Mortgage Calculators : Figure Out What You Can Afford
If you’re thinking of buying a home or transferring or refinancing your existing mortgage, use these handy calculators to:
- Figure out how much you can afford to spend on a home.
- Determine what your mortgage payments will be.
- Compare different ways of paying your mortgage off faster.
- Add lump sum or top-up payments to your mortgage calculation.
- See your amortization schedule (which provides a breakdown of principal and interest payments for the life of the mortgage).
What is a Pre-Approved Mortgage?
It’s a written commitment from a lender that you will get a mortgage for a set amount at a set interest rate, locked in for 60–120 days, depending on the lender. The commitment is subject to a financial assessment and property appraisal. This service is free and without obligation.
Why do it?
A pre-approved mortgage gives you an edge. Before you even start house hunting, you’ll know how much you can afford, your interest rate, and your monthly payments. With your financing already mapped out, you can concentrate on finding the right home in your price range.
A pre-approved mortgage shows you’re a serious buyer. In a situation where several people are bidding on the home you want, you will know the exact parameters of your financial options.
To request a pre-approval, contact a mortgage broker or your bank.
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From Offer to Closing : Mortgages Explained
When you find the home that’s right for you, your next step is to make an offer to purchase the home from the seller. The seller can accept your offer, make changes to the offer and present you with a counter-offer, or reject the offer.
About the Offer to Purchase
The Offer to Purchase is a legally binding agreement between you and the person selling the house. It includes:
- Your name
- The seller’s name(s)
- The address and legal description of the property
- The price you are prepared to pay for the home
- The items you expect to be included in the purchase price
- The amount of your deposit
- The closing date (date of possession)
- Specific terms or conditions that must be met as part of the purchase
- A time limit for meeting these conditions
It becomes a legally binding agreement the moment it is accepted, and you provide your deposit at that time. If the agreement to purchase has conditions and fails to firm up because a condition is not successfully fulfilled, your deposit will be returned to you. If the conditions are fulfilled, the sale is firm and you are committed to the purchase.
When your offer is accepted
You’re in the home stretch, finalizing the details of your mortgage and closing the purchase of your new home. Now you need to call your mortgage specialist. You may be asked to send them the following info:
- A copy of the real estate listing
- A copy of the accepted Agreement of Purchase & Sale
- Information on the source of your down payment
- Income verification if you are employed
- A letter from your employer verifying your place of employment and income, or T4s and Notice of Assessment, or T1 General Tax Return and Notice of Assessment
- Income verification if you are self-employed
- 3 years of Financial Statements and 3 years of Notice of Assessments, or 3 years of T1 General Tax Returns and 3 years of Notice of Assessments
Processing the mortgage application
Your mortgage specialist will want to verify the value of the property you are buying, your current financial picture and your credit history, so a property appraisal and credit report will be ordered.
If your down payment is less than 20%, your mortgage is considered “high ratio” and you will pay insurance premiums. You decide whether you want to pay the premium in cash or have your lender add it to your mortgage amount. Your mortgage representative can contact Canada Mortgage and Housing Corporation (CMHC) or GE Capital Mortgage Insurance Company of Canada (GEMI) to make the arrangements.
Be prepared to pay fees for the mortgage application, credit report and property appraisal.
Closing the purchase
Closing day is the day you become the official owner of your home and get possession of your new home. The closing process however, usually takes a few days leading up to that day.
Typically, you visit your lawyer’s office to review and sign documents relating to the mortgage, the property you are buying, the ownership of the property and the conditions of the purchase. Your lawyer will also ask you to bring a certified cheque to cover the closing costs and any other outstanding costs.
Once your mortgage and the deed for the property are officially recorded, you become the official owner of the property. Your lawyer will give you the keys to your new home!
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Mortgage Terms Explained
Mystified by all the financial jargon used to describe mortgages? Here’s a quick overview of key terms to help you understand the language — and make the process clearer and easier.
Mortgage: A loan that you take out in order to buy property. The collateral is the property itself. (Or as was wisely described by one of our 6 year old nephews… ‘a mortgage is when you buy a house and the bank lets you live in it’.)
Down payment: The buyer’s cash payment toward the property; the difference between the purchase price and the mortgage loan.
Principal: The amount of money borrowed for a new mortgage.
Interest Rate: The value charged by the lender for the use of the lender’s money, expressed as a percentage.
Term: The length of the current mortgage agreement. A mortgage may be amortized over a long period (such as 35 years) with a shorter term (6 months to 5 years or more). After the term expires, the balance of the principal then owing on the mortgage can be repaid or a new mortgage agreement can be entered into at the current interest rates.
Amortization Period: The actual number of years it will take to pay back your mortgage loan, or the time over which all regular payments would pay off the mortgage. This is usually 25 years for a new mortgage, however can be greater, up to a maximum of 35 years.
Equity: The interest of the owner in a property over and above all claims against the property. It is usually the difference between the market value of the property and any outstanding encumbrances.
Conventional mortgage: A mortgage that does not exceed 80% of the purchase price of the home. Mortgages that exceed this limit must be insured against default, and are referred to as high-ratio mortgages.
High ratio mortgage: If you don’t have 20% of the lesser of the purchase price or appraised value of the property, your mortgage must be insured against payment default by a Mortgage Insurer, such as CMHC.
Fixed rate mortgage: A mortgage for which the rate of interest is fixed for a specific period of time (the term).
Open mortgage: A mortgage which can be prepaid at any time, without penalty.
Porting: This allows you to move to another property without having to lose your existing interest rate. You can keep your existing mortgage balance, term and interest rate plus save money by avoiding early discharge penalties.
Assumability: Allows the buyer to take over the seller’s mortgage on the property.