Home Ownership Guide
First, Some Financial Facts
1 in 6 Canadians (17%) say their monthly spending exceeds their income.
77% of Canadians are worried about having enough money in retirement.
Only 49% of Canadians report using a budget to plan their monthly spending.
1 in 6 Canadians can benefit from using a monthly budget (according to the Canadian Financial Capability survey).
Being aware of your finances and having a clear plan helps you put money away and be better positioned for larger purchased.
Planning a big purchase in the next 3 years?
You're not alone.
To help you prepare for a big purchase like a new car or home, make sure you understand the difference between Saving and Investing in order to get you over the financial finish line before your purchase.
The purpose of Saving money is to keep your money safe in a risk free environment that is easily accessible.
Investments are made with the goal of making more money with an element of risk.
Saving enables you to earn a lower return but with almost zero risk. Where as with investing, you’re able to earn a greater return, but in order to do so, you take on more risk.
Let's Talk Credit
According to the Bank of Canada, 89% of Canadians have at least one credit card. A related fact: Canadians now owe $1.77 for every dollar they have to spend.
Do you know what your credit score is? 59% of Canadians say that their credit score rating is above average.
Here are some tips for maintaining a good credit score:
- Pay off your balance each month
- Always pay your bills on time
- Apply for credit sparingly
Having a higher credit score puts you in a better position when you require financing or taking out a loan.
In the last 5 years, 1.3 million Canadians have bought their first home
Let's look at down payments
The minimum down payment needed to purchase a house:
- > $500,000: 5% of the purchase price
- $500,000 – $1,000,000: 5% of the first $500,000 of the purchase price, 10% for the portion of the purchase price above $500,000
- < $1,000,000: 20% of the purchase price
Remember: if your down payment is less than 20% of the price of your home, you must buy mortgage default insurance.
Understanding Mortgage Rates
With a Fixed Rate Mortgage, fixed interest rates will stay the same for the entire term.
A Variable Rate Mortgage has variable interest rates that can increase and decease during the term.
A fixed rate mortgage can be helpful for budget planning as you always know what your payment will be. With a variable rate mortgage, the interest rate can go up or down over time, affecting your rate and amount of interest you’ll pay over the term.
Meet Your Mortgage Broker
Why use a mortgage broker instead of just going to the bank?
The bank only has access to their own products.
A Mortgage Broker acts as a personal shopper for you, contracting different banks and lenders to see who can provide the lowest rate for your individual situation.