Step 3 -An offer no one could refuse

An Offer No One Can Refuse From a Prepared Montreal First Time Home Buyer

Mortgages can be bewildering to the uninitiated. There are many options to consider. Because mortgages are long term commitments, making the right decision in the beginning can save tens of thousands of dollars over the life of the mortgage. Rawski introduces some of the key factors in selecting the right mortgage as well as some valuable tips on preparing the best offer to ensure you get the Montreal real estate home you want at the best price possible.

Montreal Mortgage Primer

A mortgage is nothing more than a loan that uses your house as collateral, or security, that you will repay the loan. Most mortgages are obtained through lending institutions such as banks and credit unions. Private lenders also offer mortgages. These are customarily offered for a three or five year term. To obtain a mortgage from a private lender, you must have a good credit crediting. You will usually be charged an administration fee of three % of the transaction value. No approval is required from Canadian Mortgage Home Corporation. Every Mortgage is made up of two parts: principal and interest. Principal refers to the amount that you borrow. This amount decreases as you make payments to the lending institution. Interest is the cost of borrowing and is part of your regular(usually monthly) payment. Depending on the amount of your down payment(the cash you were able to contribute when you obtained the mortgage), you may also need mortgage insurance. If you do, the fee for that insurance is usually part of your regular payment. Alternatively, you can choose to pre-pay the insurance so that it isn’t added to the mortgage. Mortgages come in two basic varieties: conventional and high ratio. With a conventional mortgage, the lender will loan you as much as 80% of the market value of the house, or its purchase price, whichever is lower. The remaining 20% is the amount of cash you will need as a down payment. If you are putting down less that 20% (considered high-ratio) which is like almost all first time home buyers, then you will need to have private lender insurance. The federal government, through an agency called the Canadian Mortgage Home Corporation (CMHC), requires mortgage insurance on high ratio loans.

To obtain CMHC Mortgage Loan Insurance, you will have to pay an insurance premium which get added onto your mortgage for closing. The amount of the insurance depends on how much you are putting down and your mortgaeg professional will be able to give you the exact premium amount when you apply for your mortgage.

The CMHC Mortgage Loan Insurance premium is calculated as a percentage of the loan and is based on the size of your down payment. The higher the percentage of the total house price/value that you borrow, the higher percentage you will pay in insurance premiums.

Remember: without mortgage insurance you may avoid the insurance premium but you’ll typically pay much higher interest rates and additional administrative fees. At the end of the day, for the vast majority of borrowers, the cost of CMHC Mortgage Loan Insurance is more than fully offset by the savings achieved.

A 10% premium refund and extended amortization period without surcharge may be available when CMHC Mortgage Loan Insurance is used to finance an Energy-Efficient Homes.

Loan-to-Value

Premium on Total Loan

Premium on Increase to Loan Amount for Portability and Refinance

Standard Premium Self-Employed without 3rd Party Income   Validation Standard Premium Self-Employed without 3rd Party Income   Validation**
Up to and including 65%

0.50%

0.80%

0.50%

1.50%

Up to and including 75%

0.65%

1.00%

2.25%

2.60%

Up to and including 80%

1.00%

1.64%

2.75%

3.85%

Up to and including 85%

1.75%

2.90%

3.50%

5.50%

Up to and including 90%

2.00%

4.75%

4.25%

7.00%*

Up to and including 95%

2.75%

N/A

4.25%*

*

90.01% to 95% — Non-Traditional   Down Payment***

2.90%

N/A

*

N/A

Extended Amortization Surcharges

Greater than 25 years, up to and   including 30 years: 0.20% Greater than 30 years, up to and including 35   years: 0.40%

Regular mortgage payments once meant monthly payments, many options are now available. For example, you can choose to make 13 payments each year instead of 12. This doesn’t sound like much of a difference, but the result – over a 25 year amortization period – is tremendous savings in interest, which would mean you’d be mortgage free much sooner. Be sure to ask your mortgage professional about all payment options, as well as potential opportunities to make lump sum payments to reduce your principal. Mortgages can be open or closed. An open mortgage allows you to repay the loan at any time without penalty. In exchange for this flexibility, you will pay a higher rate of interest. Consider a short term open mortgage when interest rates are high and then moved to a longer term mortgage as rates decline. Closed mortgages, on the other hand, have a set term and set interest rate; a good option when rates are low. Closed Mortgages also give you the comfort of predictable payments for years to come.

Equity, a concept you will soon come to appreciate, is the difference between the outstanding amount of your mortgage and the value of your home at any given time. In other words, equity is the cash remaining once you sell your house and repay the balance of the mortgage.

Timing is Everything for Home Ownership

Owning a Montreal home is always better than paying someone else’s mortgage as you rent! That said, when it comes to investing in Montreal real estate, knowing when to buy is almost as important as knowing what to buy. You’ll want to obtain your a mortgage at the lowest possible interest rate, but how can you know when you have been offered the best rate, or what mortgage terms to accept? A mortgage professional can assist you in making the best financial decisions for your situation and we highly recommend a Montreal Mortgage Broker (Conexia Mortgage) to assist you in deciding on the best mortgage options, rates and terms for you. As a first time home buyer, you also want to be in what is called a buyers market rather than in a sellers market. A buyer’s market is when the supply of available housing exceeds the demand and keeps housing prices lower. In a community with a stable but fairly sedate economy, this may not be much of a concern as inflationary pressures are low, but in a booming place like Montreal, delaying your purchase for a year usually means a higher price. Finally, you should keep in mind the long term resale potential of the Montreal real estate you’re considering. This is your first Montreal home and you will likely want to buy another down the road as your income increases or your family grows. Thus, you should give some thought to what it will be worth in years to come. While you can’t predict future property values, you can influence the value of your particular home. If you’re considering an older home, for example, you can increase its value by investing in improvements such as a new roof or furnace. If you want to buy in a new district, take a moment to learn about plans to provide local amenities such as recreational facilities, stores, schools and churches: more is better, in this instance. Consider the length of the daily commute to work; not everyone will be willing to buy a home or condo far from the city core. And consider plans for the community as a whole. Are the planned Montreal homes comparable in size and character, or is there a real mix being built? Property values in an estate community, for example, always tend to rise faster than those in a neighborhood of detached homes, apartments and mobile home parks.

Arranging a Pre approved Montreal Mortgage

One of the best things you can do for yourself as you hunt for your first home is be certain of your finances. As a rule of thumb, your housing costs should not exceed 44% of your gross monthly income. Arranging a pre-approved mortgage takes all the guesswork out of what you can and cannot afford. There is typically no cost to you for this service. Once pre approved, your search for a new Montreal home will focus on properties within your financial reach and you can proceed with an offer on one of them knowing that the bank will probably support your decision.(In many cases, the lender will require a property appraisal before proceeding with the loan.) What’s more, lending institutions will often guarantee the rate of the pre approved mortgage while you hunt for a home. A 120 day rate hold is typical and this can be a real advantage in a booming market. Don’t forget that Montreal real estate agent Rawski Tost has some great contacts to help you get some of the lowest mortgage rates available to you in the Montreal real estate market today.

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