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Principal residence- 5%, Investment/recreation property – 20%-35%

Starting with principal residences, if you are buying a home and planning on living in it, you can expect to have to put 5% down.  A couple things to keep in mind for this- first. anything less than 20% down requires CMHC insurance (which is a few extra thousand dollars that will be added to your mortgage).   The other thing to remember is that when you purchase home, you most likely included an initial deposit with your offer; these funds will be subtracting from the 5% down. (ie.  Buy house for $100,000 with $2500 deposit…only need to pay $2500 later to equal the $5000 down payment)

There a few lenders out there right now that are still offering 0% down, but they can be hard to get and you will end up paying more for them.  Usually they add that extra 5% right into the mortgage.  On top of this the lenders will be very particular about the house they are lending on, so could deny lending based on the condition/appraisal of property.

When looking at investment or second properties, the gold standard used to be 20% down.  Nowadays however this is becoming more and more rare, as lenders now are more often expecting 30-35% down.  Again there are many stipulations.  Although you wont need CMHC insurance on this type of product, you will most likely still need appraisals (at your own cost) to be completed.  Additionally, most lenders have restrictions on the type and amount of properties you can own.  It is best to talk with a mortgage broker about a potential purchase so you can know what to expect ahead of time.

There are a few options when it comes to securing financing for your home.  The most common are private funding or institutional financing.  The first is far more risky, expensive and only seeked when you have no other option (ie. bad credit, bankruptcy history) whereas the latter is more common and readily available.

The most traditional method of getting a mortgage is by going through your bank.  You may have an advantage by going through your bank if you have a long history with them.  Ultimately their rates are usually already set (not necessarily the lowest around), but if once providing all your income/expenses you are right on the edge of getting/not getting a mortgage, your personal history with the lender might be enough to sway them to lend to you.

The most common method nowadays however is to get a mortgage through a mortgage broker, or mortgage specialist.  It is really win/win for the applicant, as it is no cost to you (the lenders are paying the broker to bring them clients) and the specialist is searching all avenues (including banks) to try and find you the best terms and rate.  And if you are considered high risk (low down payment, low credit rating) mortgage brokers can also apply to the private lenders if traditional lenders are not an option for you.  Again, keep in mind these “high risk” mortgages often come with fees to set up, as well as much higher interest rates.

In an upcoming post I will talk more about debt service ratio, percentage down payment, CMHC insurance and other factors that come into play when applying for a mortgage, but I hope this is enough to get you started on your quest to secure a mortgage.

This is probably the most common question I get asked right now.  Again, my answer like always, is it depends.  It depends on what your goals are and what your real estate plans for the future are.  The main point you need to consider is supply vs. demand.  This principal is quite simple:  A high demand for housing and shortage of houses on the market creates an ideal situation for selling.

However, there is alot more to it than that.  Spring typically brings more buyers to the market, so there tends to be a slightly higher demand for houses.  But, over the last few years, sellers have taken this into consideration and waited for srping to list their houses; thus increasing the supply of houses as well.  You could expect to get more potential buyers looking at your house, but they have more options to choose from.

Now the other thing to remember is that if you plan to sell your home, and buy a new home in the same area, you are subject to the same market.  This means that if you wait until spring to sell your home and get 5% more than you would have in the winter, you will also be paying 5% more for your new home.  And if you are moving up to a more expensive home, this means a higher cost.

For example: sell house for 5% more on $300,000 =make $15000 more.  Buy house for 5% more on $400,000 = spend $20,000 more.

To summarize, if you plan to buy a house in the same area you currently live in, there is really no advantage to waiting for a certain time of the year to sell.  The only way you can use this to your advantage is if you are downsizing to a cheaper home or moving to a completely different market that isnt following the same current market trends.   If anything, it would be most advantageous to look at the current trends in your current neighborhood to see if there is more of a local advantage to listing at certain time (ie. currently no comparable houses in your neighborhood for sale = smaller supply).  Let me know and I’d be happy to sit down and do a current market analysis with you of your neighborhood to see how it is trending.

A lot of people are quite surprised when they buy a new home with all the costs they may incur.  We call any costs associated with the purchase or sale of a home, “closing costs”.  Here is an idea of what you could expect:

SELLING A HOME:

Lawyer fees (with a mortgage): $800-1000

Mortgage transfer/breakage:  Often you can transfer a mortgage for very little cost, but paying off a mortgage will usually cost 3 months interest.

Realtor fees:  Of course these are negotiable, but a typical contract will pay 7% on the first $100,000 and 3% on the remaining balance.  (ie. selling a home for $200,000 would cost $7000+$3000 = $10,000)

Condo Documents: $200-$300.  If you live in a condo, and do not have current condo documentation, you will need to supply them for a potential buyer

Real Property Report:  An article you recieved when you first purchased your home showing property lines – if you have made any changes to your property since purchase (built a shed, fence, deck, etc…) you will need to get a new one – $600

Property taxes/condo fees:  Sometimes these are paid for a year at a time, so depending on the time of year the house is sold, debits or credits may have to be made to the buyer.

Staging: if applicable – $700-$1000/month

Cleaning costs: if applicable – $20-$50/hr for maid service

Moving fees:  if applicable – gas, renting vehicles, hiring movers, buying beer and pizza for friends 😉

BUYING A HOME:

Lawyer fees: $800-$1000

Realtor fees: 0.  Realtor fees are only payed by seller.

Mortgage Broker fees: Typically 0.  The mortgage breaker makes money from the lending company by bringing them clients.

Property inspection:  Not necessary, but recommended for sure.  $450

Future repairs:  the best thing about getting a property inspection, is being able to create a timeline for what expenses may be incurred in the future (ie. new furnace in 5 years, shingles in 10).  Although there may not be any immediate costs, it is a good idea to have money set aside for these expenditures that could arise.

Property taxes/condo fees:  Sometimes these are paid for a year at a time, so depending on the time of year the house is sold, debits or credits may have to be made to the sellers.

Cost of moving:  Same as above

Furniture:  Well if you have a nice new home, you need nice new furniture to go with it right 😉

Transfer of utilities:  If you havent had your name on epcor, direct energy, shaw, telus, etc… before quite often you may need to put down a deposit on your account.  Avg per utility – $200-$300

Insurance:  It is definitely recommended to get insurance on your house and its contents, but could also be a good idea to get insurance on your mortgage should something happen to you in the future and you cant make your payments ~ $100-$150/month

That should cover most things.  Keep in mind you may need to buy specific things such as lawn mowers, snow shovels, etc….if you have a yard to look after now.

Hope this helps!  Feel free to email me if you think I missed anything, and Ill add it to the list.