August 30, 2009
Employed Persons, First Time Home Buyer, List, Pre Approval
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A key question for most first time home buyers is how often do I have to pay my mortgage?
In previous generations they only had one choice – monthly. This was largely due to the fact that each of these transactions were done manually at the bank level and to have more choices would make the task of processing these transactions very complex.
Today all of these transactions are done with computers. The computer uses its considerable ability to make payments as often as necessary for the exact right amounts. So today we have choices!
Most lenders give their customers four choices: Monthly, Semi Monthly, Bi Weekly and Weekly.
We still have the Monthly Payment option. Payments are made on a specific day every month. People typically choose the first of each month to make their payments. So for example if you have a mortgage payment that is $1000 you will then pay $1000 each month on the first of the month. Totaling 12 payments a year and $12,000 in payments every year.
The next option is Semi Monthly Payments. Semi Monthly means that you make two payments every month. This is a great option for people who get paid from their jobs twice a month. Payments are typically made on the 1st and 15th of every month. So to compare against the example shown above the semi monthly payments would each be for $500 and you would make two each month. So you would make 24 payments through the course of the year for a total of $12,000 in payments every year. This option is all about ease of budgeting and convenience.
Next on our list of payment options is Bi Weekly Payments. Bi Weekly Payments mean that you will make a payment every second week through out the year – typically every second Friday. This means that there will be two months where you will make one extra payment – these months are July and December. So the advantages are two fold. Firstly if you get paid every two weeks at your job then it makes budgeting easier. Secondly those extra two payments get applied directly to your principal thusly doing two things, shortening your amortization and reducing the total interest you will pay on your mortgage. So using the example above you would make payments of $500 every two weeks. Throughout the course of the year you would make 26 payment for a total of $13,000 a year with $1,000 applied directly to your principal.
The last option on our list is Weekly Payments. In this case you make your payments on a weekly basis. It maybe useful for people who get paid weekly. So with the example noted above you would have payments of $250 every week. 52 payments made every year for a total of $13,000 a year with $1,000 applied directly to your principle.
So when my customers ask which is right for them what I typically ask them is how often do they get paid then suggest that they choose a payment plan that mimics this.
One last key thing to note about payment frequencies is that with most lenders you can change your payment frequency at any time.
April 14, 2009
First Time Home Buyer, List
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They are:
- Legal Fees,
- Land Titles Disbursements,
- Property Tax Adjustments,
- Real Property Reports,
- Fire Insurance, and
- Interest Adjustment Date.
LEGAL FEES
Your realtor or mortgage broker will refer you to a lawyer that they trust and who is familiar with real estate law. Legal fees will vary from lawyer to lawyer. Typically they range from $800 to $1,200.
LAND TITLES DISBURSEMENTS
Land titles disbursements remain constant.
Below is an example of these disbursements.
- Mortgage registration – $1 per $5,000 plus $15. This charge is based upon the amount of the mortgage. For example a purchase of $150,000 with a mortgage of $100,000 the fee would be $35.
- Title Transfer – $1 per $5000 plus $35 & $9. This charge is based upon the purchase price. For example a purchase of $150,000 the fee would be $74.
- Tax Certificate from the city of Calgary – $12.75
- Land Titles search and City of Calgary Search – $15 – $30
- Couriers – range from $30 – $60
- Photocopying, postage and faxing – $30
Add your lawyer’s legal fees to the disbursements to determine your entire legal bill.
REAL PROPERTY REPORT
A Real Property Report is a legal document that clearly illustrates the location of significant visible improvements relative to property boundaries.
Your mortgage lender will always require a Real Property Report. The offer to purchase contract used by the Calgary Real Estate board, states in clause 2.22 that the seller has to make the RPR available to the Buyer along with a stamp of compliance from the City of Calgary. If one is not available, make sure that you contact your realtor and lawyer immediately. Some mortgage companies are accepting Title Insurance in lieu of an RPR. Call your lawyer to make sure that your mortgage company accepts Title Insurance. If Title Insurance is used there will be a charge to you. You can expect a cost of around $400.
FIRE INSURANCE
The lender requires that you keep your house adequately insured and that the lender is made “First Loss Payable”. A good place to purchase your fire insurance is through the broker that handles your car insurance. To get this proof contact your insurance provider/broker and they will arrange to have your file updated and this information forwarded to you. This proof of fire insurance is to be provided at the lawyer’s office.
PROPERTY TAX ADJUSTMENTS
When you purchase a property you will now have to pay property taxes to the City of Calgary. Property taxes are due in full the last week in June each year. The City has implemented a program called the Tax Instalment Payment Plan (TIPP) which deducts 1/12 of the annual tax bill from your bank account each month. Most lenders now prefer that you pay using this method. There may be a tax adjustment (payment from you or to you depending on the previous owners method of tax payment) for the current year. Your Lawyer will notify you of any “adjustments”.
Please call me to find out more about Closing Costs.
April 7, 2009
Employed Persons, First Time Home Buyer, List, Pre Approval, Proving income
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The following is what most buyers can expect to have to provide to the lender to purchase a home:
- Job letter – It will need to show:
- your job title,
- the day you started working there,
- your annual salary and
- the contact information for your HR department;
- Current pay stub – a paystub from the last month that shows your gross salary, deductions and net salary will be fine;
- Void cheque – this is so the lender will know where to withdraw the funds from after funding;
- Three month history of your down payment – bank statements, RRSP statements, GIC statements;
- Offer to purchase – this is the agreement between the buyer and the seller that outlines the conditions of the sale;
- MLS listing/Feature Sheet – when purchasing a used house where a realtor is involved the MLS listing is required – for all other deals (private sales and new builds) a feature sheet will tell the lender about the house;
- Real Estate Lawyer contact information – so the lender knows who to send the final paper work to;
- Credit bureau – part of your mortgage broker’s complimentary service;
- Appraisal – your mortgage broker will set this up for you – it is to ensure that the price that you are paying for the property is fair.
This list applies to most people who are purchasing their first home. Other paperwork may be added if you are separated, divorced, business for self, new to Canada, purchasing in a rural area, etc..
A good mortgage broker with the time to look at your situation will be able to help you by providing you with a list of what you will need to gather.
Feel free to contact me if you have any further questions or comment below and I will respond.