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FAQs

How much can I afford to pay for a home?
Maximum mortgage
What income proof do I have to provide?
What is the Property Transfer Tax?
Reverse Mortgage (CHIP)
What LTV
CMHC & Genworth Mortgage Default Insurance Premiums
What is title Insurance
Whats CMHC
Tax Free Savings vs RRSP


How much can I afford to pay for a home?

To determine 'affordability' you will first need to know your taxable income along with the amount of any debt outstanding and the monthly payments. Assuming it is your principal residence you are purchasing, calculate 32% of your income for use toward a mortgage payment, property taxes and heating costs. If applicable, half of the estimated monthly condominium maintenance fees will also be included in this calculation.

Second, calculate 40% of your taxable income and deduct all of your monthly debt payments, including car loans, credit cards, lines of credit payments. The lesser of the first or second calculation will be used to help determine how much of your income may be used towards housing related payments, including your mortgage payment. These calculations are based on lenders' usual guidelines.

In addition to considering what the ratios say you can afford, make sure you calculate how much you think you can afford. If the payment amount you are comfortable with is less than 32% of your income you may want to settle for the lower amount rather than stretch yourself financially. Make sure you don't leave yourself house poor. Structure your payments so that you can still afford simple luxuries.


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Maximum mortgage

Figure out the maximum mortgage you can afford

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What income proof do I have to provide?

In most situations lenders require a comfort level that the borrower has sufficient income and cash flow to service the mortgage as well as any other obligations that they may have. The higher the Loan to Value (ie mortgage amount vs. purchase price) the more important this becomes as the lender is placing less reliance on the value and equity in the property and more on the earning power of the borrower. The following is a summary of what Lenders require depending on what type of job you have:

Salaried Employees

  • Job Letter - Lenders use 100% of the income. Verification is made on company letterhead, signed by appropriate individual. If you are a recent hire, the letter should confirm that probation period has been passed. Bonuses, car allowances and other forms of remuneration should be mentioned if applicable.
  • Pay Stubs - Many Lenders will also require your most recent pay stubs.

Hourly Employees

  • Pay Stubs - showing year-to-date income verification.
  • T4's and/or Personal Tax Returns (T1 Generals)- 3 years to take an average.
  • Notice of Assessment - (NOA) - most recent to confirm no taxes owed.

Commission Income

  • T4's and/or Personal Tax Returns - 3 years to take an average.
  • Job Letter - confirming position.
  • Notice of Assessment (NOA) - optional depending on Lender.

Self-Employed

  • Financial Statements of Company - 3 years average of net income used. Depending on Lenders policies, The add-back of various personal expenses run through the company may or may not be allowed (eg's of allowable add backs - Depreciation, Amortization, CCA (Capital Cost Allowance).
  • NOA's (Personal Notice of Assessments).
  • Personal Tax Returns ( T1 Generals showing personal net income).

Overtime

  • Will be used as long as there is a proven track record - 3 years evidence (T-4's). Bonuses - Once again a 3 yr track record required. Part-time Job - should be in place for a couple of years before using the additional income. Tips - generally not recognized unless declared for tax purposes. Car Allowances - This varies from lender to lender. Alimony and Support - Evidence that payments have been made regularly and a copy of divorce agreement is required. Investment Income - must be received continuously. This source of income is limited to interest, dividends or some type of ongoing revenue. Capital gains, which result from the liquidation of an asset is a 1 time occurrence and can't be used.

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What is the Property Transfer Tax?

What is Property Transfer Tax and do I have to pay it?

  • This tax is charged by the Provincial Government and is collected by your lawyer at closing.
  • Each Province varies as to the amount but it is usually a percentage of the purchase price. For example in British Columbia, the amount the purchaser must pay is 1% of the first $200,000 and 2% of the balance.
  • You are exempt from paying PTT in British Columbia if you have never owned a home anywhere. You must finance at least 70% of the purchase price and the maximum home price must not exceed $425,000.00.

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Reverse Mortgage (CHIP)
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What LTV

Example of LTV:
if purchase

 

Definition: The loan to value or LTV ratio of a property is the percentage of the property's value that is mortgaged. If you divide the mortgage amount by the lesser of either the appraised value or the selling price, you get the LTV.

There are differing lender requirements used to determine whether a loan will be granted with a certain LTV. It's quite common for owner occupied residences to get loans at an LTV of 80%. However, when a property is to be an investment, lenders will frequently require higher LTV's.
Examples: $300,000 appraised value of a home.

$240,000 mortgage on the property.

$240,000 / $300,000 = .80 or 80% Loan to Value Ratio

 

 


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CMHC & Genworth Mortgage Default Insurance Premiums


CMHC & Genworth Mortgage Default Insurance Premiums

CMHC and GE Mortgage Insurance Canada have reduced homeowner mortgage insurance premiums as of November 6, 2006.

The following are the latest mortgage insurance premiums:

Application Fees have been eliminated for all high-ratio homeowner mortgage loan insurance products, effective June 28, 2006.

PST of 8% is charged on the premium.

For Vacation or Second Home Premiums, please consult Nadeem
Purchases:
Loan-to-Value Ratio Premium Charged on Total Loan
Amortization: 25-Year 30-Year 35-Year 40-Year
Up to and including 65% 0.50% 0.70% 0.90% 1.10%
Up to and including 75% 0.65% 0.85% 1.05% 1.25%
Up to and including 80% 1.00% 1.20% 1.40% 1.60%
Up to and including 85% 1.75% 1.95% 2.15% 2.35%
Up to and including 90% 2.00% 2.20% 2.40% 2.60%
Up to and including 95%:
Traditional Down Payment (from own resources)
Flex Down Payment (borrowed funds) 2.75%
2.90% 2.95%
3.10% 3.15%
3.30% 3.35%
3.50%
Up to and including 100%
(CMHC FLEX 100 & GENWORTH HOMEBUYER 100) 3.10% 3.30% 3.50% 3.70%
Refinances With No Increase to the Existing Amortization:
Loan-to-Value Ratio Premium Charged on the Increased Mortgage Amount
Up to and including 65% 0.50%
Up to and including 75% 2.25%
Up to and including 80% 2.75%
Up to and including 85% 3.50%
Up to and including 90% 4.25%
Up to and including 95% 4.25%
Self Employed Rates:
Loan-to-Value Ratio Purchase & Refinance
90.01% to 95% 6.00%
85.01% to 90% 4.75%
80.01% to 85% 2.90%
75.01% to 80% 1.64%
Secured Line of Credit and Interest Only Mortgages:
Repayment Option
5 years (5/20) 0.25%
10 years (10/15) 0.50%
Conversion from 5/20 to 10/15 0.35%
Premium Surcharges For Extended Amortizations:
Surcharges
Greater than 25 years, up to and including 30 years 0.20%
Greater than 30 years, up to and including 35 years 0.40%
Greater than 35 years, up to and including 40 years 0.60%

For Portability Premiums, please refer to Insurer's website: www.cmhc.ca or www.genworth.ca
 


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What is title Insurance
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Whats CMHC
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Tax Free Savings vs RRSP

The following are helpful links with details about Tax Free Savings vs. RRSP.


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Current Rates as of 2019-03-22
Duration Posted Bank Rates Our Rates
1 year 3.04 2.44
2 year 3.24 2.54
3 year 3.44 2.74
4 Year 3.89 2.99
5 Year 4.99 2.94
7 year 5.30 3.79
10 year 6.10 3.74
5 Yr - Variable 3.45 2.41
Qualifying rate 0.00 5.14

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