Do I need great credit to get a mortgage?
No you do not, however it will certainly help. A low credit score doesn’t necessarily mean that an individual cannot get a conventional mortgage. It is important to note however, that a low credit score will likely result in a higher interest rate.
How much down payment do I need?
The standard down payment for mortgage financing is 20% of property value. However, many first-time home buyers who don’t necessarily have the funds available can opt in for a “high-ratio” mortgage where down payment can be as little as 5%. This is a great option for millennials who wants to get their foot in the housing market.
What are closing costs and how much should I expect them to be?
Closing costs refers to how much you will need to pay before your loan is completed. Property appraisal, land transfer tax, legal, and brokerage fees are common expenses NOT included in the cost of borrowing the loan.
What is the difference between fixed or variable rates?
A fixed interest rate stays the same during the entire rate period. Whereas variable interest rates fluctuate when the prime rate changes.
What type of interest rate should I choose, fixed or variable?
Both types of interest rates serve different purposes (one isn’t better than the other) – it truly depends on your situation and your future plans. The fixed rate is commonly used by people who plan to live in their home through the duration of their term. Breaking the term will likely result in penalty fees. On the other hand, the variable rate is commonly used by people who want the flexibility to sell their property before their term ends, with minimal penalty. In addition to variable rates, this option makes good financial sense for people who want to invest in properties.
Can you use your RRSP savings to help you buy your first home?
There is a Home Buyers Plan available to first-time home buyers where individuals can withdraw out of their RRSP, tax-free. However, it important to know that there are specific conditions to meet in order to be eligible for the HBP program.