Frequently Asked Questions
What is the minimum down payment I need?
Regardless of the amount of your down payment, at least 5% of it must be from your own cash resources or a gift from a family member. It cannot be borrowed.
Lenders will generally accept a gift from a family member as an acceptable down payment provided a letter stating it is a true gift, not a loan, is signed by the donor. Where the mortgage loan insurance is provided by Canada Mortgage and Housing Corporation (CMHC), the gift money must be in your possession before the application is sent to CMHC for approval.
Mortgages with less than 20% down must have mortgage loan insurance provided by either CMHC or GE.
What is a home inspection and should I have one done?
A pre-purchase home inspection can add peace of mind and make a difficult decision much easier. It may indicate that the home needs major structural repairs which can be factored into your buying decision. A home inspection helps remove a number of unknowns and increases the likelihood of a successful purchase.
What is a pre-approval mortgage?
Most successful real estate professionals will want to ensure you have a pre-approved mortgage in place before they take you out looking for a home. This is to ensure that they are showing you property within your affordable price range.
In summary, a pre-approved mortgage is one of the first steps a home buyer should take before beginning the buying process.
How can I pay my mortgage off sooner?
- Selecting a non-monthly or accelerated payment schedule
- Increasing your payment frequency schedule
- Making principal prepayments
- Making Double-Up Payments
- Selecting a shorter amortization at renewal
How can I use my RRSP to help buy my first home?
There are certain conditions you must meet to be eligible for the HBP. For more information,
contact CRA at www.cra.gc.ca.
How much can you withdraw?
- You can withdraw up to $25,000 from your RRSP
- If you buy the home together with your spouse, partner, or someone else, each of you can
withdraw up to $25,000, for a total of up to $50,000.
- The withdrawal from your RRSP does not need to be included in your income on your annual
income tax return, and no tax is taken off the money you withdraw.
What is the payback period?
- You don’t have to start paying back the money to your RRSP until two years after the purchase of
- You must pay back all withdrawals from your RRSP within 15 years by making RRSP deposits each
year, starting the second year following your withdrawal. CRA will determine what your minimum yearly repayment will be and will notify you once you need to start repaying the amount.
- If you do not repay the amount due in a given year, it is included in your taxable income for that year and you’ll have to pay income tax on this amount.
source: Financial Consumer Agency of Canada
How can I acquire a home with as little as 5% down?
With all low down payment insured mortgages, you are responsible for:
- appraisal and legal fees
- an application fee for the insurance
- the payment of the mortgage default insurance premium (although the amount of the premium may be added to the mortgage amount)
How will child support affect my mortgage qualification?
Where child support and alimony are received by you from another person, generally the amount paid may be added to your total income before determining the size of mortgage you will qualify for, provided proof of regular receipt is available for a period of time determined by the lender.
Can I use gifted funds as a down payment?
See ‘what is mortgage loan insurance?’ for further information.
What is mortgage loan insurance?
What length should my mortgage term be?
While four or five-year mortgages are what most home buyers typically choose, you may consider a short-term mortgage if you have a higher tolerance for risk, if you have time to watch rates or are not prepared to make a long-term commitment right now.
Before selecting your mortgage term, we suggest you answer the following questions:
- Do you plan to sell your house in the short-term without buying another? If so, a short mortgage term may be the best option.
- Do you believe that interest rates have bottomed out and are not likely to drop more? If that’s the case, a long mortgage term may be the right choice for you. Similarly, if you think rates are currently high, you may want to opt for a short to medium length mortgage term hoping that rates drop by the time your term expires.
- Are you looking for security as a first-time home buyer? Then you may prefer a longer mortgage term so that you can budget for and manage your monthly expenses.
- Are you willing to follow interest rates closely and risk their being increased mortgage payments following a renewal? If that’s the case, a short mortgage term may best suit your needs.
What are my monthly cost of owning my home?
Some of them, like taxes, may not be billed monthly, so do the calculations to break them down into monthly costs. Below you will find a list of these expenses.
The Mortgage Payment
For most home buyers, this is the largest monthly expense. The actual amount of the mortgage payment can vary widely since it is based on a number of variables, such as mortgage term or amortization.
Property tax can be paid in two ways – remitted directly to the municipality by you, in which case you may be required to periodically show proof of payment to your financial institution; or paid as part of your monthly mortgage payment.
In some municipalities, these taxes are integrated into the property taxes. In others, they are collected separately and are payable in a single lump sum, usually due at the end of the current school year.
As a homeowner, you’ll be responsible for all utility bills including heating, gas, electricity, water, telephone and cable.
Maintenance and Upkeep
You will also have to cover the cost of painting, roof repairs, electrical and plumbing, walks and driveway, lawn care and snow removal. A well-maintained property helps to preserve your home’s market value, enhances the neighborhood and, depending on the kind of renovations you make could add to the worth of your property.
Should I wait for my mortgage to mature?
Most lenders send out their mortgage renewal notices offering existing clients their posted interest rates. The rate you are being offered is usually not the best one. Always investigate the possibility of a lower interest rate with the lender or another lender. If you don’t you may end up paying a much higher interest rate on your renewing mortgage than you need to.
What is a down-payment?
The down payment is that portion of the purchase price you furnish yourself. The amount of the down payment (which represents your financial stake, or the equity in your new home) should be determined well before you start house hunting.
The larger the down payment, the less your home costs in the long run. With a smaller mortgage, interest costs will be lower and over time this will add up to significant savings.