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 $1,500,000.
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 provincial tax paid on closing whenever you buy a property in Ontario. It is calculated in brackets based on the purchase price:
- 0.5% on the first $55,000
- 1.0% from $55,000 to $250,000
- 1.5% from $250,000 to $400,000
- 2.0% from $400,000 to $2,000,000
- 2.5% over $2,000,000 (homes with one or two single-family residences)
FIRST-TIME HOME BUYERS: If you have never owned a home, you may qualify for a refund of up to $4,000. This means first-time buyers pay no land transfer tax on homes up to about $368,000. On a $600,000 home, this brings the tax down to about $4,475.
London and the surrounding areas only pay the provincial tax. There is no additional municipal land transfer tax like in Toronto.
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 FEES: It is important to note that if you are purchasing a condo, townhouse or another property with condo 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 and typically runs $100-$300.
- Default Insurance is explained in the Mortgage Default Insurance section of this guide, 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!
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 closing 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.
