What do I need to think about when selling my home and buying a new one?

The holiday season is fast upon us. Good luck to us last minute shoppers this week! Wow this year has totally flown by. I wanted to send my best wishes and happy holidays to all the vistors to the North East site and all our clients.

In true holiday spirit, we all will eat a lot, find great gifts for those we care about but also have dreams of Santa getting us that new home. Okay well maybe not Santa... If you’re thinking about putting your home on the market in January or February and in the hunt for a new home then take a minute to plan ahead a little. It’s not a bad idea to first figure out how much your home may realistically fetch and how much you will have net left in your pocket after repaying the mortgage, mortgage penalty (if any), real estate broker fees, lowering personal debts, etc.

With an idea of down payment in mind then it’s a good idea to get pre-approved for a mortgage. Make sure your mortgage pre-approval holds the rate into spring or early summer. Together this will give you good idea about budget and what’s reasonable to expect. What’s important is not be financially over-stretched. The step after that is the fun part, start the house hunting process with a good real estate broker.

If you have any questions or experiences you’d like to share please feel free to contact me even over the holidays.

Residential Mortgage ABC’s

I hope that everyone’s had a great week. I’ve decided tofocus this week’s column on a couple mortgage basics. I often hear thatterminology and mortgage options are not properly discussed at the bank.Hopefully this helps...

Interest rate: isthe rate of return a lender receives for permitting you (the borrower) for aspecified term (or duration). 

Term: when yousign for a new mortgage you can usually choose the duration of your term (1, 2,3, 4, 5 years or more). If you decide to sell or refinance within your term youcan usually expect to pay a penalty to the bank. Upon completing your term, youare permitted to refinance or change banks without penalty. 

Fixed and variable: Fixedrates remain set throughout your mortgage term. Variable rate mortgages arealso set to a term but fluctuate based on the Bank of Canada. Choosing betweeneither is based on your personal risk tolerance and you must qualify. 

Amortization period:is the number of years it takes to pay back your mortgage. Maximum amortizationis currently 30 years but some lenders still offer 35 years but you need toqualify.   

Frequency:  refers to frequency of your mortgage paymentsuch as weekly, accelerate bi-weekly, and monthly. What frequency you choose isimportant as it help pay your mortgage down quicker.

Closed versus an openmortgage: If you are looking to buy a property and “flip-it” within 2-3months then an open mortgage may be what you’re looking for.  The rate is higher but you can break yourmortgage at any time without penalty. A closed mortgage is exactly how itsounds closed for the duration of your term and there are generally penaltiesfor breaking it.

Cash back: A cashback mortgage is great if you’re a first time buying and need a little helpwith your down payment.  If you have goodcredit then you could qualify to get up to 5% cash back to supplement yourexisting down payment.  Make sure youwill keep your home for your term otherwise you will have two penalties, themortgage penalty and you will also be expected to repay the cash backportion.  

Secured line ofcredit: is a line of credit attached to your home which is based on thesame principles as a variable mortgage. I would suggest that you use it as a short to medium term financial toolbecause the closer you get to your limit the more it could affect your creditscore. Lines of credit compound monthly.

If you have any specific questions or good and badexperiences you’d like to share please feel free to contact me.

What is a mortgage pre-approval?

Welcome to the calm before the upcoming buying storm. If youare thinking of buying between now and next summer then its good idea to getpre-approved by a bank. The mortgage pre-approval process is not that complexbut quite valuable. Think of it like a doctor’s check-up where your income,credit and downpayment are reviewed and “qualified.” All three factors areimportant considerations when a mortgage application is analyzed by not onlythe financial institution but also the mortgage insurer.

Some clients place ahead which is great but at times I havemet with clients after they have an accepted promise to purchase in play. Inmost cases that’s fine but I have seen more and more situations where the clientsrealize they are either over-budget, or don’t qualify due to other controllablefactors (that could have been fixed prior). It’s never fun to find out that inthe midst the financing deadline that you cannot qualify for a mortgage with anA-lender.  A pre-approval is also importantas it shows the real estate broker representing the vendor that you are aserious buyer.   

If you have any specific questions or good and bad experiencesyou’d like to share please feel free to contact me.