Financing

Organizing Finances

How do I begin to plan my financing? House hunting begins at home… with planning. Before you grab the road maps and hit the streets with your favourite Royal LePage Realtor, you need to know how expensive a house you can afford to buy. Knowing your affordable price range will bring your house hunting into focus.

Down Payment

How much will I need for my initial investment in my new home?

You’ll need a combination of a down payment and closing costs.

Down payment

The money that you pay up front for a house is the down payment. These payments typically range from 5 to 25% of the total value of the home. The obvious source of money for your down payment is either your savings or the proceeds from the sale of a home you already own.

While it is possible to buy a home with as little as 5% down, the amount of your down payment will determine whether you will have a conventional mortgage or an insured, high-ratio mortgage.

What’s the difference?

• Conventional mortgage: Your down payment is at least 25% of the purchase price.
• High-ratio mortgage: Your down payment is less than 25% of the purchase price and must be insured by CMHC or GEMI. An insurance premium will apply.

Closing Costs

For high-ratio or insured mortgages, the mortgage provider requires the borrower to demonstrate his or her ability to cover closing costs in the amount of 1.5% of the value of the property. Closing costs can be as high as 3% of the value of the property being purchased and can vary widely depending on:

• The property being purchased
• Services required
• Taxes
• Applicable insurances
• Whether the home is new or old
• Closing dates affecting interest adjustments
• The balances of any prepaid expenses

 

Your Credit

What is my credit rating?

There are a number of steps to getting mortgage financing. A particularly important step – and one many people don’t give much thought to is the credit check. As a routine part of the application process the lender will order a copy of your credit history.

Your personal credit history is compiled by credit bureaus that collect information from various sources including banks, retailers, and other public records, creating a credit report. Information such as what credit and debit cards you have, the types of accounts you have at various financial institutions, information about personal loans, mortgages, student loans, etc., is all part of the report. The report shows the creditors’ names, account numbers, the date accounts were started, the current balance, as well as a detailed payment history (for example, how many times you were over 30, 60, or 90 days late in paying bills). Generally, credit reports show information going back six to seven years.

Because the report contains information about you, you have a right to inspect a copy of it. Equifax, one of Canada’s largest credit bureaus, will mail consumers a free copy of their personal credit file upon request. The request can be made by mail, fax, or online. Certain information must be supplied with the request. For more information, call Equifax at 1 800 4657166, or visit the website: http://www.equifax.com/EFX_Canada/.

Knowing your affordable price range will bring your house hunting into focus.

 

Financial Ratios

How do lenders assess how much I can afford per month?

Generally, lenders calculate that the homebuyer shouldn’t pay more than 30 to 32% of gross income for principal, interest, taxes, and insurance (PITI), or 40 to 42% for both PITI and monthly debts combined.

The easiest way to make a quick estimate of the mortgage amount you may qualify for requires applying the two basic formulas used by lenders for loan application. Keep in mind that the loan balance will vary over the term of the loan, although the monthly payment remains the same.

Two Lender Formulas

30 to 32% formula	Total monthly housing costs (PITI) = 30 to 325 (or less) gross monthly income
40 to 42% formula	PITI + all monthly debts = 40 to 42% )or less) gross monthly income

 

How Much Can I Afford?

What amount should I establish for my monthly mortgage payments?

House hunting begins at home… with planning. Knowing your affordable price range will bring your house hunting into focus.

How much house you can afford depends on two things: how much you can afford for the monthly mortgage payment, and how much you can invest in the down payment. Monthly payments include the principal and interest on the mortgage loan and property taxes and insurance against fire and other hazards. These four costs are often abbreviated PITI.

The key items are the size of the down payment, the amount of the mortgage and the term – or length – of the loan. HLC Home Loans Canada offers a Mortgage Affordability Calculator to determine how much you can afford and a Mortgage Comparison Calculator to compare different payment options.

 

Getting Pre-approved

Why should I apply for a mortgage pre-approval?

Having a pre-approved mortgage will give you the confidence of knowing exactly what you can spend on a home before you start looking. You will also be protected against interest rate increases while you look for your new home.

To request a mortgage pre-approval, call 1-888-562-3284 (toll-free) or apply on-line with Home Loans Canada. Your mortgage specialist will answer your questions and help you determine which financing terms and options are right for you.

Mortgage Experts: HLC Home Loans Canada

Why choose HLC Home Loans Canada?

Whether you’re buying your first home, considering a renovation, or looking into your next purchase, HLC has the options, choice, and flexibility to meet your specific needs.

Better rates – Guaranteed discounted interest rates between 0.50% and 1.25%, or higher (including rates below prime).

Choice and flexibility – Access to 60% of all mortgage lenders in the Canadian marketplace and over 300 products.

Cash up front – Cashback up to 5% (Use the money however you like, including renovations, investments, or a lump-sum mortgage.)

Increased prepayment privileges – up to 20%.

Mortgage solutions – Specialized products specific to self-employment, previous credit issues, and rental or vacation properties.

HLC Home Loans Canada is a division of CIBC Mortgages Inc. in Saskatchewan; in all other provinces, 3877337 Canada Inc., a subsidiary of CIBC Mortgages Inc., carries on business as HLC Home Loans Canada.

 

Mortgage Products

What HLC mortgage product best suits my needs?

HLC’s Special Mortgage Offer is available for a limited time.

HLC offers access to 60% of all mortgage lenders in the Canadian marketplace and over 300 mortgage products, including CIBC, FirstLine, and President’s Choice Financial.

Product	Features and Considerations
Variable-rate Mortgages	Short, open terms (6-12 months) Variable-rate mortgages Fully open products related to bank prime High risk tolerance Watch market trends want flexibility and options, e.g., option to pay down mortgage at any time, without penalty Rate Fluctuations Payment Fluctuations Know how to capitalize on payment priviledges Have equity in your home – greater than 25%
Long-term Products	Long terms (3 to 10 years) Fixed rates Closed mortgages Fixed payments for a set period of time Conservative, budget conscious Usually a first-time homebuyer or in the first third of your mortgage amortization(i.e 1 to 10 years) Have a minimum of 5% down payment Payment Fluctuations Know how to capitalize on payment priviledges Have equity in your home – greater than 25%
Short-term products	Short terms (1 to 3 years) Fixed rates Closed mortgages Fixed payments for a set period of time Somewhat conservative Prefer a shorter term (i.e. market/rate awareness) No rate or payment fluctuations Probably in the middle of your mortgage (i.e. 7 to 15 years) Have some equity in your home (i.e. greater than 15%)

HLC Home Loans Canada is a division of CIBC Mortgages Inc. in Saskatchewan; in all other provinces, 3877337 Canada Inc., a subsidiary of CIBC Mortgages Inc., carries on business as HLC Home Loans Canada.

Register with E-rate

What is an easy way to keep an eye on mortgage rates? HLC’s E-rate Sheet is a great way to keep in touch with the mortgage marketplace and to learn about new products and offers that could save you thousands.

E-rate sheets will be distributed via e-mail every Wednesday fromroyallepage@hlcmortgages.ca with the subject line “www.royallepage.ca Rate Sheet Notice.” You will receive a confirmation e-mail from HLC Home Loans Canada Mortgages.

Personal information entered into the forms within the Mortgages section is being collected by HLC Home Loans Canada is a division of CIBC Mortgages Inc. in Saskatchewan; in all other provinces, 3877337 Canada Inc., a subsidiary of CIBC Mortgages Inc., carries on business as HLC Home Loans Canada. HLC respects your privacy and is committed to protecting your personal information. HLC’s privacy statement HLC’s process for Questions or Complaints.

Apply Now

How can I get pre-approval?

Mortgage Application

Take a few minutes to complete the mortgage application and an HLC mortgage specialist will contact you within four business hours, or please call 18885623284 to speak to an HLC mortgage specialist. Questions? Looking for pre-approval? To contact an HLC mortgage specialist, call 1-888-562-3284 (toll-free) or e-mail:royallepage@hlcmortgages.ca.

 

Mortgage FAQ

Why Choose HLC?

Feature and Benefit	Description
Perferred interest rates	Up to 2% below posted rates
Choice	60% of all mortgage lenders in the Canadian market, including CIBC, FirstLine, President’s Choice Financial, national Bank, MCAP, First National
Waived fees	Transfer or appraisal (certian conditions apply)
Cash up front	Up to 5% to use however you like
Unique solutions	Mortgage solutions in case of previous credit challenges, bankruptcy, or unique properties such as vacation homes, as well as personal situatoins such as self-employment

What can I afford?

How do I figure out what I can afford? House hunting begins at home… with planning. Before you grab the road maps and hit the streets with your favourite Royal LePage Realtor, you need to know how much house you can afford to buy. Knowing your affordable price range will bring your house hunting into focus. The amount you can afford depends on a number of factors. Most importantly, consider your gross household income, your down payment amount, and the mortgage interest rate.

Two rules of thumb to determine the mortgage you can afford:

Monthly Payments	Examples
First, determine your gross annual household income	$70000
Multiply by 32% to calculate your gross debt service ratio, which is the typical portion of you income that goes towards total household expenses	X 32%
The amount gives you the full amount you can afford between a mortgage payment, taxes, and mortgage life insurance	$22,400 or $1866 per month.
Purchase Price
The total amount of purchase price you can comfortably afford is approximately three times your household income. Of course, this general rule of thumb does not consider your down payment, assets, and liabilities, or personal net worth. However, it is a good indicator of your general price range	Household income = $90,000 Price Range = $90,000 x 3 or $270,000

What are the additional and closing costs? This is a list of possible extra costs involved in buying a home. Some of them are one-time costs and others, such as condominium maintenance fees and property insurance, will be ongoing monthly expenses.

Costs can range from 1.5 to 5% of total purchase price, excluding down payment. For eample, a purchase price of $250,000 would yeild:
Appraisal fees	$250
Inspection	$175
Property survey	—
Mortgage insurance	$2000
Home/Fire insurance	$450
Land Transfer Tax	$2800
Intrest adjustments	$350
Property taxes and utility adjustments	$400
Legal fees and disbursements	$700
Sales taxes	$800
Moving expenses	$500
Immediate repairs	—
Service charges	$200
Appliances/Decorating costs/Painting	$1000
4% of total purchase price of $250,000	$9625

What mortgage products and services can I get through HLC Home Loans Canada?

What are my mortgage options with HLC? Selecting the right mortgage is as individual as you are. Determine your risk tolerance to help you determine what mortgage will best suit your needs.

Mortgage options	Determining whether this makes sense for you
Short-term mortgages Historically a faster way to pay off your mortgage balance	Willing to play th market Believe rates are going to decrease Want the flexibility now and will decide long-term mortgage colution later
Specialty mortgages Variable rate with lock-in features for longer term mortgages – best of both worlds	Good option for customer who wants both flexibility and certainty
Closed vs. Open Terms Are you considering refianancing orselling your home withinthe next five years?	Open terms – flexibility to pay off mortgage quicker and/or refinance in shorter time increments (from anytime to 6 months to a year) Good option if you believe rates will be comming down Closed terms – locks you in for 1 to 25 years, capitalize on low rates for set period of time
Fixed vs. Variable rate Prime rate mortgages tied to Bank of Canada rate setting policies, versus fixed-term mortgages that are tied to bond market.	Currently in a low-prime-rate environment Over the past 25 years, taking a variable rate mortgage over a five-year, closed mortgage has been a better overall rate decision

What are the advantages of a pre-approved mortgage?

Pre-approved mortgage advantages:

• guarantees an interest rate for a period of time and for a certain mortgage amount
• different lenders provide different types of pre-approvals
• some only consider only rate, mortgage amount, and time period (i.e. guarantee the rate for 30, 60, or 90 days); others, including HLC Group Mortgage Plan, consider your full financial picture, actually qualifying you for a true, financial peace of mind mortgage

What are my options for pre-approval eligibility periods with Home Loans Canada (HLC)? HLC offers eligibility periods of:

• up to 120 days for an existing property
• up to 365 days for a new construction (depending on location)

When the mortgage lender pays the property taxes, how are payments calculated? The estimated amount of your property taxes can be added to the mortgage payment and paid on your behalf at the appropriate times. Depending on the balance in your tax account, it may be necessary to increase or decrease the amount of monthly payments to reflect the timing of property tax payments.

What do I need to know about mortgage life insurance?

• MLI is different from term insurance in that it strictly covers the entire cost of the mortgage, and is not subject to probate of wills.
• Ease of purchase: When you take MLI, you’re automatically protected throughout the approval stage until mortgage closing.
• Forever Young policy: The premium is based upon your age at time of initial funding of mortgage. Therefore, your premiums never increase throughout the term of your mortgage.
• MLI avoids liquidation of assets in the event of an unfortunate circumstance.
• Your creditor insurance adds less than 4% to a monthly mortgage payment.

What is the difference between high-ratio mortgage insurance and mortgage life insurance? High-ratio insurance is a government legislated mechanism to protect deposit-taking institutions for loans over 75% of the lesser of a property’s appraised value or sale price. In Canada the insurance premium is paid to either of two approved insurers. Mortgage life insurance protects the estate or co-owner of an insured homeowner.

Lender Showcase

What borrowers and lenders does HLC work with? HLC lenders specialize in the right mortgage financing solution for you:

• purchasing your first home
• Refinancing
• Debt consolidation
• Self-employment
• Downsizing
• Renovating
• Construction or project financing
• Rental properties
• Past credit issues
• Previous bankruptcy
• First and second mortgages
• Urban and rural properties

Lenders	Applicable regions	Highlights
	National	Insured and convetional Closed terms of 6 months, 2-5, 7, 10 years
	National	Insured and convetional Closed terms of 6 months, 1-5, 7, 10 years
	National (except QC)	Insured and convetional Closed terms of 6 months, 1-5, 7, 10 years
	AB, BC, ON, PEI, NB, NF, NS, and SK	Insured and convetional Closed terms of 6 months, 1-5, 7, 10 years
	National (except BC)	Insured and convetional Closed terms of 6 months, 1-5, 7, 10 years
	National	Insured and convetional Closed terms of 6 months, 1-5, 7, 10 years
	National	Insured and convetional Closed terms of 6 months, 2-5, 7, 10 years
	ON, BC, AB, SK, MB, Atlantic	Vision mortgage Up to 75% loan-to-value ratio 95% insured
	National	Insured and conventional (6 month, 105, 7, 10 years closed)”B” Program (ON only) Up to 75% loan-to-value ratio
First marathon Mortgage Corporation	AB, BC, ON, PEI, NB, NF, NS, and SK	Insured and Conventional Closed terms of 6 months, 1-5, 7, 10 years
Bridgewater	ON, BC, AB, SK, MB and Atlantic (except NS)	Insured up to 95%
Equisure Trust	ON, BC, AB, Atlantic (except NF)	Insured up to 95%
Equitable Trust	ON	75% loan-tp-value ratio in urban areas
Home Trust	ON, BC, AB, NS, and NB	“A”, “B”, and “C” programs, up to 75% load-to-value ratio in urban areas, up to 65% in rural areas.
Home Trust	ON, and AB	Secured line of credit AB up to 80% ON up to 85%
Household Finance Corporation	ON, BC, AB, Central Praries, Atlantic, QC	Up to 90% load-to-value ratio 2nd mortgages behind CIBC or institutional 1st Specializes in self-employed
ICI (Not Presently Lending)	ON, BC, AB, Atlantic (except NS)	Insured upto 95%
Industrial Alliance (Not Presently Lending)	Greater Toronto Area only	Up to 75% loan-to-value ratio
Option Mortgage	National (except YT and NWT)	High-ratio, uninsured, and conventional Terms of 1, 3, 5 years Specializes in self-employment
Private	ON, BC, AB	Up to 85% loan-to-value raito 2nd mortgages
XCEED Mortgage Corp.	ON, AB, MB (winnipeg only), Atlantic, BC	Up to 100% load-to-value ratio 100% financing 1st mortgage uninsured

HLC Home Loans Canada is a division of CIBC Mortgages Inc. in Saskatchewan; in all other provinces, 3877337 Canada Inc., a subsidiary of CIBC Mortgages Inc., carries on businessas HLC Home Loans Canada.

Questions? Looking for pre-approval? To contact an HLC mortgage specialist, call 1-888-562-3284 (toll-free) or e-mail:royallepage@hlcmortgages.ca

Glossary of Terms

Amortization period: The actual number of years it will take to pay back your mortgage loan.

Anniversary: Many mortgage products allow you to make payments against the principal on the anniversary of the mortgage.

Appraisal: The process of determining the lending value of a property.

Assumability: Allows the buyer to take over the seller’s mortgage on the property.

CMHC: Canada Mortgage and Housing Corporation, a Crown corporation that administers the National Housing Act for the federal government and encourages the improvement of housing and living conditions for Canadians. CMHC is one of two sources for high-ratio mortgage insurance.

Capped rate: An interest rate with a pre-determined ceiling, usually associated with a variable-rate mortgage.

Closed mortgage: Locks you into a specific payment schedule. A penalty usually applies if you repay the loan in full before the end of a closed term.

Closing costs: Costs in addition to the purchase price of a property and which are payable on the closing date. Examples include legal fees, land transfer taxes, and disbursements.

Closing date: The date on which the sale of a property becomes final and the buyer takes possession.

Conditional offer: An offer subject to conditions such as loan approval.

Condominium fee: A fee paid by the condo owner that is allocated to pay building expenses.

Conventional mortgage: A loan issued for up to 75% of the property’s appraised value or purchase price, whichever is less.

Convertible mortgage: A mortgage that you can change from short-term to long-term.

Deed: A legal document, signed by both parties, that transfers ownership.

Default: Failure to abide by the terms of the mortgage; may result in legal action such as foreclosure.

Deposit: A sum paid to the seller and held by a third party upon the offer to purchase.

Down payment: The buyer’s cash payment toward the property; the difference between the purchase price and the mortgage loan.

Easement: The right to use another’s property for a specific purpose (e.g. a shared driveway).

Encroachment: A physical intrusion from one property to an adjoining property.

Equity: The difference between your home’s value and the money you owe against it.

GEMI: GE Capital Mortgage Insurance Company of Canada, a private mortgage insurance company; one of two sources of high-ratio mortgage insurance.

Gross debt service ratio: The percentage of a borrower’s monthly income to go to mortgage payments, utilities, taxes, and half of condo fees.

High-ratio mortgage: A mortgage that exceeds 75% of the home’s appraised value. (These mortgages must be insured for payment.)

Home insurance: Insurance to cover both your home and its contents in the event of fire, theft, vandalism, etc. (also referred to as property insurance). This is different from mortgage life insurance, which pays the outstanding balance of your mortgage in full if you die.

Inspection: The process of having a qualified home inspector identify potential strengths and weaknesses in the property you are interested in so that you may have a good idea of its functional condition.

Interest adjustment: The amount of interest due between the date your mortgage starts and the date the first mortgage payment is calculated from. Avoid it by arranging to make your first mortgage payment exactly one payment period after your closing date.

Interest rate: The value charged by the lender for the use of the lender’s money, expressed as a percentage.

Land transfer tax, deed tax, or property purchase tax: A fee paid to the municipal and/or provincial government for the transferring of property from seller to buyer.

Legal fees and disbursements: Some of the legal costs associated with the sale or purchase of a property. It’s in your best interest to engage the services of a real estate lawyer (or a notary in Quebec).

Lien: A claim for money owed by a property owner to a supplier or contractor.

Listing agreement: A legal agreement between the listing broker and the seller describing the property for sale and stating the services to be provided and the terms of payment. A commission is generally payable to the broker upon closing.

Lump-sum payment: An extra payment that you make to reduce the amount of your mortgage. This is the same as pre-paying, which you cannot do if you have a closed mortgage.

Maturity date: The end of the term of the loan, at which time you can pay off the mortgage or renew it.

MLS®: Multiple Listing Service®, trademarks owned by the Canadian Real Estate Association. They are used in conjunction with a real estate database service, operated by local real estate boards, under which properties may be listed, purchased, or sold.

Mortgage: A loan that you take out in order to buy property. The collateral is the property itself.

Mortgage broker: A person or company offering mortgage products from several financial institutions.

Mortgage insurance: Applies to high-ratio mortgages. It protects the lender against loss if the borrower is unable to repay the mortgage.

Mortgage life insurance: Pays off the mortgage if the borrower dies so that his or her heirs do not assume the debt.

Mortgage rate: The percentage interest that you pay on top of the loan principal.

Mortgagee: The lender.

Mortgagor: The borrower.

Moving expenses: The cost of hiring packers, movers, or renting a van.

Offer to purchase: A legally binding agreement between you and the person who owns the house you want to buy. It includes the price you are offering, what you expect to be included with the house, and the financial conditions of sale (your financing arrangements, the closing date, etc.).

Open mortgage: Allows partial or full payment of the principal at any time, without penalty.

Portability: A mortgage option that enables borrowers to take their current mortgage with them to another property without penalty.

Pre-approved mortgage: Qualifies you for a mortgage amount before you start shopping.

Pre-approved mortgage certificate: A written agreement stating that you will get a mortgage for a set amount of money at a set interest rate.

Prepaid property tax and utility adjustments: The amount you will owe if the person selling you the home has prepaid any property taxes or utility bills.

Prepayments: Voluntary payments in addition to regular mortgage payments.

Principal: The amount borrowed or still owing on a mortgage loan.

Property survey: A legal description of your property and its location and dimensions (usually required by your mortgage lender).

Realtor: Trademark identifying real estate professionals in Canada who are members of the Canadian Real Estate Association, and as such, who subscribe to a high standard of professional service and to a strict code of ethics.

Refinancing: Increasing the amount of your current mortgage (at a new interest rate). The term of the new mortgage must be equal to or greater than the term remaining on your current mortgage.

Renewal: Renegotiation of a mortgage loan at the end of a term for a new term.

Sales taxes: Taxes applied to the purchase cost of a property. Some properties are exempt from sales tax and some are not. For instance, residential resale properties are usually GST exempt, while new properties require GST.

Service charges: Extra costs incurred when hooking up hydro, gas, phone, etc. to a new address.

Second mortgage: Additional financing, which usually has a shorter term and a higher interest rate than the first mortgage.

Survey: A document that shows the boundaries of the property and specifies encroachments, easements, and the placement of buildings on the property.

Term: The period for which the conditions of the mortgage apply and after which must be renegotiated.

Title: Legal ownership in a property.

Total debt service ratio: The percentage of the buyer or owner’s gross annual income required to pay mortgage, utilities, insurance, debts, and all other payments.

Variable-rate mortgage: A mortgage with an interest rate that changes with the market.

Vendor take-back mortgage: When the seller provides some or all of the mortgage financing in order to sell the property.