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Andre (Andrzej) Sterniczuk
Sales Representative

Royal LePage Realty Centre, Brokerage
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Helpful Tips For Buyers

 

Get Ready to Buy

Ask yourself first if you are ready for home ownership. It comes with benefits but also with obligations, especially financial ones. Do your research first. Begin the process only when you are ready to buy.
 
There are some factors which may influence your decision and issues which have to be resolved first. For example:
 
- Your current housing status - do you lease or own?
 
- If you lease, what's the minim/maximum notice time?
 
- If you own, should you buy or sell first?
 
- How do you choose location? (proximity to work, family, schools, etc.)
 
- What is the time frame you want to start and complete the process
 
- Who else will be involved in the decision making?
 
- Make sure that all parties involved are committed
 
- Check your budget - state all income and expenses and plan for the future
 

Meet with a Real Estate Agent

- Meet the agent at his/her office. This way the meeting will be quicker, more productive and without any distractions (kids, TV, phone etc.).
 
- Get to know each other.
 
- Tell your agent about your plans
 
- Ask to explain the buying process
 
- Ask about Buyer Agency, its benefits and obligations
 
- Sign the Buyer Representation Agreement
 
- Make sure you understand everything. If not don't be shy to ask questions
 

Bi-weekly and weekly payments

Most mortgages have the option to allow payments to be made on a weekly or bi-weekly basis. This option may be desirable for two reasons. The first is it can save you money as you can expect to pay off your mortgage about 4 years sooner. This can save you dramatically over the life of your mortgage. The other reason why these options are so popular is that if your employer pays you on a weekly or bi-weekly basis, you can simplify your budgeting by making the payment line up with the way you paid.
 

Making Extra payments

Paying extra amounts on your mortgage can make a big interest saving over time. When we select a mortgage company, privilege payments options are something that we look for. A 20% privilege payment will allow you to pay off up to $20,000 per year on a $100 000 mortgage. It is important that the privilege payment also be flexible to allow you to pay smaller payments on the mortgage and as often as you wish. An extra $1000 periodically paid on a mortgage can help you become mortgage free faster.
 

Reducing the CMHC fees on your purchase

When you require a mortgage for more than 80% of the purchase price of a property, that mortgage must be insured by Canada Mortgage and Housing (CMHC) or GE Mortgage insurance. The premium charged by these company`s decreases as the down payment increases. When you finance your property at 95%, a premium of 3.75% is added to the mortgage. By increasing the down payment to 10% of the purchase price the premium can be reduced to 2.5%. If you can put down 20%, you can avoid any additional insurance fee. Depending on your situation there are ways that you can structure this financing to avoid the CMHC or GE insurance premium.
 

Advantages of Bigger Down Payments

As mentioned above, when you put a 25% down payment on your purchase you can avoid the CMHC premium. More importantly the larger the down payment, the lower the amount of interest you will pay over the life of your mortgage. It is important to note that it may not be wise to stretch yourself to increase your down payment and end up borrowing on credit cards or a line of credit at a higher rate.
 

Short Term Rates vs. Long Term Rates

The options for mortgages available can be very confusing for most mortgage shoppers. Terms for mortgages vary between variable and fixed rate, 6-month terms to 10 year terms. Taking a variable or floating rate mortgage can have savings. Typically the shorter the term or guarantee of the rate, the lower the rate will be. This does not always happen, depending on the market place and the economy, but history has shown that short-term rates tend to be lower than long-term rates. The up side of variable rate is the strong potential for interest rate savings. The down side is the fact that you are accepting the interest rate risk without a guarantee. If you are considering a variable rate mortgage you need to look at your own risk tolerance, and your cash flow available to deal with potential increased payment. Considering projections of rates and where we see interest rates heading can also be important in this decision. Make sure you talk to an expert when you are making this decision.
 
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