly basis. 
 
PRE-PAYMENT PENALTY: A fee charged by your lender if you pay more money on your mortgage than the prepayment option allows. 
 
PRE-PAYMENT PRIVILEGES: The ability to prepay a portion of the mortgage principal before it is due and without penalty. This extra payment on the mortgage would be applied directly to the principal, as your regularly monthly payment covers the interest. 
 
PRINCIPAL: The amount a person borrows for a loan (not including the interest). 
 
PROPERTY TAXES: These are taxes that are charged by the municipality based on the value of the home. In some cases, the lender will collect property taxes as part of the borrower’s mortgage payments and then pay the taxes to the municipality on the borrower’s behalf. 
 
TITLE INSURANCE: Protects against losses or damages that could occur because of anything that affects the title to a property (for example, a defect in the title or any liens, encumbrances or servitudes registered against the legal title to a home). 
 
TOTAL DEBT SERVICE (TDS) RATIO: The percentage of a person or household’s gross monthly income that goes to pay the mortgage principal and interest, property taxes and heating costs, PLUS all other debt obligations such as car payments, personal loans or credit card debt. To qualify for a mortgage, the borrower’s TDS ratio must typically be at or below 42% or 44% (depending on the lender). 
 
VARIABLE INTEREST RATE MORTGAGE: A mortgage where the interest rate fluctuates based on the current market conditions. The payments will generally remain the same, but the amount of each payment that goes toward the principal or the interest on the loan changes as interest rates fluctuate. 
 
VENDOR: The seller of a property.
 
 VENDOR TAKE-BACK MORTGAGE: A type of mortgage where the seller, not a bank or other financial institution, finances the mortgage loan for the buyer.
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Mike Boniferro
Mortgage Broker
Originator Licence #M18001301

TLC Mortgage Group
Independently Owned and Operated