Buying a home is one of the most important transactions of our lives. Being well prepared will facilitate the process and allow you to make informed choices.
Minimum Down Payment
When buying a home, a minimum down payment of 5% must be given for a single-family property. The down payment corresponds to the amount of money not financed by your mortgage loan that you must hand over to purchase your home. The minimum down payment varies according to the purchase price. If the purchase price of the coveted property is $500,000 or less, the minimum down payment required is 5% of the purchase price. If the purchase price is between $500,000 and $999,999, the minimum down payment required is 5% for the first $500,000 and 10% for the excess. Finally, if the purchase price is $1,000,000 or more, the minimum down payment required is 20% of the purchase price.
Obtaining a Mortgage Loan
Are you looking for a dream home that will be yours and offer you freedom and peace of mind?
Becoming a homeowner for the first time takes time and energy. To accompany you in your steps when obtaining a loan, you could choose to do business with a mortgage broker. They will give you the necessary tools to go through this process and guide you at every step of buying a property. Your mortgage broker will also know how to help you choose, among the entire range of mortgage products offered, the one that best meets your needs and situation.
To facilitate the assessment of your file and advise you properly, your broker will need to obtain several documents. Without being exhaustive, here is a list of documents that could be requested and that you could gather prior to your first meeting with your broker:
- Your new property: signed purchase offer, description sheet, municipal and school tax accounts, coordinates of your notary or lawyer, etc.
- Your employment: employment confirmation (hiring date, gross salary and title), pay stub, etc.
- Your financial situation: source of your down payment, list of your assets and debts, void cheque, etc.
Mortgage Insurance
Furthermore, if you have a down payment of less than 20%, your loan must be insured by a mortgage insurer such as CMHC or Genworth. This insurance will cover the lender’s risk related to the loan repayment. The insurance premium will be financed within your mortgage loan and calculated according to the percentage of down payment deposited.
You will have important choices to make
When your mortgage lender has been chosen, you will have to make important decisions regarding amortization, term, and interest rate type of your mortgage loan.
Amortization: The maximum period to repay your mortgage loan is 25 years and can go up to 30 years under certain conditions. However, it may decrease during the term of your loan depending notably on your type of interest rate or chosen payment method.
Terms: They can vary between 1 year and 5 years. Closed terms offer more advantageous rates, and open terms are usually used for the short term. The difference between the two is as follows: a loan with an open term can be repaid at any time without penalty. In contrast, the interest rate of an open term is higher than that of a closed term.
Fixed rate or variable rate? A fixed rate guarantees you the same rate and the same payment throughout the term, and a variable rate is based on the Bank of Canada prime rate minus a discount established with your lender at the beginning of your term.
