Mortgage and Financial Information

June 18, 2021June 18, 2021

Becoming a First Time Home Owner

Becoming a First-Time Home Owner

The rapidly rising cost of real estate has made becoming a first-time homeowner a pipe dream for the younger generations, but it doesn’t have to be! Of course, the perception of the younger generations is currently “We would if we could…” but becoming a first-time homeowner might just be easier than it originally seems.

If you take some steps to become financially stable, buying a home in your twenties and thirties can be a great investment, and easier than you might think! In this article, we’ll take a look at the different ways young people can prepare to become homeowners and get approved in the first place.

The obvious first step to becoming a first-time homeowner and qualifying for a mortgage in your twenties and thirties is to start saving! Of course, this might seem like a no-brainer, but all it takes is to cut down on your spending and live more frugally.

Once you narrow down your monthly income and contrast that against your spending habits, it will be easy to see where you can tighten your belt and put aside some money.

Of course, you’re not just going to chuck that money into your sock drawer and let it sit there — you’re going to make it work for you! Begin by contributing to your Registered Retirement Savings Plan (RRSP) on a regular basis so you can leverage that against your mortgage when the time comes.

Additionally, if you’ve recently gotten a raise, the “new money” that you are bringing in regularly shouldn’t just be spent — it should be moved over into your RRSP so it’s as though you’re not MAKING more money, instead, you’re saving more money. An RRSP is a great tool for first-time homebuyers and is a great step along the path to becoming a first-time homeowner.

Of course, as with any large purchase in life, you are going to want to do your homework and know what the market looks like, and what you might qualify for. Additionally, you’re going to want to do a personal audit of your finances so you know what the maximum your monthly fees can amount to. You’ll want to consider ALL fees involved, and make sure you have a cushion for the extras.

When digging into the numbers, be sure you know how much homes cost, what you can afford, look into condo fees or homeowner fees, think about renovations, educate yourself about mortgages, and get pre-approved.

If you don’t get preapproved for the amount you had hoped for, consider purchasing a condo or more modest home for your first home investment. Additionally, it’s important to not rush into anything too quickly! A bargain might come along that ticks most of the boxes you have, but is a bit of a fixer-upper.

Don’t be afraid to invest in a home such as this, as long as you make sure you aren’t walking into a poor investment. You’ll need to get the home inspected, and having a contractor quote you on the things you would like to renovate will help you make a final decision.

An alternative to settling for something less than what you want would be to get a co-signer or leveraging a buying partner. Many young people will need assistance to purchase their first home, and there is no shame in doing so! The market is quite inflated, and having a parent co-sign could help you get approved for the home you’ve fallen in love with.

All of this might seem like a lot, but becoming a first-time homeowner is a very rewarding experience when done right! If you follow all of the steps we have outlined to help you prepare, you’ll find that most of the work is done and purchasing your first home was a breeze!

April 12, 2021September 21, 2021

First Time Home Buyer Guide to Success

The road to success for a first time home buyer can be a tedious process, but it’s worth it in the end! There are plenty of steps that need to be taken to ensure you are ready when the right home comes along.

As you prepare to purchase your first home in Alberta and beyond, Brian Gentles’ Team has put together some steps to help you on your way.

Are You Ready to Become a First Time Home Buyer?

Being a homeowner can be a lot more expensive than renting, since you’re responsible for added costs like home repairs, utility costs, garbage pickup, water, and electricity. A good practise for first time home buyers, is to purchase a home where your monthly fees will be the same as your current renting situation, or only slightly more. You are already on the right track with paying rent monthly, and it will be easier for you to budget and be prepared for the monthly home ownership payments.

Don’t forget – you’re not just paying a mortgage! You will also need to pay for property taxes, utilities, insurance and possibly condo fees related to your home.

We suggest that first time home buyers try their hand at sticking to a budget with what you expect your home payment will be, and then placing the extra money in savings. This will help you to build your confidence and be prepared for those first months of home ownership! Let’s look at some other tips from the Gentles’ Financial team:

Shop for a Loan and Secure a Lender

It’s no secret that most people need a loan to make a first time home purchase. We suggest that you get pre-approved for a mortgage before you start shopping for a home, so that you know what your ceiling looks like. If you want more lending options, we urge you to consider using a mortgage broker over a bank or credit union. With our team here at Gentles Financial, or another team as your mortgage broker, you will have access to several different mortgage lenders and programs which will help you secure the best rate, terms, conditions and privileges for your first mortgage. Of course, mortgage lending rates are low right now, but that doesn’t mean that you shouldn’t shop around for the best overall mortgage!

Not all lenders are the same – even if the rate might be. It is especially important to understand the 3 P’s: porting, penalties and prepayment privileges. Most bank employees don’t understand how their products differ from those of other lenders. Brokers do. There are also many excellent lenders who do not offer “retail” access. They strictly work through brokers as this is a very efficient and effective model.

Secure your Down Payment

It’s important to remember that your down payment can help to reduce what you owe, subsequently reducing your overall costs. We want you to realize, though, that if your down payment is less than 20%, you will be paying high-ratio mortgage insurance. While most first time home buyers are unable to secure 20%, it might be a good idea to consider the cost of the high-ratio insurance when you buy, and consider asking a relative for help with the down payment. That said, the cost of the insurance is fairly minimal when included in your mortgage payment and might save years of trying to save 20% while paying rent. On the other hand, if your down payment is 20% or more you can take advantage of a 30-year amortization which will reduce your mortgage payment.

Be Open to What You Can Afford as a First Time Home Buyer

Of course, your dream home is out there waiting for you, but it is important to remember if you spend too much on your mortgage you may not be able to meet your daily obligations, let alone save for retirement! A smaller house might be worth the peace of mind. If you have any other outstanding debts, it may be a good choice to buy a smaller home as your first home, instead of splurging to check off every box on your ‘must-have’ list. Remember, this is likely just your starter home, and in a few years time you’ll likely be able to upgrade to your dream home!

Find a Good Real Estate Agent

When choosing a real estate agent, it is important to get information from friends and family, and make an informed decision. Any real estate agent should listen to your wants and needs carefully and help you make a decision based on your budget and the overall picture. Your Realtor will likely make recommendations and can help to explain the market to help you find a home that suits your needs and budget. They will also help to walk you through every aspect of the purchase, from the conditions and terms, right through to signing the papers and getting the keys to your new home!

Schedule a Home Inspection

The most important thing you’ll need to do as a first time home buyer is get a home inspection completed before you go all in on the purchase of your home. An inspection is important to make sure everything is in good working order, and there are no surprises on move-in day, or down the road. You’ll need to pay out of pocket for your home inspection as the buyer of the home, so be prepared to have these fees ready. Your Realtor can help you source a local and trusted home inspector to help you be sure your new home is really as great as it looks!

Close and Get Ready to Move-In!

You did it – the closing date has arrived and it’s time to celebrate! You’ll need to sign the final papers so your lawyer, or Notary in BC, will release the funds to all appropriate parties. Once the funds are secure it is time for you to move in! These are likely the last of the costs you will incur, unless you are doing a renovation. Move in costs can include painting, moving vehicles, and furniture.

Final Thoughts on Becoming a First Time Home Buyer

Last but not least, be sure to contact your bank and other services to change your address. It may be necessary to set up mail forwarding until you get everything changed over. Don’t forget to set up your utilities to be connected ahead of time – this will save you time and money because you will avoid extra costs associated with “rush service”. Lastly, be sure that the account your mortgage payments are coming out of always has a surplus, so you don’t miss any of your payments.

Otherwise, it’s time to unpack and enjoy your new home! If you have any additional questions about becoming a first time home buyer, please feel free to reach out to us at Gentles Financial – Axiom Mortgage Solutions. We would be more than happy to help you figure everything out!

March 20, 2021March 30, 2021

Applying for a Home Loan in 2021

Are you planning to apply for a home loan this year?

Learn about the facts you should know in this less than a 2 minute read.

It’s no secret that 2020 was an unprecedented year for mortgages. In Canada, we saw mortgage rates plunge to record lows for both new home purchases and refinances. Some home buyers saw fixed mortgage rates as low as 0.99%, although that was a very specific lender under very specific conditions! We are already seeing mortgage rates creeping upward of this record low, so for how long will these low mortgage rates last?

Let’s take a look at what you need to know about applying for a home loan this year and how to navigate the housing market.

“Low interest rates have helped drive parts of the real estate market to new highs in some markets. In Calgary and Alberta today we are seeing the market swing from a “buyer’s” market to a “seller’s market” despite the pandemic.

So far, Bank of Canada rates are not expected to rise. There have been worries that a hike in rates that have allowed Canadians to afford large mortgages would lead to a sudden slowdown” (Don Pittis/CBC). This risk seems more prevalent in the hot Greater Toronto, Greater Vancouver and Greater Victoria markets.

The Bank of Canada decisions affect variable or floating rate mortgages and secured lines of credit. Shifts between the stock and bond markets influence fixed interest rates. Whereas fixed rates have been creeping higher, variable rates have gone down a bit.

Taking into account all of the information and projections that have been released thus far, mortgage interest rates are expected to remain at a low throughout 2021, making this year a great time to become a new homeowner or refinance an existing mortgage.

As a result of the coronavirus pandemic, some lenders have tightened their guidelines when it comes to mortgage applications. If you plan to apply for a home loan in 2021, you’ll need to make sure you’re a viable candidate.

Applying for a Home Loan

We suggest starting off by really doing your homework. You’ll need to understand your credit score and have a good rating, have your down payment and funds for fees available if buying, and have knowledge of what interest rates are being offered for the mortgage that fits your goals. The credit score that mortgage lenders use is typically the FICO score from Equifax, although some will rely on the TransUnion score. When you pull up your own score it is not the FICO score that you see. The best bet for the mortgage that best suits you is to really understand all your options — there will be plenty of lenders with enticing rates in 2021. Mortgage brokers have this information at their fingertips. Mortgage brokers have access to many lenders who do not have a “retail” or direct to borrower access.

When working with a mortgage broker, we are sure to do our due diligence here and shop around to find the best lender. It’s very important to us to find a partnership with a lender you can trust, that understands your financial goals, and is a good move for someone in your financial position before moving forward with your application.

After a proper and complete pre-qualification discussion, and perhaps a formal pre-approval, you’ll need to find the right home that you are ready and willing to buy. Given the current housing market climate, this may prove challenging given the limited supply of available properties right now. Ideally you will be patient with the process. Pre-approvals don’t go away. They can be managed and kept alive during your home search. In the market, on one hand you have those who might have had a wage decrease moving into a smaller home, and on the other you’ll find those looking to escape the city moving to a more rural area. Buyers are also looking for the home with 2 office spots and 2-3 student work areas – while not sacrificing the kitchen table.

The Result?

Things may improve as 2021 goes on. One thing is for sure, we know that many sellers held off on listing their homes in 2020 and therefore are likely itching to put their properties on the market this spring, which is usually the most popular time to list homes.

Something else to keep in mind — once more vaccines for the coronavirus become available, the more open house showings will become available for those in the market for a new home.

As we move into the spring keep an eye on the housing inventory in the cities and neighbourhoods of your choice, while getting pre-approved for your mortgage so you are ready to jump on the listing that best suits your needs and housing criteria. Remember that the home itself is the security for the mortgage loan – so no loan is “approved” until the lender reviews and accepts all of the property details.

One thing is for sure, 2021 is definitely going to be an interesting year to apply for a mortgage. Although we have cited that interest rates among mortgage lenders will remain low, the lack of available housing and increased due diligence by lenders require you to be patient. Home Buying “2021” is very different from Home Buying “2007” and “2017”.

That being said, now is the time to act as this is definitely an excellent opportunity to potentially save thousands on your mortgage.

On the refinance side of things we are seeing home renovation projects, basement developments, garage building, eliminating high interest debt and trading out your pre-COVID interest rate for a 2021 interest rate. Mortgage brokers can help you understand the pros and cons of all these things.

We all know that these record low interest rates won’t stay put for much longer, so taking action and getting ahead of the game today is absolutely crucial for those looking to refinance or contemplating a new home purchase.