Residential Mortgages

FIRST TIME BUYERS / REPEAT BUYERS

Planning

There is so much to be aware of when planning to buy your first home and KMS will guide you through the financing process from start to finish.

The first thing to take into consideration is affordability. In order to figure this out, we compare your income to your hypothetical mortgage payments, heating costs and property taxes. This is called your Gross Debt Service Ratio (GDS Ratio). The next thing to factor in is all of your other debt serving costs that you pay on a monthly basis. This is called your Total Debt Service Ratio (TDS). TDS will usually include credit card payments, car loans, and existing lines of credit, as well as existing mortgage payments (if applicable).

The maximum ratios for people with 5% to 25% down payment are 32% for GDS and 40% for TDS. This means that lenders will allow you to use a maximum of 32% of your total pre-tax or gross income to pay for your mortgage payments, property taxes, half your condo fees (if applicable) and heating costs. You are allowed up to a maximum of 40% of your total pre-tax or gross income for these payments plus all other debt servicing cost you may have is allowed.

KMS can help you select an affordable and comfortable price range by using these ratios. We will advise you as to the maximum price that you will qualify for to help you have a realistic picture of what price range you should be considering when looking at your future home. Once this is established, we will get you what is called a Pre-Approval from a Lender who offers the best discounted rate available on the market. In order to do this, we will need to run a credit bureau report and receive written confirmation of income and how much you plan to put down on your purchase.

Another thing to consider are the additional costs involved when buying your new home.

• Lawyer's Fees

  These may vary so be wise when choosing your legal representation. If you need help with this, let us know and we will happy to refer you to a reputable lawyer. Make sure to ask your chosen lawyer what the approximate fees will be, as you will have to plan ahead for that expense.

• Appraisal Fees

  Most lenders will request an appraisal of your property and it is your responsibility to cover the cost. The fees on a residential appraisal are usually approximately $250. If your mortgage is high ratio and insured by CMHC or GE then they will charge approximately $165.

• Home Inspection

  This is a very wise choice when buying a new property. It is a report that will state the condition of the property prior to firming up the deal. The majority of reports will indicate any problems and provide a cost to repair them. Qualifications for home inspectors may vary as well as the cost associated with this. Please verify their experience before making your selection as a person does not have to be licensed to say they are a home inspector.

• Land Transfer Tax

  This is a tax payable to the Provincial Government by the purchaser upon the transfer of title. Make sure to check with your real estate agent or lawyer to verify this, as well.

• Mortgage Default Insurance

  This allows many people in Canada to purchase their first homes with less than 25% down payment. CMHC and GE charge a sliding scale of fees depending on the amount of down payment being put towards the purchase. This fee can be paid up front or added to the mortgage.

• Property Taxes

  At the time of the sale, your lawyer will determine if the taxes have been paid up to date or in advance. If the seller has paid their property taxes in advance your lawyer will determine how much the buyer must compensate the seller. If they are not up to date the seller is required to pay them off the proceeds of the sale. If there are insufficient proceeds, the buyer may be forced to pay them.