HOMEBUYER WORKSHOP Welcome HOMEBUYER WORKSHOP Overview 1. Choosing the Right Home 2. Home Buying and Financing Options 3. Building a Team of Professionals 4. Mortgage Insurance 5. Mortgage Pre-approval 6. Mortgage Options 7. Sequence of Events 8. Finalizing Your Mortgage 9. Additional Costs to Consider 10. Closing Day 11. Questions?? CHOOSING THE RIGHT HOME • House vs. condominium • New vs. resale • Neighbourhood – Proximity to schools and public transportation – Real estate taxes – Recreational facilities – Distance to and from work – Traffic flow and parking – Planning and zoning laws HOME BUYING AND FINANCING OPTIONS • Many mortgage options • Each customer is different • Sources of information – TD Canada Trust Mortgage Representative – Brochures – www.tdcanadatrust.com – www.cmhc.ca • Today’s seminar will help you BUILDING A TEAM OF PROFESSIONALS • Realtor • Lawyer (or Notary in Quebec) • Lender BUILDING A TEAM OF PROFESSIONALS REALTOR What do they do? • Aware of current market conditions • What price offers are realistic • What conditions to include in any offers • Be as specific as possible about the kind of home you’re looking for and your price range BUILDING A TEAM OF PROFESSIONALS REALTOR Choosing a Realtor • A good real estate representative should be able to save you time and trouble • Ask for referrals from satisfied friends, family or other housing professionals • Make sure you are clear on who is paying the Realtor’s commission and understand your obligations once you've signed an agreement BUILDING A TEAM OF PROFESSIONALS LAWYER (or notary in Quebec) What do they do? • Your lawyer will review any contracts you need to sign, like the Offer to Purchase • If you make an Offer to Purchase that is accepted, your lawyer will be responsible for many of the closing arrangements • Reviews the title and identifies any issues • Prepares and reviews the terms with you and registers the mortgage on title BUILDING A TEAM OF PROFESSIONALS LAWYER (or notary in Quebec) Choosing a Lawyer • Ask for referrals from satisfied friends, family or other housing professionals. Ask your financial institution • Check for a lawyer referral service in your community • Call the local law association for the names of lawyers who specialize in real estate law • Lawyers fees range widely and depend on the complexity of the deal BUILDING A TEAM OF PROFESSIONALS LENDER • Having the right information is a big part of making wise financial home buying decisions • Your lender - part of your team of professionals - helps you make the decisions that are best for you Financing Information MORTGAGE INSURANCE CMHC Insured Mortgage • When you need a mortgage that is more than 80% of the purchase price of your home, mortgage loan insurance is required • MLI protects the Financial Institution and, by law, most Canadian lending institutions require it Conventional Mortgage • Your down payment is a minimum 20% of the purchase price MORTGAGE INSURANCE How do you qualify for Mortgage Insurance • The home is located in Canada • Home related expenses must not exceed 32% of gross household income • Total monthly debt load does not exceed 40% of gross household income • Able to pay closing costs MORTGAGE INSURANCE CMHC Insured Financing • A range of flexible down payment options. For example, TD Canada Trust's “Cash Back Mortgage” • First-time homebuyers and repeat buyers are eligible • Available on properties with up to four units • Discuss the qualifying criteria and financing options that are best for you with your TD Canada Trust Mortgage Specialist MORTGAGE INSURANCE Mortgage Loan Insurance Costs • CMHC Mortgage Loan Insurance Premium Premiums: calculated as a percentage of the loan based on your down payment • Premiums range from 0.5% to 3.30% • Payable in a lump sum, or it can be added to mortgage MORTGAGE INSURANCE Mortgage Insurance Costs % of Lending Value Premium (by Amortization) Up to 25 yrs >25 yrs to 30 yrs >30 yrs to 35 yrs Up to and including 0.50% 0.70% 0.90% 65% Up to and including 0.65% 0.85% 1.05% 75% Up to and including 1.00% 1.20% 1.40% 80% Up to and including 1.75% 1.95% 2.15% 85% Up to and including 2.00% 2.20% 2.40% 90% Up to and including 2.75% 2.95% 3.15% 95% Cash Back Mortgage 2.90% 3.10% 3.30% MORTGAGE INSURANCE Conventional Financing: A mortgage loan up to 80% of the value Purchase Price $175,000 80% financing $140,000 ____________________________________ Down payment $35,000 CMHC Insured Financing: A mortgage loan of 95% of the value Purchase Price $175,000 95% financing $166,250 ____________________________________ Down payment $8,750 A $26,250 difference MORTGAGE INSURANCE CMHC Insured Financing: A mortgage loan up to 95% of the value Purchase Price: $175,000 5% down payment: $ 8,750 _______________________________ Mortgage $166,250 Premium (95% financing) 2.75% ========================== Total CMHC Insurance Premium $4,571.88 Total Mortgage Amount (if premium added): $170,821.88 Note: Not including PST (if applicable) on the premium. This is a one time fee payable to CMHC at time of closing. Based on an amortization of 25 years. MORTGAGE PRE-APPROVAL • Provides insight into affordability • Shows you how much you qualify for • Interest rate guarantee for 120 days* • There’s no obligation! *Subject to conditions HOW MUCH CAN I AFFORD? • Formula used to estimate* home purchase amount: • Total family income…………….... $_________ • Multiply by 3.3…………………… x 3.3 • Approximate mortgage………….. $_________ • Add down payment……………… $_________ • Approximate home purchase……. $_________ * Any fixed expenses may reduce the amount you can afford. MORTGAGE OPTIONS Mortgage - A loan against real estate that reduces over time as payments are made Home Equity Line of Credit (HELOC)– A credit facility against real estate with a set credit limit, with borrowings allowed up to the limit Factors to consider • Loan amount required – Mortgage available up to 95% loan to value – HELOC maximum is 80% • Mortgage provides forced savings • HELOC flexibility for future borrowings MORTGAGE OPTIONS Term - The length of the current mortgage agreement. After the term expires, the mortgage can be repaid, or renewed for a new term and rate – Terms range from 6 months to 10 years – Most common term is 5 year fixed term – 3-year and 1-year terms are also popular terms Amortization Period - The time over which equal payments would pay off the mortgage. This is normally 25 years for a new mortgage, however TD Canada Trust offers amortizations up to 35 years. Factors to Consider • How soon do you plan to sell the house • Do you plan to pay off the mortgage in the next few years • Risk tolerance – rate certainty (long term) vs. possible rate savings (short term) MORTGAGE OPTIONS Fixed Rate - A rate that does not change during the Term of the mortgage Variable Interest Rate - A rate that changes from month to month based on short term market rates. Also referred to as a floating rate based on TD Prime Factors to Consider • Risk tolerance MORTGAGE OPTIONS Closed - A mortgage agreement that cannot be prepaid, renegotiated or refinanced before maturity, except according to its terms Open - A mortgage which can be prepaid at any time, without compensation Factors to Consider • Open rarely used for first time mortgage • Do you plan to pay off the mortgage soon in the next years BECOME MORTGAGE-FREE FASTER • Take advantage of increased payment options (up to 100%) • Make lump sum payments (up to 15%) • Increased payment frequency • Choose a shorter amortization For example: Payment Repayment Time to Pay Total Interest Frequency on $100,000 Off Mortgage Monthly $731 25.0 years $119,711 Bi-weekly $366 20.1 years $91,779 Potential Savings 4.9 yrs $27,932 Based on 7.5% rate calculated semi-annually, not in advance PROTECT WHAT’S IMPORTANT TO YOU • Peace of mind • Make insurance planning part of your overall home ownership strategy • Home Insurance (fire, etc.) • Mortgage/HELOC Critical Illness and Life Insurance SEQUENCE OF EVENTS • Pre-approval • Conditional Offer to Purchase • Counter offer from seller • Conditional agreement • Solicitor initial title review • Mortgage Approval • Satisfactory home inspection • Valid, up-to-date property survey (if required) • Binding Purchase Agreement • Closing Day NOTE: Consult your lawyer and realtor for conditions that will protect you FINALIZING YOUR MORTGAGE You’ll Need • Confirmation of income • Current banking information • Evidence of your down payment amount • A list of assets and liabilities • Contact information for your lawyer or notary • A copy of the Purchase Agreement • A copy of the MLS® listing (where applicable) • Contract and building plans (if purchasing from a builder) ADDITIONAL COSTS TO CONSIDER CMHC premium Premium: 0.5% to 3.30% of mortgage amount Legal fees/disbursements & land transfer Legal Fees: Approximately $500 to tax (applicable in some provincial $1000 provinces) Land Transfer: 0% to 4% of the purchase price Adjustments re prepaid property taxes, Property Taxes: 1% - 2% of purchase condo fees, etc price Home inspection fee Approximately $150 - $300 for home priced less then $300,000 Service hook ups (i.e. Hydro, Telephone) Ranging between $100 - $500 Down Payment May range between $5000 - $40,000 Moving Costs $50 to $100/hour – 10%-20% higher at the end of the month and in the summer CLOSING DAY • Lender will provide the mortgage money to your lawyer • You must provide the balance of the purchase price and are responsible for paying legal fees, disbursements and land transfer taxes • Lawyer uses funds to pay the vendor, transfers the title to your name, registers the mortgage • You receive the keys to your new house NEXT STEPS • Book an appointment with a TD Canada Trust Mortgage Representative • Obtain a Pre-approval • Build team of professionals • Start shopping! HOMEBUYER WORKSHOP Thank You and Happy House Hunting!
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