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Affording A Home

Your “Dream Home” becomes a nightmare when you end up “house poor”, with most of your money going to pay for the mortgage and unexpected costs, with a little left over for enjoyment.
When buying a home, you need to be practical, realistic and informed. Lakeview Realty Inc., Specialists can assist you in finding the “right home”, and can also assist you in evaluating mortgage options, obtain financing and review the anticipated costs involved.

Are you considering applying for a Mortgage? Why not make your first stop with the “In House Mortgage Specialist” at Lakeview Realty. Inc.

Throughout this site, you will find an outline of the normal costs involved in buying a residential “resale” home and a guide for calculating mortgage payments (at different rates and amortization periods.

Note the amortization period has nothing to do with the term of the mortgage. The term is the length of time before maturity and refinancing whereas the amortization period is the period that is used to calculate monthly payments.. this is a very basic definition.

If you require any assistance in relation to applying for a Mortgage, please contact our In House Mortgage Specialist today at Mortgages@LakeviewRealty.Ca

If you are considering purchasing property as an investment for you and your family, we would like to invite you to contact us to discuss the options available to you.

What You Can Afford. There are a few things to consider:

Down Payment & Closing Costs – This is the amount that you have to invest in a home, bearing in mind that you have to keep a “reserve” for closing costs and moving. The land transfer tax is the biggest closing cost. See the chart in the following pages, plus the other costs involved.
The amount remaining is your down payment. Part of this will be required as “a Deposit” when you make an Offer, and the balance will be paid on closing. The difference will be covered by the mortgage.

The Mortgage. How much can you afford to borrow? A conventional mortgage is a mortgage that does not exceed 75% of the sale price of the home, with a down payment of 25%. There are other options however. A first mortgage can be obtained for up to 95% of the value of the home with as little as 5% down. There are qualifications and conditions however, which we would be happy to discuss with you, or provide information to you.

The first step is to calculate the amount which you can afford to repay the financial institution for principal and interest on a monthly basis. We would be pleased to assist you with this calculation.

Financial institutions do this by calculating your debt/service ratio.

They calculate this on two different levels.

The GDS. (gross debt service) is the maximum amount which they feel you should pay for Principal & Interest (P & I). 32% of your gross combined monthly income is the amount most commonly used.

The TDS (total debt service) is the other consideration. This amount factors in all other monthly expenses for items such as car loan or lease, personal loan(s), etc. 40% of your gross combined monthly income is the factor used for TDS. This means that your monthly payments for P & I; plus your other monthly fixed costs would not exceed 40% of your gross, combined monthly income.

Interest Rates & Other Variables:

The amount of the mortgage you can arrange, based on payments you can afford, depends on the interest rate and the amortization period you use. The lower the rate, (and the longer the amortization period) than the larger the possible mortgage you can afford will be.

Terms of the mortgage: Other things to consider might be:
-How open is the mortgage? (When can you pay it off without penalty/ or portions of it?)
-Is the mortgage portable? (Can you move it to another house if you buy another in the future?)

This is for general information only. Please contact us today to discuss your financial options.

Michael J Preston, Broker of Record, Lakeview Realty Inc., Brokerage 705-325-3600 or email.