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Welcome to My Mortgage Broker
Greetings!
As I continue to enhance my service to all of my valued clients, I have updated the monthly newsletter the website content. I trust this will provide you with a reliable resource for many aspects of your life, not limited to your mortgage. I welcome any ideas or suggestions.
In this issue I will touch on some helpful information for first time buyers with questions that have been raised by my clients. If you have any other questions, just give me a call or send me an email and I will get right back to you.
Also, please feel free to pass on this information to anyone you know that could benefit - sharing is a good thing.
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Renovating - The Dollars and Sense
Your shopping for your first home and considering a fixer-upper. The time and cost of renovating can be more than anticipated. Some things to consider....
"First, you figure out what you feel is a
reasonably accurate price, and what you feel comfortable spending. Then, double
that figure. Add another 10% or so for contingencies, and you should just about
get it right."
That may be a slight exaggeration, but it's true that
the renovation that goes exactly as planned, right down to matching its
original budget, is a rare thing indeed. Renovating is an art, not a science -
especially with older homes - and so, naturally, is accurately predicting the
final cost. But is it possible to avoid, or at least minimize, that ugly
post-reno sticker shock?
According to CMHC's latest figures, an estimated
1.7-million households in 10 of Canada's largest cities spent a total of almost
$21.3-billion on renovations in 2008, at an average of $12,600 per household.
Of these households, 38% reported that the project went over budget, even
though nearly 70% used a professional contractor for all or part of the job.
Does this mean that contractors can't be trusted? Well, not exactly. But it
could mean that there's a lot of confusion about how to approach the whole
question of renovation financing.
To learn more, visit www.mybcmortgage.ca and go to My Blog - Renovating - The Dollars and Sense
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How Much Can You Afford?
Once you have a clear picture of your income and expenses you can determine how much you can afford in monthly housing costs. Lenders
follow two simple approaches to determine how much you can afford to pay each month for your mortgage and housing costs.
Maximum monthly housing costs = no more than 32% of gross household income. Housing costs include monthly mortgage
principal and interest, taxes and heating expenses - known as P.I.T.H.
for short. For a condominium, P.I.T.H. also includes half of the
monthly condominium fees. This
figure is known as your Gross Debt Service (GDS) ratio.
Maximum monthly debt load = no more than 40% of your gross monthly income. This includes housing costs and other debts,
such as car loans and credit card payments. This figure is your Total Debt Service (TDS) ratio.
To calculate how much you can afford, visit www.mybcmortgage.ca/learning-centre/calculator or call me to run the numbers for you.
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Down Payment Options
Don't let the downpayment be the barrier to your homeownership dreams.
There are many mortgage products that allow you to achieve
homeownership with little or no down payment at all. Be sure you speak
to your broker about all your downpayment options.
Beyond mortgage products, there are other sources to consider for your
downpayment needs. You can use your savings, a gift from a parent or
relative, or your Registered Retirement Savings Plans (RRSPs)
towards the purchase of a first home?
The Federal Government of Canada has a First-Time
Homebuyers Plan (HBP) that allows you to use money in your RRSP to
purchase your first home. For example, the current HBP lets first-time
buyers withdraw up to $25,000 from their RRSPs to buy or build a home.
RRSPs are a great way to secure your financial future while enjoying
tax benefits today.
Additional considerations when using your RRSP:
The amount you withdraw must be repaid within 15 years, beginning in the third year after the withdrawal.
You can create an RRSP with borrowed money and use the tax refund as a down payment.
You can establish an RRSP with borrowed money and withdraw the money as a down payment through HBP.
You can set up an RRSP through your bank or other financial institutions like credit unions or insurance companies. Visit Canada Revenue Agency for more information on setting up an RRSP and the Homebuyers' Plan.
Lenders do require some proof of down payment. For details on using your savings, a gift or your RRSP funds towards your down payment, call me to talk in detail or run some numbers for you.
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Pauline's Pick - 50/50 Mortgage
I don't typically promote a specific product. However, many people are asking - fixed or variable. Now you can do both - split your mortgage into a fixed and a variable portion. So, you don't have to decide. Just ask me how to set this up and I will show you how. It is simple and very cost effective.
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Buying a new condo?
Some developers are offering rebates to home buyers at the time of closing or funding. Many home buyers are banking on this rebate to buy furniture or pay down other debt. All lenders will deduct any rebates from the purchase price. Although this will reduce the amount required for a down payment - in effect you are getting the discount off the price of the condo and not receiving a rebate at the time of closing. Don't be misled by saavy marketing. Consult with your broker before making an offer to determine what you can really afford before you get locked in..
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