Table of Contents

Page

Topic

2.

Introduction – For most people, buying a home is the largest financial decision they will make in their lifetime…

3.

Pre-qualification – Having the right documents in place will speed up the process…

4.

Mortgage Options – The mortgage you choose will form the foundation of your financial stability…

5.

Downpayment – Homebuyers today have more choice than ever before in terms of what they can use for a down payment.

7.

LTT (Land Transfer Tax) Refund & GST New Housing Rebate - First time home buyers can get a land transfer tax refund if they purchase a newly built home.  GST New Housing Rebate is also available (not just for first time buyers).

8.

RRSP Program – Home Buyers' Plan (HBP) - You can withdraw RRSP money 'tax free' provided you buy or build a qualifying home…

9.

Purchase Plus Improvements - Does your new home require some upgrades?  Add the cost to your mortgage before you move in…

10.

Mortgage Types – Arranging to pay for that home is one of the most important financial decisions you will ever make…

12.

Repayment Options – How you pay your mortgage has a dramatic effect on the amount of interest you pay…

13.

Closing the Deal – There are costs involved in every real estate transaction…be prepared for all the extras…

15.

Closing Cost Worksheet

16.

Glossary of Terms

19.

Moving Check List

Introduction

There are few things more important to your family’s security than the home you buy…

If you are looking to buy or sell make sure you call

Larry Broadley  for all of your financial needs.

Mortgage financing has become very complex with constantly changing rates, terms and challenging conditions.  Choosing the mortgage best suited to your circumstances has never been more difficult.  Banks, trust and insurance companies are continually inventing new mortgage products to capture your attention, and hopefully your business.  In addition, ensuring that you get the best possible rate and product depends on aggressively shopping the mortgage marketplace.  Often a mortgage lender’s posted rate may not be the best rate available.  You may be able to qualify for a lower rate, but not know it.

To maximize the benefits to you, you may want to consider enlisting the services of a professional Mortgage Intelligence consultant.  We negotiate with major financial institutions, chartered banks, trust and insurance companies, Canada Mortgage and Housing Corporation, Genworth and others to bring our clients the most competitive mortgage rates and terms.  Mortgage Intelligence will usually earn a commission or fee from the lender* for all the work, advertising and promotion done on their behalf.  Our professional services are provided, in most cases, at no cost to you.  A professional Mortgage Intelligence consultant is constantly updated on rate changes and new products being introduced in the market.  As our client, you can choose from the widest range of options, obtain the most competitive rate and best product suited to your specific needs.  An extensive network of financial institutions has enabled many of our clients to obtain substantial savings below posted lender rates.

Mortgage Intelligence, a GMAC Company, is Canada’ largest and fastest growing mortgage brokerage firm.

Before you make what is likely to be the biggest financial decision of your life, talk to us:

Larry Broadley

Mortgage Consultant

Tel: 519 238 5899 or 877 338 5899

Fax: 519 238 5727or email at:

larry.broadley@migroup.ca

To complete a secure application on-line, visit my Web-page at:

www.larrybroadley.com  or  Click HERE

* Subject to certain guidelines

Pre-qualification

Having the right documents in place will speed up the process…

Information required to be pre-qualified for a mortgage:

ü      Ask your employer to prepare a letter on company letterhead outlining your name, base salary or hourly rate, normal hours worked per week, position and length of service.  A recent pay stub and a copy of your T4 from last year may also be required.

ü      If commission sales, three years personal tax returns together with the Notice of Assessments from Canada Customs & Revenue Agency.

ü      If self-employed, three years personal tax returns together with the Notice of Assessments from Canada Customs & Revenue Agency, three years business financial statements, and three years business tax returns
(if applicable). Talk to us about mortgage approvals specifically for the
self-employed.

ü      Social Insurance Numbers. (Optional).

ü      At least 3 years history of residence and employment.

ü      Know your banking information (name of financial institutions, address, and type of accounts, account numbers).

ü      Know your assets (what you own) and their value.  i.e. cash amounts, stocks, bonds, RRSPs, car.

ü      Know your liabilities (what you owe).  i.e. car loan, credit card balances, child or spousal support payments.

ü      Please let us know about any past credit problems you may have had.

ü      Write down a list of questions you would like to have answered.

Mortgage Options

Longer amortizations can help with cash flow needs.

Conventional:

Regulations under The Bank Act prohibit Bank, Trust and Insurance Companies from lending in excess of 80% of the purchase price or the appraised value of a property without obtaining Mortgage Loan (High Ratio) Insurance.  A loan for up to 80% of the purchase price of a property is a conventional mortgage.

High ratio:

A loan for 80.1% to 100% of the purchase price of a property.

Mortgage loan insurance (high ratio):

High ratio mortgages must be insured through CMHC (Canada Mortgage and Housing Corporation) or GE (Genworth Financial Canada).  CMHC and GE provide default or high ratio insurance to the lenders protecting them against the risk of lending to homebuyers who have less than 20% downpayment available.  An insurance premium is paid by the borrower on behalf of the lender.  The insurance premium that is paid to CMHC or GE is to protect the lender in the event that the mortgage is not paid.  This is not to be confused with life, disability, or job loss insurance.

The insurance premium is calculated as a percentage of the mortgage amount, depending on the loan to value, and may be added to the mortgage amount.  Typical premiums are as follow:

Source: CMHC, 2007

Premium rates may vary for different mortgage types, see your Mortgage Intelligence Consultant for details.

Mortgage money sources:

There is a wide range of financial institutions that are involved in the mortgage industry in Canada.  Some of these include:

Chartered Banks                     Loan Corporations

Trust Companies                     Credit Unions

Finance Companies                Pension Funds

Life Insurance Companies       Private Individuals

Downpayment

Homebuyers today have more choice than ever in terms of what they can use for a down payment…

If you have less than 20% downpayment, mortgage insurance is required as outlined on the previous page. Homeowners no longer need the minimum 5% down payment from their own funds to purchase a home.  You can now use borrowed funds for your 5% down, but keep in mind that there are higher credit criteria and your insurance premiums increase.

Downpayment from your own resources (non borrowed):

You must supply verification satisfactory to the lender of accumulated savings from non-borrowed funds.  This may be in the form of:

ü      Copy of your bank statement or bankbook (including cover) showing a minimum three-month history.  Any large deposits during this time period must be explained and documented.

ü      Copy of RRSP statement, term deposits, CSBs, or other investments.

Downpayment from a gift (non borrowed):

All or part of the minimum equity requirement (5% for downpayment plus 1.5% for closing costs) may be provided by way of a financial gift, as long as all of the following conditions are met:

ü      The donor is an immediate relative of the borrower (recipient); and

ü      The Approved Lender has verified that the money is a genuine gift; and

ü      The Approved Lender has verified that the funds are in the borrower’s (recipient’s) possession at least 15 days prior to closing.

The Approved Lender will verify the authenticity of the gift by obtaining a written confirmation, signed by the donor and the borrower (recipient), which will include the following points:

ü      The money is a genuine gift from the donor and does not ever have to be repaid;

ü      No part of the financial gift is being provided by any third party having any interest (direct or indirect) in the sale of the subject property.

Borrowed down payment:

Effective March 1, 2004, homebuyers can get their down payment from borrowed sources that include:

ü      Lender cash back incentives;

ü      Personal loans, lines of credit or credit cards;

ü      Unsubstantiated gifts.

When using a borrowed downpayment, there are a higher credit criteria and also increased insurance premiums.

Downpayment (cont’d)

Now it's easier than ever to own the home of your dreams…

Downpayment from the sale of an existing property:

You will be required to provide a copy of the unconditional Agreement of Purchase and Sale on your existing property.  This needs to be accompanied by a copy of a recent mortgage statement, showing the balance owing, on any mortgages presently registered against the property.  The difference between the sale price and the mortgages owing will substantiate the funds available for your
downpayment.

0% downpayment mortgages

ü      If you can afford mortgage payments but can’t seem to save for a downpayment, there are numerous no downpayment mortgage options, including the borrowed downpayment program. 

ü      No down payment mortgages can be ideal for:

ü      professionals and other high income earners just starting out who may have large student loans.

ü      also consider renters who often worry they won’t be able to find an affordable home by the time they’ve saved enough for a downpayment.

ü      Mortgage Intelligence offers the unique i secure^® mortgage to borrowers that prefer not to make a downpayment.

To be sure, 0% down payment mortgages are not for everyone. The objective is not to take on a higher debt load than can be comfortably handled. But for Canadians with good credit and steady incomes, these mortgages can definitely help to make the
dream of home ownership a reality.

    LTT Refund (Ontario Only)

First time homebuyers can get a land transfer tax refund if they purchase a newly-built home…

GST New Housing Rebate is also available (not just for first time buyers)

Ontario Land Transfer Tax refund to be extended

To continue helping families buy their first home and to support job creation in the housing industry, Ontario passed legislation (fiscal 2000) to extend the Land Transfer Tax (LTT) refund. The Land Transfer Tax refund applies to first-time buyers of newly built homes.  The maximum refund is $2,000 and equals the land transfer tax payable on a house valued at $227,500.

How do I know if I qualify for a refund?

ü      You must be at least 18 years old.

ü      The refund applies to a newly built home.

ü      Applications for refund must be made within 18 months after the date of conveyance.

ü      The purchaser must occupy the home as his or her principle residence within 9 months of the date of conveyance.

ü      You cannot have previously owned a home, or an interest in a home, anywhere in the world.

ü      If you have a spouse or same-sex partner, he or she cannot have owned a home, or an interest in a home, anywhere in the world while he/she was your spouse or same-sex partner.

ü      You cannot have received an OHOSP-based refund of land transfer tax.

How much is the refund?

The amount of the refund will be the entire amount of tax paid or payable, up to a maximum of $2,000.  If you own less than 100% interest in the new home, the amount will be reduced and calculated according to the amount of your interest in the new home. 

How do I get the refund?

You can receive an immediate refund at the time of registration by submitting a properly completed – Land Transfer Tax Refund Affidavit for First Time Purchasers of Newly Constructed Homes - to the Land Registry Office.

GST New Housing Rebate? (All Provinces)

You may be able to claim a rebate for a portion of the GST you pay on the purchase price or cost of building your home if you buy a new or substantially renovated home, mobile home, floating or modular home from a builder or vendor. Or, you buy a share in the capital stock of a co-operative housing corporation, or construct or substantially renovate your home (or hire someone to do so).  Also applicable if your home is destroyed by fire and is rebuilt.  Contact the Canada Customs and Revenue Agency in your community for the Completion Guide and Application Form. In most cases, your solicitor will take care of this for you.

RRSP Program

You can withdraw RRSP money

'tax free' provided you buy or build a qualifying home…

Home Buyers’ Plan (HBP)

The HBP is a program that allows you to withdraw up to $20,000 per person (or $40,000 per couple) from your registered retirement savings plans (RRSPs) to buy or build a qualifying home.  Withdrawals that meet all conditions do not have to be included in income and there is no withholding tax.

Conditions for participating in the HBP:

ü      You have entered into a written agreement to buy or build a qualifying home. You intend to occupy the home as your principal residence.

ü      You or your spouse or common law partner have to be considered a first-time homebuyer i.e. have never owned or have not owned in the last 4 calendar years and 31 days before the withdrawal.

ü      Your HBP balance on January 1 of the year of the withdrawal has to be zero i.e. nothing is outstanding from a previous purchase.

ü      Neither you, nor your spouse or common-law partner can own the home more than 30 days before a withdrawal is made.

ü      You must be a resident of Canada.

ü      You must complete Form T1036.

ü      You have to receive all withdrawals in the same year.

ü      You have to buy or build the home before October 1 of the year after the year of the withdrawal.

ü      When an RRSP contribution is made, you must wait 90 days before withdrawing funds under the HBP or you may be denied the right to use that contribution as an RRSP deduction for that year.

ü      The home can be for yourself or it can be for a related disabled person if it is more accessible to that person than his or her current home, or it is better suited to that person’s needs. You can acquire the home for the disabled person, or you can provide the withdrawn funds to the disabled person to acquire the home.

Repayment of the RRSP funds:

Repayment of the funds back to your RRSP must be made within a period of no more than 15 years. Generally, in each year of your repayment period, you have to repay 1/15 of the total amount you withdrew until the full amount is repaid. Your repayment period starts the second year following the year in which you made your withdrawals.  If the required amount is not repaid in a year, that year’s repayment amount will be added to your income and taxed accordingly. Repayment can occur earlier if you wish.

Purchase Plus Improvements

Does your new home require some upgrades?  Add the cost to your mortgage before you move in…

This program is designed for people who wish to purchase a home that may require some immediate upgrades . . . a new electrical service, a new roof, central air, a new furnace, new siding, eaves, soffits, fascia, doors, windows, a new kitchen, carpeting . . . or any other renovation that would increase the value of the home.

The way it works is like this…Let’s assume that you are a first time buyer and have 5% downpayment.  Before the mortgage financing is arranged, written quotes are obtained from licensed contractors for the repairs and or the improvements to be done to the home.  When the application for mortgage financing is made, the request is made for 95% of the purchase price PLUS 95% of the cost to complete the improvements.  Note: The lender will “hold-back” on closing the “improvement” portion of the mortgage until the work has been completed and inspected, normally within 30 to 60 days of closing.  Once the work has been completed, the lender will advance the balance of the funds and the contractor can be paid.

What does this mean?  Let us give you an example…

Purchase price:                $100,000 X 95% =      $  95,000

Cost of improvements:     $  10,000 X 95% =      $    9,500

Total mortgage:                $110,000 X 95% =      $104,500

Therefore, an application is made for a mortgage in the amount of $104,500, which represents 95% of the purchase price plus 95% of the improvements.

On closing this is what happens…The Mortgage advanced to complete the purchase is $95,000 plus the original 5% from the purchaser’s downpayment ($5,000) sufficient funds to complete the purchase of $100,000.

After closing the contractor completes the improvements (normally within 30 to 60 days after the closing) the lender advances the hold-back of $9,500, the purchaser pays the additional 5% of the cost of the improvements ($500) and the $10,000 owed to the contractor can be paid as per the original quote for the work.

Everyone’s a winner!

The purchaser is happy because they got $10,000 of improvements done to the home with a cash outlay of only $500 (the balance was financed with their mortgage).

The lender is happy because they now have a mortgage on an improved home.

Mortgage Types

Arranging to pay for that home is one of the most important financial decisions you will ever make…

Term of a mortgage:

The actual length of time money is loaned at the contractual rate of interest.  Terms range from three months to twenty-five years.  Traditionally the longer the term, the higher the rate.

First mortgage:

Mortgage given first priority at the registry office.  Usually the only financing required.  Gives borrowers the best rate of interest.

Second mortgage:

A higher interest rate loan that provides borrowers with additional financing if the first mortgage does not meet their total financial requirements. Mortgage Intelligence’s fixed or variable rate i secondâ mortgage can provide the money that is needed at competitive and flexible terms, including a rate maximum.  It is ideal for those looking for secondary financing to bypass mortgage insurance, port an existing mortgage, or for debt consolidation.

Fully open mortgage, with no penalty of notice:

With this type of mortgage, the entire principal or any part of it can be prepaid to the lender at any time, without having to pay any penalty or bonus interest to the lender.

Open mortgage, with a predetermined penalty or notice:

All or part of the principal can be prepaid at any time by paying a penalty or giving a set amount of written notice.  The amount of the penalty or the notice period would have been predetermined at the time the mortgage was arranged.

Partially open mortgage, with no penalty or notice on that open portion:

This type of mortgage is partially open, but not fully open.  The mortgage contract permits a limited, fixed percentage to be returned to the lender each year (up to 10%, 15% or even 20% depending on the lender), in addition to the regular payment without any penalty being paid or notice being given.  There may also be some restrictions as to when during the year this prepayment can be made.  The balance of the mortgage (80% - 90%) is closed and can only be prepaid if the lender allows – and then on the lenders terms!

Partially open mortgage, with a predetermined penalty or notice on that open portion:

As above, this mortgage is partially open, but not fully open.  The mortgage contract would allow for a fixed percentage of principal to be prepaid, but subject to a predetermined penalty (i.e. 3 months interest) or with a pre-established amount of written notice.  The lender may also have some restrictions as to when the prepayment can be made during the year.  The balance of the mortgage is closed and does not allow for automatic early prepayment of the loan.

Mortgage Types…continued