Mortgage Minute... Downpayment
This week, we want to highlight…DOWNPAYMENT
My best advice for first time homebuyers is to do a personal review of your finances to see what you think you would be comfortable paying each month for a mortgage payment. We can then work backwards and tell you what home price that equates to.
Once you know what kind of payment is affordable, you will want to ensure you have enough money set aside for the down payment and closing costs. The minimum required down payment is 5% of the purchase price, and you can typically expect closing costs to be between 2-3% of the purchase price. This money can be from your bank account, a gift from parents, or as a first time homebuyer, it can also come from an RRSP. The down payment must be from your own resources and cannot be borrowed.
If you haven’t yet been able to set aside enough cash, simply set up an automatic transfer from your bank account on each payday to a special home savings account. For example, if you think you would be comfortable with a mortgage payment of $1000/m and you are currently only paying $750/m in rent, set up the automatic transfer for $250/m or $125 biweekly if that is how you get paid. By doing this, you will not only be saving money for your down payment, but you will also be testing your budget and whether or not the $1000/m payment is actually affordable! In addition to this transfer, make a point to deposit any “extra” cash such as tax refunds, birthday money etc. You will be surprised how quickly this will add up! Put this money into an RRSP, and you may also get a tax refund that you can use to help with the closing costs!
If you have been renting and wondering if now might be the time you should buy a home of your own, we would love to talk to you!
First time homebuyers are some of our favorite clients. We will do a full review of your financial situation to determine if now is the time for you to buy your home.
If you aren’t quite financially ready, we will prepare your Personal Mortgage Plan, a step by step list to follow to get you to the point where you are ready to buy!
We are your Mortgage Partners!
For more information, you can contact us:
Posted by Kim Reddin
on September 16, 2013