How You Can Muster Up The Money For Your Real Estate Deposit

I frequently meet people who are eager to buy homes but who have yet to save their down payments. Being on the sidelines and having to watch other consumers build their home equity is making them frustrated.

So, given all of the latest changes in mortgage rules, can a person purchase a home without having a down payment? The answer to this question is both yes and no.

Although the past does not determine the future, history does indeed show that for Canadians, owning a home is a major part of establishing financial security and strength.

If this is something that you’re ready to do for yourself, start building up your real estate deposit and then leap into home ownership.

When purchasing a new home, you will be expected to have access to a mortgage deposit that can be put towards the sales price. Lenders don’t want you to borrow your real estate deposit either. This has to be the money of your very own – whether you’ve saved it up or gotten a loan from family members.

The larger your mortgage deposit is, the smaller your mortgage is going to be. Currently, you are going to need to have approximately five percent of the home’s sales price saved up for the real estate deposit.

Lenders also want to know that you’ll have sufficient funds remaining at the time of closing to cover the land transfer tax, your closing costs, any related legal fees, the PST for the CMHC coverage premium, an advance payment on your property taxes, and cash for hooking up your utilities and getting your things moved in.

For these miscellaneous and unavoidable costs, your lender will usually want you to have an extra 1.5 percent of the sales price saved up also.

Possible sources of your real estate deposit:

1. Your personal savings

This is money you can have invested just about anywhere, so long as it will be accessible ahead of closing. It could be mutual funds, a GIC, a savings account or your TFSA (tax-free savings account).

2. Your RRSP

If there are funds that you have already built up in an RRSP, you can use as much as $25k (for each person) from your own RRSP to serve as your real estate deposit.

You can remove money from your RRSP for your mortgage deposit without facing any tax consequences so long as it has been here for no less than 90 days – and you have as long as 15 years to put the funds back into your RRSP.

3. A monetary gift

Given how high the costs of owning a home currently are, a lot of young people are getting help from their family members when it comes to putting together a real estate deposit. This is perfectly acceptable to lenders, so long as a one-page “gift letter” is signed by you and your family stating this money has been given as a gift and is not a lown.

4. Can you borrow your mortgage deposit?

This is the very same problem that I had when purchasing my first house many years ago. I had an amazing credit score and a really good job, but I was not able to save up enough money for a decent real estate deposit.

I had a substantial line of personal credit that hadn’t been used, and I decided to apply it to my real estate deposit. I was terrified that the bank would learn about this and that the entire transaction would come to a grinding halt.

Well, it turned out that everything worked out – and I was able to use great saving and bonuses to pay this line of credit off – but this is NOT something that I would suggest doing.

Moreover, mortgage lenders currently have far more advanced computer systems than they did in time past along with underwriting processes that allow them to identify actions like this one.

Could you imagine discovering that either your mortgage insurer or your lender has decided to change its mind about qualifying you for a mortgage just days ahead of closing?

At the least – the real estate deposit that you’ve placed with the agent will be at risk – but the most likely outcome is that you will set off a chain reaction that affects every transaction connected to the purchase of your home.

However, there are new companies like Deposit Financing Canada, who are offering low-risk mortgage deposit loans. I’m not too sure if they’re the best idea for everyone buying a house, but I checked out the Facebook of Deposit Financing and it seems like they have decent reviews from their customers. You could possibly use them if the bank is okay with it.

You’ve probably given notice on your current home
Your seller probably has to bring this purchase to a close and move into his or her new home
And the seller that your seller is working with might have to bring their purchase to a close and move into their new home
And so forth
Why take such a risk? It could have a terrible impact on your life.

Ultimately, most people need to simply control their spending enough to save sufficient money for a real estate deposit. In theory, it is possible to purchase a home with zero down, but it might be a trifle dodgy, or it could entail a very high-interest rate.

For more on this topic please check out our blog post: Real Estate Deposits and Why Are They Needed? : Deposit Financing

How To Prepare For Moving Day – Packing Tips From Realtors

Although moving into a new home is an exciting transition for the majority of people, as realtors, we are aware that the move itself requires a lot of energy.

Another approach to deal with your move is to go on the internet. If it requires a road trip, make sure your vehicle can go the distance. Ahead of starting your moving preparation, it’s critical to calculate what you are ready to spend towards your move that will help you abide by it along the way. Once you have prepared yourself for the huge move, you can anticipate enjoying the hot summer weather in your new house. Hope you have a simple and painless move in! If you follow this advice, you’re going to be well on your way to quite a successful, smooth move.

The very first step is choosing when you’re likely to move. Keeping a running list can help you really feel as if you’re moving in the proper direction (pun intended) and you’ll be less inclined to forget key actions in the moving process. Getting prepared to move process is during its end.

Read More: How To Prepare For Moving Day – Packing Tips & More

How To Increase The Real Estate Value of Your Home By Home Renovations

The best part of owning a house is that it can be a great investment opportunity just by making several improvements. House designs keep changing with time buy you can keep track with them by making some renovations. Through these renovations, you can significantly raise the value of your home thereby attracting many home buyers. So, what are some of the changes you can incorporate into your living space to make it more valuable? Read on and discover some of these modifications in our home renovations article!

How Commercial Mortgages Function in Canada

In Canada, commercial mortgages are very popular among investors, which can be a shock to a lot of people, as this type of mortgage tends to have higher interest rates than residential mortgages. There is a clear explanation for this. Commercial tenancies last a longer period than residential options. Not only that, they are easier to handle. Residential leases tend to be signed annually, whereas commercial leases can go up to 10 years.

“Commercial mortgages may be the riskiest loan to take out, but it can wreak the best benefits” -Jared Bartos mortgage expert in Vancouver.

Commercial Mortgage Options

In Canada, a small commercial mortgages typically ranges between half a million to $2 million. When it comes to this type of mortgage, one of the key elements that play a role in obtaining it is the amount of income that is generated by the property, as well as one’s ability to pay back.

When the commercial loan is meaningful in amount, it comes accompanied by a lower interest rate than if it were to be a small mortgage, especially if the property is situated in a commercial area that is highly desired. Large loans tend to be made to owners of plazas, shopping malls, vacant lots, industrial land, and high-rise apartment buildings. Commercial mortgages can take weeks or several months to finalize, as environmental reports are required, and numerous conditions must be met. This process can be much quicker if there is a private lender involved, but rates tend to be higher.

The Process of Commercial Mortgage

It has been noted that having the aid of a professional mortgage broker can be extremely valuable when preparing to apply for a commercial mortgage. A licensed brokerage firm, would be more than happy to work with you in getting all your legal work in order. This type of firm can explain everything, from A to Z. To speed up the application, a licensed brokerage firm can present your income and financial statement to potential lenders.

A good broker can save you a meaningful amount of money on your interest rate. It’s important to mention that a broker doesn’t earn a commission for this type of loan, and thus, he or she will charge the borrower for services.

If you don’t have experience in handling a commercial property, you should hire somebody who does, because lenders like to be certain that the property is going to be taken care of and will operate smoothly. Mortgages that are insured by the Canada Mortgage and Housing Corporation (CMHC) have a low-interest rate when there is sufficient income to support the loan. Even so, it is important that you know that demand and supply also plays an important role in the rate.

Investors in Real Estate

If the property is being categorized as an investment, an investor should know that residential real estate might be financed with commercial mortgages. The amount of money that you will be able to borrow will depend on the property.

Most lenders expect a down payment that consists of at least 35%. They tend to look at the current status of the business, as well as one’s credit history. For those businesses that are operating, lenders expect them to be profitable and steady. If you are not operating a business, business plan and financial projections will be requested. If it’s just for commercial use, CMHC won’t place insurance on the property but may ensure a venture that is of mixed nature (commercial and residential).

This post was written by Community Lending Centre

Community Lending Centre
2608 Granville St #550, Vancouver, BC V6H 3V3
(604) 614-2382

Real Estate Lawyers or Realtors?

When a realtor makes a sale they get a high commission. The seller usually pays the commission, but the cost may be passed onto the buyer indirectly. Real estate lawyers charge their customers by the hour. Do you need to work with a real estate agent or a lawyer to purchase a home?

Advise of the Law

Real estate laws will vary by state. The assistance of a real estate agent is not legally required but they can help with the preparing a purchase contract. In some states only the lawyer is allowed to prepare the documents for home purchase, do the title search, and agree to close the deal.

Why Hire an Agent

Buying a home is a complex process and many people find this easier with the assistance of a real estate agent. There is a lot of paperwork to fill out and having advice from someone inside the industry can help. Other parts of the home buyer process need to happen in a short period of time. Inspectors need to be hired, negotiation over repairs and price, and keeping relations with the sellers via their agent, along with other topics. This is all routine for the agents. Experience agents can recommend good inspectors, mortgage brokers, and make can the experience easier. They know what appropriate behavior for agents and clients are in their region.

Seller Agent

One of the biggest reasons to hire your own agent is that you will have representation and the seller’s agent will not take over the entire process. The seller’s agents may pressure you to allow them to represent you and the buyer. This is known as a duel agency relationship. This often benefits just the seller. Sellers’ agents may not always make it clear that they are working for both parties. If there is one agent involve it can be taken that they are working for the seller. It is better to work with your own agents , an expert assert, or no agent at all then to work with a duel agent.

Stay in Control

You are the only person that knows what you want in a home. An agent can scout out homes for you and scan the listings, but they do not understand your exact needs. They may not take you to “for sale by owner” listings. There are ways that you can find your dream home on your own.

Become Educated

Even if you work with a lawyer or an agent it you should educate yourself on the home buying process. Maple Ridge Realtors on Facebook believes that you should learn about the market value of homes that are selling in the same area you can protect yourself against an agent that would want you to put in a high bid for a home. This will reduce the stress when you are asked to sign several documents in the home buying process.

Reasons to work with an Attorney

Except in states where a lawyer is required the average real estate transaction does not require a lawyer. Many transaction are standard and many people will say exactly what they are looking for in the purchase and all that is needed is a couple of signatures.
If legal issues happen and the real estate agent and the real estate agent is not able to answer the questions or the issue the lawyer may be needed for help. An agent can help with negotiation issues but they cannot answer all legal questions. For example if the new home has an illegal in-law unit that has a tenant living there is the buyer able to evict the person in order to rent it to someone else. Only a lawyer can answer this question. If you would like to rent the home for an extended time period before purchasing it are you able to do so? This will require an additional cause in the lease. If there is unusual language in your contract or you are concerned about some of the terms let the attorney look over the documents.

How the Real Estate Agent Gets Paid

Real estate agents are paid on commission and not a salary. They get paid only after the home buying transaction is complete. They do not get paid if the buyer loses interest or cannot get a mortgage to close the deal. The seller usually pays the commission to both agents which is around five percent of the sale price that is then split between these two agents. This percentage may vary. For example a seller may get a lesser percentage if the home is very expense. In probate court costs need to be paid as well. Some buyer’s agents have been known to offer the buyer a percentage at the time of closing.

There are some variations on these commission arrangements. A buyer may hire an agent and pay their commission. Less common an agent may offer to work for an hourly fee rather than a full commission. You may then ask the seller to bring down the price of the home. Discount and rebate brokers are work but they may provided limited service or make work over the internet. Their commission may be as low as one percent.

Agents Working on Commission have a Conflict of Interest

Even an agent that only works for the buyer and not the seller has their own financial interest in the closing. While an experienced agent will not push you into anything and will not push you into making a bid on a home that you do not love. They may recommend that you an inspector that may overlook some issues. When looking to find a reliable agent see Choosing Your Real Estate Agent.

How Attorneys are Paid

Lawyers often charge by the hour. Their fees can range from $150 to $350 per hour. Attorneys may charge a flat fee for a specific task such as preparing the closing documents. Although they like to start with a blank check and bill based on the hours spent on the task you should call the shots. If you hire a lawyer for a limited number of hours or a specific task you can negotiate the price. You need to get this agreement in writing.