Finding the right mortgage product and lender is crucial to your home buying success. It's up to the buyer to determine which lender is best for their needs, and it's always a good idea to have at least a bit of background about the loan process before you speak with a lender.
How much can you afford?
Down payment amounts will better determine the answer as the amount of down will depend on several factors. First off the buyer must feel comfortable with the amount that is being put down, and I suggest to all types of buyers regardless if they are first time or seasoned that a little reserve fund is always better as opposed to allocating all your money towards the down payment. Sometimes it makes more sense as a buyer to work backwards in order to figure out how much you can afford, feeling comfortable with your monthly payment and setting a budget from that perspective will tell you how much home you can buy. A great first step before you actually go shopping for a home is to have yourself pre-approved by a lender, and I recommend that you speak to at least 2 different lenders and negotiate the best rate and product that best serves your needs.
Understanding an insured mortgage versus a conventional mortgage, Insured montages are needed when the buyer’s down payment is less than 20% of the purchase price and thus must be insured by either GE Capital or by the Canadian Mortgage and Housing Corporation (CMHC). Conventional mortgages are put in place when the buyer has 20% or more of the purchase price as a down payment, it’s safe to say that having a conventional mortgage is beneficial as the buyer is saving on the insurance portion of the monthly payment and the H.S.T on closing. Also it is vital that as a buyer searching for homes in Toronto for sale that closing costs will affect the affordability index. The land transfer tax alone in the city is double as opposed to neighboring cities such as Mississauga or Vaughan.
It’s also important to know that most of us are accustomed to calling our home loan a mortgage, but that is not an accurate definition of the term. A mortgage is not a loan and it is money that the lender has granted you. It is a security note that is documented on your dead when the instrument is registered. This document protects the lender’s interests in the property. There are two parties to a mortgage, you as the buyer are known as the mortgagor (borrower) and the lender is the mortgagee. It’s important that a home buyer understands that even though a mortgage has been registered towards the dead that you as the home owner have full title to the property in fee simple and no one else can claim ownership. Although a mortgage gives the lender the right to sell the property in order to recover funds that were lent if the home owner fails to pay the debt back as agreed, this process is called Power Of Sale the property and NOT Foreclosure. In Canada lenders do not have the authority to foreclose as the home owner has the right of redemption and all equity at the time of sale.(please note that ownership of the property cannot be transferred to someone else or another entity unless the debt is paid and is free and clear on closing)
This brings me to my next point as there is a huge misconception here in Toronto Ontario that the public has. They firstly believe that Foreclosures exist in Canada as they do in the United States and secondly they believe that a Power of Sale is purchased from the bank at a reduced price below market value. This is not the case! In fact it works the opposite, all Power of Sale homes are sold at current market value and the home owner not only has the right to remedy( comes up with the total monies owed prior to someone else closing on the home before closing) but also must be paid all if any equity that exists.
Buying a home in Toronto is and should be a wonderful and satisfying experience and it is vital that the home buyer has the right professionals working on their behave to not only help in achieving their goals but who will also educate them along the process.
Please feel free to comment and tell share your home buying experiences with us.