Tag Archives: genworth canada

Learn Before You Leap

December 3, 2012

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Article courtesy of Genworth Canada.

 

Owning your own home is an exciting proposition. But before you can know whether homeownership is right for you, it’s important to understand what’s involved.
The worst mistake you can make as a new homeowner is to buy a house that ends up over-extending you financially. The key is to make sure that you can comfortably afford the mortgage payment and other monthly expenses that come with homeownership.

 

How Much Can You Afford?

The first thing you need to do is figure out your net worth. Your net worth is the amount left over once you’ve subtracted your total debts from your total assets. This can work as a guide to show you how much you can afford as a down payment.

 

Prepare a Budget

Next, prepare a budget. Detail all of your current monthly expenses and debt payments. Be as accurate as possible. Add everything up and then subtract this amount from your monthly take home amount. This will then give you a clear idea of how much you can truly afford for a mortgage payment each month.

 

Monthly Mortgage Payments

Just like when you rent, as a new homeowner, you will have a monthly payment to make on your mortgage. The size of your mortgage payments will depend on your down payment, the amortization period, the term and your payment schedule.

 

The Down Payment

In order to buy a home, the first thing you will need is a down payment. The more money you put down, the less interest you will pay over the life of your mortgage. The minimum mortgage down payment amount that is typically required in Canada is 5%.

In order to put less than 20% down, mortgage default insurance is required. Mortgage insurance premiums are paid once, but can be added to the principle of the mortgage.

 

How Much Can You Borrow?

Before you start looking at homes, visit your mortgage broker for a pre-approved mortgage. The mortgage broker will look at your finances and determine the amount of mortgage they are willing to give you. The maximum amount you can qualify for depends on a number of factors but the most important are your household income, your down payment and the mortgage interest rate.

 

Remember Your Budget

Quite often you will qualify for more than you expected. This is where preparing your budget beforehand is so important. Remember, your goal is to not over-extend yourself financially. Let your budget be your guide in determining how much mortgage to take on. You now know how much you have to spend, but not all of it can go towards the purchase price of your new home. Some of it will have to be used to cover costs associated with buying a home.

Tim

Tim is a mortgage agent in Barrie who specializes in helping first-time home buyers. He works with a variety of lenders and can help customize a mortgage with the best rates & options that fit the needs of each customer.

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Understanding Your Credit Report

November 5, 2012

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Article courtesy of Genworth Canada.

 

A credit report is a history of how consistently you pay your financial obligations. It is created when you first borrow money or apply for credit and is built over time.

The companies that lend or collect money or issue credit cards (banks, finance companies, credit unions, retailers, etc.) send credit reporting agencies specific and factual information about their financial relationship with you. Details, such as when you opened up your account, timeliness of your payments and if you have gone over your credit limit are shown in full.

Although this information is confidential, you have the right to see your credit report and no one else can have access to the information in the report unless you allow it.

Typically, when you apply for a loan, a credit card or even a mortgage you will need to allow this organization to check your credit history.

The credit report summarizes information about the different types of accounts you have. It will include the following account types:

  • Revolving accounts, like credit cards and lines of credit
  • Installment accounts, like loans
  • Other accounts, eg: cell phone
  • Collection accounts

There are many ways to order your credit report, such as by phone or fax. The easiest and safest method is by internet through a credit-reporting agency such as Equifax or TransUnion Canada.

When you receive your credit score it’s important to make sure that the information in the report is correct. If the score is lower than you want, read the report carefully to find out which factors are most likely having a negative influence on the score, and then work to improve them.

 

Tips to Remember to Improve Your Score

  • Make sure you have a credit history: you may not have a score because you do not have a record of owing money and paying it back. One way to build a credit history is by using a credit card.
  • Always pay your bills on time
  • Don’t go over 50% of the credit limit on your credit card
  • Apply for credit in moderation

Tim

Tim is a mortgage agent in Barrie who specializes in helping first-time home buyers. He works with a variety of lenders and can help customize a mortgage with the best rates & options that fit the needs of each customer.

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10 Things to Consider Before Your Mortgage Renews

October 22, 2012

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Article courtesy of Genworth Canada.

 

  1. Have you explored all your options?  Once you receive your mortgage renewal statement, there’s nothing easier than simply signing on for another term. But while this may make sense in many cases, your family or financial situation may have changed over time. Mortgage brokers can look for opportunities that could better meet your needs right now.
  2. Are you comfortable with your payments?  If you’ve been feeling financially strapped each month making your mortgage payments, this could be the time to reduce them to a more easily managed level. On the other hand, if you’re earning more, why not pay down your mortgage faster and save thousands of dollars in interest over time?
  3. Do you need cash flow for other things? Your priorities may have shifted since you first bought your home, and your cash flow needs can shift too. Things like paying for a child’s university education, planning a career change, or a major purchase such as a vacation property may call for spending money on things other than your home. You may be able to refinance your mortgage to take this into account.
  4. Can you handle fluctuating rates?  Some homeowners are nervous about any hikes in interest rates, while others are comfortable to go with the flow. Rates are tough to predict. It’s best to base your decision on your personal situation, not what you read in the news, and tailor your mortgage renewal around your needs. Mortgage brokers can help you decide whether to opt for fixed or variable rates — and they don’t want you to lose any sleep over your decision!
  5. Will you sell soon?   If you are likely to sell soon, consider a shorter-term mortgage or one that has flexible terms so you’re not penalized if you sell your house before the mortgage comes due.
  6. Are you thinking about a major renovation?  You know that projects such as a new kitchen or an addition can make your home more valuable. But the cost of having the work done can tie up a lot of money. Before you renew, look at all your financing options, which may include getting an additional line of credit or keeping your monthly mortgage payments low so you have money on hand to finance the renos.
  7. When do you want to be “mortgage-free”?  If you’re planning extended time away from work or perhaps an early retirement, it may make sense to pay down your mortgage sooner rather than later. While increasing your payments will raise your monthly costs now, you’ll ultimately save on interest in the long term and can prepare for that fabulous, mortgage-free lifestyle.
  8. Could you use your home equity to fulfill other goals?  Refinancing a mortgage can be one way to free up cash you need for other things, which could even include buying another property. Mortgage renewal time is an ideal occasion to review all your options.
  9. Have your insurance needs changed?  If your financial situation has changed since you first took out your mortgage, review whether you need the same level of insurance in place to cover mortgage obligations.
  10. Are you getting the best rates and terms?  In a competitive mortgage environment, your good credit history can make refinancing work to your advantage. Mortgage brokers analyze mortgage markets daily to ensure you don’t miss any money-saving opportunities.

Tim

Tim is a mortgage agent in Barrie who specializes in helping first-time home buyers. He works with a variety of lenders and can help customize a mortgage with the best rates & options that fit the needs of each customer.

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Can You Afford to Buy a Home?

September 17, 2012

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Article courtesy of Genworth Canada.

 

The first thing any prospective homebuyer needs to do is determine whether they can afford to buy the home they want.

Many people believe they have to save a large down payment. Thanks to mortgage insurance, there are various programs that enable homeownership with little or no down payment at all.

A down payment of 20 per cent or more will qualify you for a conventional mortgage. If it is less than 20 per cent, the mortgage must be insured with a mortgage insurance company, such as Genworth Financial Canada.

Mortgage insurance works by transferring the homeowner’s risk of default from the lender to the mortgage insurer. This benefits homebuyers by allowing them to obtain loans at lower interest rates than would otherwise be charged if the lender retained the risk of default.

Once you’ve determined how much you can put toward a down payment, it’s time to approach a qualified mortgage planner to discuss mortgage options available to you, and create a mortgage strategy that meets your specific needs and goals.

Most mortgage lenders look at five factors when determining whether you qualify for a mortgage loan: your income, debts, employment and credit history and value of the property you want to buy.

One of the first criteria a lender will consider is how much of your total income you’ll be spending on housing. This helps the lender decide whether you can comfortably afford to buy a home.

A lender will then look at your debts, which generally include house payments as well as other monthly obligations — such as loan payments, charge cards, and child support.

A history of steady employment, usually within the same job for several years, helps you to qualify. But a short history in your current job shouldn’t prevent you from getting a loan, as long as there have been no significant gaps in income over the last two years.

Good credit is very important in qualifying for a loan. It’s important that you have maintained all of your obligations in a timely manner. The lender will also want to know what the house is worth and the price you plan to pay.

The size of your down payment affects the amount of your monthly mortgage payments. A smaller down payment will mean your monthly mortgage payments will be higher, but it may allow you to buy sooner rather than later.

Mortgage payments for principal, interest and taxes should not generally exceed 30 per cent of your gross monthly income. Simply multiply your gross monthly household income by 0.30 to determine your maximum monthly payments. If your gross monthly income is $4,000, the maximum you can quality for is $4,000 x 0.30 = $1,200.00 a month to cover mortgage payments plus property taxes.

You should also remember that there are other expenses over and above your mortgage payments. These include the land transfer tax and legal fees to close the purchase of your home and other monthly-related expenses such as condominium fees, heat, hydro, water, property tax, moving costs, insurance and household maintenance.

Tim

Tim is a mortgage agent in Barrie who specializes in helping first-time home buyers. He works with a variety of lenders and can help customize a mortgage with the best rates & options that fit the needs of each customer.

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10 Closing Costs When Buying a Home

August 27, 2012

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Article courtesy of Genworth Canada.

 

  1. Land transfer tax. When a home changes hands, many provinces and a few municipalities charge a property transfer tax or title transfer fee. Rates are usually on a scale of 0.5% to 2% of the home’s value and can add thousands to your purchase price. First-time homebuyers qualify for rebates or exemptions in some provinces.
  2. Appraisal fee. Your lender may ask you to have a home appraised to confirm its market value. Fees vary depending on a property’s value and complexity, but are typically around $400.
  3. Legal fees. A lawyer or notary will help protect your interests by reviewing your purchase agreement, searching the property title, and ensuring that all documents are completed properly. Basic legal fees start between $500 and $800, plus disbursements, with added services as needed.
  4. Home inspection. An inspection can help make you aware of issues related to a house’s structure and systems, such as plumbing and electrical, and recommended or necessary repairs. Fees range from about $350 to $450.
  5. Home/fire insurance. Your lender will require proof that the property is insured in case of fire and other damage. Insurance costs vary, depending on the coverage needed, but budget for at least $500 a year.
  6. Costs for newly constructed homes. If you’re buying a brand-new home, be prepared to settle any items not quoted in the original price, including upgrades or paving and landscaping fees. New homes are also subject to 5% GST or 13% HST, although this is often included in your purchase price. A federal rebate reduces the GST or the federal part of the HST to about 3.5% for homes valued at $350,000 or less.
  7. Prepaid costs. If the seller has paid property taxes, water bills, or utilities in advance, you’ll need to reimburse these at closing. This can add hundreds to your upfront costs, but means these bills will be paid for your first months in your new home.
  8. Tax on mortgage insurance. If you have less than a 20% down payment, your lender will require that you obtain mortgage default insurance. You can roll the cost into your mortgage payments, but the PST is due at closing. For example, if your mortgage insurance is $5,000 and the PST is 8%, you’ll pay $400.
  9. Title insurance. Title insurance can safeguard you against fraud and problems with your property title or survey. Fees range from $150 to $350.
  10. Moving-in costs. Before the big day, budget for all those last-minute things: $100 or more to rent a van or a few hundred for professional movers, $50 to $60 for a locksmith to rekey your locks, and cleaning supplies. Such incidentals can easily come to $500 or more.

Tim

Tim is a mortgage agent in Barrie who specializes in helping first-time home buyers. He works with a variety of lenders and can help customize a mortgage with the best rates & options that fit the needs of each customer.

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