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Ready to buy your new home?
Presented by
Nikki Kwiatkowski & Bret Wolfer
AgendaReady to buy your new home?
Are you ready?
• Exciting decision
• Ownership and building equity vs. Paying rent
• Saving for a down payment
• Calculate how much your home will cost each
month and practice living on that budget now
The 5 C’s of Credit
• Character
• Credit
• Capacity
• Capital
• Collateral
• Know your member
• Credit history
• Job and residence stability
• Attitude toward borrowing and repaying the debt
Character
• Repayment history
• Existing obligations and proposed loads
• Account and loan history with your financial institution
• Credit repayment history
• Credit Bureaus
Credit
Credit Bureau Report
Ability to Repay the Debt:
•Gross Debt Service – Max 32%
•Total Debt Service – Max 40%
Proof of Income – 2 years of income and employment history
to be recorded and verified in the form of:
•Recent pay stub
•Letter of employment
•Income tax returns or financial statements
CapacityCan you afford the payment?
Net Worth:
•Assets – liabilities
•Types of assets
•Value of individual assets
Down Payment:
•Amount of the down payment you are putting into the
project or purchase
Capital
The security pledged to the lender to support the loan
•Your signature
•Co-signer
•Serial numbered assets
•Real property
•Cash, bonds or certificate of value
•Shares in publicly traded company
Collateral
House Buying Process
• Pre-Approval
• Down payment
• Qualifying payments
• Payment calculators
Calculate the maximum house price you can afford
based on:
•Your current credit rating
•Available income/ability to make the payment
•Your down payment
Pre-Approval
Purchase price – down payment/purchase price = LTV %
$300,000 - $15,000 = $258,000/300,000 = 95% LTV
Loan to Value Ratio (LTV)
Owner Occupied Residential Mortgage
Conventional Mortgage
First Charge based on the lesser of the purchase price
(if applicable) or the “established value” as defined**
Up to 80% of the first $750,000 and 50% of any balance
300 Months
Maximum Amortization
Owner Occupied Residential Mortgage
High Ratio Mortgage
First Charge based on the purchase price (if applicable)
or the member stated value
Up to 95% based on the Insurer’s program in place at
the time of borrowing
300 Months
Maximum Amortization
The Down Payment
• Can be a gift (immediate family member)
• Proceeds of the sale of another property
• From savings (RRSP, account, TFSA)
Conventional Mortgage
House $325,000.00 Purchase Price
x 80% Maximum financing
= $260,000.00 Maximum mortgage
Down Payment = $65,000.00
Down Payment Calculation
High Ratio Mortgage
House $325,000.00 Purchase Price
x 95% Maximum financing
= $308,750.00 Maximum mortgage
Down Payment = $16,250.00 Can be a gift from an immediate
family member
Financing $308,750.00 Mortgage (above)
$8,490.63 Mortgage Insurance:
($308,750.00 x 2.75%)
$317,240.63 Total Financed
Down Payment Calculation
Include:
•Principal and Interest
•Property Taxes
•Condo Fees (50% of monthly fees)
Budget for:
•Life Insurance
•Disability Insurance
•Property Tax Adjustment
Qualifying Payments
Quick Calculation - Conventional
Example: $260,000 mortgage at 3.25% on 5-year term
with a 25-year amortization
Principal & Interest Payment $1,264.04/month
Property Taxes (approx $2,400/y) $200.00/month
Utilities $200.00/month
Total Housing costs $1,664.04/month
Principal and Interest
Monthly Income Example
$7,000.00/month (single or combined income)
Gross Debt Service (housing) – Maximum 30%$7,000 x 30% = $2,100/month max
Housing Payment: $1,664.04 / $7,000 = 23.77%
Total Debt Service (all debt payments) – Maximum 40%$7,000 x 40% = $2,800/month max
All other debt (including credit cards, car loans, etc) = $570
Housing Payment = $1,664.04
Total = $2,234.04/month / $7,000 = 31.9%
Result: The members in this scenario can afford the monthly payments
Can you afford the payment?
Quick Calculation – High Ratio
Example: $395,000.00 mortgage at 3.25% on 5-year
term with a 25-year amortization
Principal & Interest Payment $1,920.36/month
Property Taxes ( approx $2400/year) $200.000/month
Utilities $200.00/month
Total Housing costs $2,320.36/month
Principal and Interest
Monthly Income Example
$7,000.00/month (single or combined income)
Gross Debt Service (housing) – Maximum 30%$7,000 x 30% = $2,100/month max
Housing Payment: $2,320.36 / $7,000 = 33.15%
Total Debt Service (all debt payments) – Maximum 40%$7,000 x 38% = $2,800/month max.
All other debt (including credit cards, car loans, etc) = $570
Housing Payment = $2,320.36
Total = $2,890.36/month / $7,000 = 41.3%
Can you afford the payment?
• Flexible payment options
• 20% lump sum each year based on
your original mortgage
• 20% increase each year in payments
• Profit Sharing Program
The Servus Advantage
Offer to Purchase
• View potential homes
• Make an offer to purchase your dream home
• Negotiations
• Negotiate the purchase price of the home
• Legal contract
• Deposit is offered
• Condition of Sales
• Financing date
• Possession date
The Offer to Purchase
Your Lawyer
• Your lawyer
• Property Tax Adjustments
• Prepares Transfer of Title Documents for Land Titles
registration
• Prepares and registers mortgage documents for
registration at Land Titles
• Ensures that all previous liens on title are removed and
you have a clean title
• Calculates property tax adjustments and other fees
and ensures they are paid
Your Lawyer
Property Tax AdjustmentsProperty Taxes (e.g.: $2,400) are calculated for the year and paid annually:
Possession March 30
Due June 30
Example #1
•You take possession of your new home at the end of March. Taxes are due annually
in June
•The seller owes you tax money for January, February and March ($600)
•You have to pay the full amount ($2,400) in June
•You need to save $1,800 in 3 months to pay the full amount on June 30 or you can
add the amount to your mortgage and pay $266.67/month
•In January of the next year, you can start paying your property tax to your
municipality directly each month or you can add it on to your mortgage
Property Tax AdjustmentsProperty Taxes (e.g.: $2,400) are calculated for the year and paid annually:
Due June 30 Possession Sept 30
Example #2
•You take possession at the end of September
•Taxes are due annually in June and were paid by the seller
•You owe the seller for October, November and December taxes ($600)
•You have to provide the $600 to your lawyer in September
•In January of the next year, you can start paying your property tax each month to
your municipality directly or you can add it on to your mortgage
Protection
• Protect your family
• Protect your credit rating
• Protect your home
Life Insurance
•Pays off your mortgage if you pass away
•Premiums on a $260,000 mortgage for a 27-year old
non-smoker in good health = approx. $25/month
•Peace of mind
Protecting Your Family
Disability Insurance
•Covers your mortgage payment if you suffer an illness or
injury
•A $1,578.47 monthly mortgage payment for a 27-year
old non-smoker in good health = $43/month
Protecting Your Credit Rating
1.888.732.1494
Servus.ca/homeinsurance
The Additional Costs• Fair estimate = 1.5% of house price
• Remember:
• Legal Fees
• Appraisal cost
• House inspection
• Moving expenses
• Utility hookups
• And, your Property Tax Adjustment
This is an exciting time,
so remember to have fun!
Tips to Remember
Questions?
Thank you!Nikki Kwiatkowski – Branch Manager, West Lethbridge
Bret Wolfer – Branch Manager, Scenic Drive