Maybe You Should Just Buy a Coffee

April 8, 2017

 

In Canada, you require a minimum of $2.30 to buy an extra large coffee at Tims and a minimum of 5% of the total purchase price to buy a home. Check your bank account and if you have under $5 buy yourself the coffee and your co-workers a box of donuts. Sadly, you won’t be buying a home.

 

I don't mean to sound harsh, but from experience, some tend to overestimate their financial ability.

 

In addition, you need to have the 5% of the purchase price saved and in a bank account, as a gift with documentation of such or in an RRSP. You can’t borrow the down payment.

 

Buyers with a down payment of less than 20% of the total purchase price must have their mortgage insured against default. Mortgage insurance protects the lender and not the borrower. It assures lenders that they will be covered in the event that a borrower defaults on, or fails to make, their mortgage payments within 90 days of being due.

 

The lender is the one that actually buys the insurance for their benefit and then passes the cost on to the borrower. Bummer.

 

If you have more that 20% of the purchase price available as a down payment congratulations! You manage your money well and will not need mortgage insurance. This is called a conventional mortgage. Some lenders will opt to insure the mortgage anyway but are not required by law to do so. The lenders will not typically pass this charge along to the borrower.

 

The insurer most people have heard about is The Canadian Mortgage and Housing Corporation (CMHC) The CMHC is a federal crown corporation and is the largest insurer of residential mortgages in Canada. Their rates are here and vary depending on the amount you put down.

 

The fees are not required up front but instead added as a lump some to your total mortgage.

 

Borrowers also have the option to choose private insurers that include both Genworth Financial Canada and Canada Guarantee. All 3 are good choices but are all a little different. Have your lender discuss the benefits of each.

 

Saving for a down payment is a challenge but with some good advice and some good habits, you can do it.

 

Cruise on over to the contact page and send me an email. I work with some excellent lenders and would be happy to connect you with the right people. You might be surprised as to how quickly you could become an owner!

 

Curtis

 

 

 

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