The first step in buying a new home should be to take a look at what you can afford and how you are going to pay for it. If you're like the majority of home buyers, you will have to finance your purchase with a mortgage.
So what exactly is a mortgage?
- A mortgage is a loan that uses the home you buy as security. This loan is registered as a legal document against the title of your property.
- The principal is the amount of the loan that is actually borrowed.
- The interest is the amount the lender charges for the use of funds borrowed. Interest rates vary according to a number of factors including terms and conditions of the mortgage and the borrower's credit history. Mortgage payments are usually comprised of both principal and interest.
- The amortization period is the number of years that it will take to repay the entire mortgage loan in full. A longer amortization period will result in lower payments but will take longer to pay off the loan which means you will pay more in interest.
- Maximum amortization for insured mortgages is 25 years.
- Maximum amortization for conventional mortgages is 30-35 years.
- The term is the length of time for which a mortgage agreement exists between you and your lender. A longer term means you will keep the interest rate agreed upon for a longer length of time. Rates and therefore payments vary with the length of the term. Terms usually range from 1-10 years with a five-year term being the most common. Generally a longer term, because of the added security, will be at a higher rate than a shorter term.
- The maturity date marks the end of the term, when you can repay the balance of the principal or renegotiate the mortgage at interest rates in effect at that time. If you choose to repay or renegotiate the mortgage before this time, penalties may be charged. Once your mortgage matures you are free to renew with your current lender or shop around to other lenders for the best rate.
- The payment schedule is the frequency at which you will make your mortgage payments. These can occur monthly, semi-monthly (twice a month), bi-weekly (every other week) or weekly.
Please complete the contact form below with the estimated amount required in the message text box. Once received, your information will be submitted to our My East Van in-house mortgage broker and you will be contacted immediately and all your mortgage questions will get answered!
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Purchase Price: $500,000
80% mortgage: $400,000
Interest Rate: 4.50%
Amortization: 30 years
Monthly Payments: $2,016.86
A good practice is to get a pre-arranged mortgage, that will not only allow you to have a better idea how much you can borrow, but also hold a mortgage rate for 90 days while you look for a new home.
BC Property Transfer Tax Information
Property Transfer Tax is a provincial tax that is payable upon the purchase of real estate in British Columbia. The tax is equal to one percent on the first $200,000 in value and two percent on the balance. There currently is an exemption for first time buyers but there are a number of requirements to qualify, including:
(a) Must be the purchase of a principal residence;
(b) The purchaser must be a Canadian citizen or permanent resident of Canada;
(c) The purchaser must have resided in the province of British Columbia for at least one year immediately prior to the application to register the purchase of the principal residence;
(d) The purchaser must not have previously owned an interest in a principal residence anywhere in the world;
(e) The fair market value of the land and improvements must not exceed $275,000 within the Capital Regional District, Greater Vancouver, Central Fraser Valley, Dewdney-Allouette and Fraser Cheam and $225,000 if the property is located elsewhere in the province;
(f) The amount borrowed to finance the purchase, and registered against title, must be 70% or greater of the fair market value; and
(g) The amount borrowed must have a term of at least one year.
These are major requirements which should be reviewed with your realtor, lender or lawyer to ensure that you qualify.
Phone: Nels Agerbo (604) 767-9534 Email: firstname.lastname@example.org, email@example.com