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There's nothing quite like owning your first home. Use the tools below to help you with the home-buying process:
Learn more About lowering your mortgage rate.
The amount of your down payment will determine whether you'll have a conventional mortgage or a high-ratio mortgage, which must be insured.
Effective February 15, 2016, the minimum down payment for new mortgages have been modified. The new breakdown is as follows:
High ratio mortgages must be insured by a mortgage insurer such as the Canada Mortgage and Housing Corporation (CMHC), Genworth Financial Canada or Canada Guaranty. You will be required to pay the premium for this insurance.
The information in this article is general only; it is not intended as specific investment, financial, accounting, legal or tax advice for any individual.
If you’re thinking about buying your first house, one of the first questions you may ask yourself is, “How much can I afford?” Read the following mortgage affordability tips before you set out to find the home of your dreams:
Consider your annual household income. This is a key factor when determining how much of a mortgage you can afford. In addition to calculating your annual household income, consider any income changes that may impact your ability to make your payments. For example, if there are currently two major income sources within your household, would you still be able to afford your mortgage if one was removed? What if a child comes into the picture and your partner decides to become a stay-at-home parent? Consider all factors before deciding.
Consider your down payment. The size of your down payment is one factor in determining the size of mortgage you can afford. The size of your down payment is one factor in determining the size of mortgage you can afford. For more information about down payments, visit What are the Down Payment Requirements?
Consider your debt. When determining “How much can I afford?” one of the other important factors to take into account is the amount of debt you currently have. The lower your debt-to-income ratio, the more money you’ll likely have to put towards your mortgage. In addition, your debt level will also help to determine how large of a mortgage you will qualify for.
Consider your amortization period. If you are simply trying to keep your regular mortgage payments low in order to comfortably fit the payment into your budget, you will probably want to apply for a mortgage with a longer amortization period. However, if you don’t mind a somewhat larger regular mortgage payment in order to save money on interest in the long run, you may want to consider a shorter amortization period.
Consider your closing costs. Closing costs are an often overlooked expense that will definitely help determine how much money you can afford as a down payment.
Consider your property taxes, various types of homeowner’s insurance such as damage, title etc and additional expenses. Lastly, there are a few additional expenses that may impact how much money you have to put towards your mortgage each month. Expenses like property taxes, homeowner’s insurance and even things like home maintenance should be factored in before making your final decision. These costs are often overlooked but should be considered before settling on the home of your dreams.
Buying a home is a big financial decision. When you start out by knowing what mortgage you can comfortably afford and what houses fit into your price range, you will be prepared to find the ideal house for your situation. CIBC also makes it easy, by offering helpful mortgage calculators like the Mortgage Affordability Calculator that lets you enter your information to find out the price range that’s right for you.
For additional information about how much mortgage you can afford or to complete an application by phone, contact a CIBC Mortgage Advisor at 1-866-525-8622.
Taking the time to narrow down your house-hunting priorities can help your real estate agent provide you with a range of properties that meet your criteria, which increases your chances of finding the house that's right for you.
Search Canadian real estate listings on The Canadian Real Estate Association's Multiple Listing Service.
Mortgages are big investments that require financial stability and dedication. Start the process on the right foot by familiarizing yourself with different types of mortgages and rates, and learn helpful facts that will prepare you to be a responsible home buyer.
Closed mortgages: Closed mortgages have prepayment options of up to 20% of the original mortgage amount. If you decide to pay out, renegotiate or refinance before the end of the term of a closed mortgage, prepayment costs will be applied.
Open mortgages: An open mortgage can be repaid at any time throughout the term, either in full or partially without any prepayment costs. Provides flexibility until you are ready to lock into a closed term.
Convertible mortgages: A convertible mortgage is similar to a closed mortgage, but gives you the option of converting to a longer, closed mortgage at any time without prepayment costs. With this option you can make an annual prepayment up to 10% of the original mortgage amount.
Fixed rate mortgages: A fixed interest rate remains the same throughout the entire term. This option allows your payment to remain constant so you know exactly how much you will pay every month and what amount you will have paid off at the end of the term. Learn more about fixed mortgage rates.
Variable rate mortgages: A variable interest rate will fluctuate with the CIBC Prime rate throughout the mortgage term. This impacts the amount of principal that you pay off each month as your mortgage payment will remain constant. Learn more about variable rate mortgages.
Mortgage payments can be made weekly, bi-weekly, semi-monthly and monthly.
With a CIBC Home Power Plan you can include a CIBC line of credit or combine a line of credit and a mortgage, in order to consolidate all of your personal credit under one simple, low-interest and secured borrowing solution, which can be adjusted to meet your changing needs.
A mortgage refinance option, known at CIBC as a CIBC Home Power Mortgage™, allows you to borrow additional money on your mortgage, so you can afford the things you've always wanted. For a low price, it can save you money and help you consolidate your debt into one convenient payment.
A credit rating is a measure of how dependable you are when it comes to repaying your debts. A good credit rating goes a long way towards helping you obtain credit and determining the rate you receive. Your rating is not established by the government or by financial institutions - it is established by you.
Credit bureaus create a detailed report containing information such as personal identification, your credit history, public records with an effect on your credit and a list of parties you have authorized to access this information. For example, if you pay your bills on time or if you repay a loan, you will be in good standing with the credit bureau. So, when it's time to borrow, a lending institution will know that you are credit worthy.
You have the right to see the information in your credit bureau file, which includes your credit rating. Contact one of Canada's credit bureaus to receive a copy of your credit report by mail, free of charge. For a fee, you can also view your credit report online. Check your report carefully - if there are errors in the payment information on your credit report, you should send a letter to the credit-reporting agency requesting rectification of your records.
For more information, contact one of the credit bureaus directly at:
TransUnion Canada: 1-866-525-0262
Equifax Canada: 1-800-465-7166
The easiest way to establish a good credit rating is to pay your bills on time. Another way is to get various forms of credit, such as a credit card, loan, or a line of credit. If you use your credit responsibly and at least make your minimum payments, you can develop a history of good credit.
When you take out a mortgage on a home, you’ll generally have your regular payment automatically deducted from your account, to cover the entire amount. This can be deceiving, since your mortgage payment may consist of several components: the mortgage principal and interest, property taxes and mortgage life insurance. Let’s take them one at a time.
The mortgage principal is the amount of the original mortgage, less any payments made towards it. This does not include interest, which is calculated on the remaining principal balance and paid with your regular payments.
Generally, mortgage interest costs are front-loaded, so that that interest comprises a much larger percentage of your regular mortgage payment at the beginning of the life of the mortgage than toward the end.
This may be part of your regular mortgage payment. The property taxes that are based on the official assessment of the market value of your property. These taxes are ordinarily paid in installments. CIBC will hold these payments in escrow until they are due as the respective city/municipality will send the bills directly to CIBC.
For convenience mortgage life insurance premiums are added to your regular mortgage payment. Should you pass away and your claim is approved, the outstanding principal balance of your mortgage on the day you pass away would be reduced or paid off (up to a maximum of $750,000).
Home ownership is more affordable than you may realize and is also a great investment alternative. For what you are paying in rent, you could own your home.
Take a look at how practical and affordable owning a home can be.
Find out if you should rent or own with the Rent vs. Own Calculator.
*The information presented above is for illustration only. Rent and Home prices are based on the Survey of Canadian Prices (Royal LePage, Second Quarter 2005, Issue No.32). Monthly mortgage payment is based on a $150,000-$250,000 mortgage, with 5% down payment at an interest rate of 5.90% per year (rate as of October 5, 2005), on a 5-year closed term and a 25-year amortization. Mortgage payment amount does not include property taxes, insurance premiums, utilities and common expenses.
Before you fall in love with a home, you'll want to ensure that you qualify for a mortgage so you have the peace of mind of knowing that your financing has been arranged. Get a CIBC Pre-Approved Mortgage Certificate and shop for your house with confidence.
A guaranteed interest rate for 120 days from the effective date of the Pre-Approval Certificate. You signal to sellers that you’re serious about your home buying intentions. This may provide leverage in the negotiation process, especially if there are multiple parties bidding for the property.
CIBC strives to simplify mortgage pre-qualification with 3 basic steps:
Once you’ve selected the house you intend to buy, you will need to complete a full application to secure your mortgage.*
*All mortgage applicants must meet CIBC lending criteria.
You thought this day would never come. You've found the perfect home. Now you're ready to make your offer.
Once accepted, an Offer to Purchase is a legally binding agreement between you and the vendor. Along with your mortgage agreement, this is one of the most important documents you'll sign.
It locks you into the conditions of the purchase, so make sure your interests are protected by discussing your Offer to Purchase with your lawyer or notary prior to signing.
Congratulations, once your Offer to Purchase is accepted, it's time to contact a CIBC advisor.
Reminder: You will need a cheque, bank draft, or money order to accompany your Offer to Purchase as a deposit.
Your offer has been accepted. You've reviewed your mortgage options and now need to finalize your mortgage agreement. Here is a list of the paperwork you'll need to bring with you to complete your CIBC Mortgage.
Call 1-866-525-8622 for more information
While your down payment and mortgage will cover the purchase price of your home, it's wise to consider the other expenses involved in buying a home.
You'll pay some costs at the beginning of the home-buying process and others, known as closing costs or disbursements, when your home purchase is finalized.
This is the fee for determining the property lending value for mortgage purposes. This value may or may not be the same as the purchase price of the home.
The home inspector evaluates the structures and systems that make up your home and provides you with a written report. While not mandatory, many people make a professional home inspection a condition of their Offer to Purchase.
A survey indicates the boundaries and measurements of the land and positions of major structures, and any registered or visible easements (such as a driveway) or encroachments (such as a neighbour's fence) on the property.
Levied in certain provinces whenever a property changes hands. In some cases, first time homebuyers may be exempt from a portion of this cost.
These fees vary by province and are subject to GST or HST where applicable. Ensure your lawyer's quote includes all related expenses and disbursements, not just legal fees. Make sure your interests are protected by discussing your Offer to Purchase with your lawyer or notary prior to signing.
Some properties are GST and/or PST sales tax exempt and some are not. Generally, GST or HST where applicable is charged on new homes, but not on resale properties. Always ask before signing an Offer.
Title insurance is optional and covers problems that may arise due to encroachment issues (for example, a structure on your property is actually part of your neighbour's property and needs to be removed), existing liens against the property's title, title fraud, undischarged mortgages and other issues relating to the property's previous owners.
Usually, mortgage default insurance premiums range between 0.5% and 2.75% of the principal plus applicable fees (may be subject to provincial sales tax which cannot be added to mortgage amount)
If your down payment is less than 20% of the purchase price of your home, you must pay a one-time insurance premium on your mortgage amount. You can make arrangements to pay the premium to CIBC before closing, or it can be added to the principal amount of your mortgage. If it is added to the principal amount of your mortgage, you will pay interest on it at the same interest rate you pay on the principal amount of your mortgage.
You will need to pay interest on any gap between the closing date of the purchase and the first payment date of the mortgage. You can avoid an interest adjustment by arranging to make your first mortgage payment exactly one payment period after your closing date.
You will be required to reimburse the vendor for any prepaid property taxes or utility bills.
Protection for your home and contents.
Costs vary but can be conveniently included in your regular mortgage payment.
Mortgage life insurance is optional and provides peace of mind. It protects your family’s financial security by paying off all or a portion of your mortgage (up to a maximum of $500,000) in the event of the premature death of you or your spouse.
Don’t forget to consider general expenses such as moving, upgrades, and home decorating costs as well.
Buying a home is a major step, and often the most significant purchase you will make. When making your final decision, it is important that you are aware of the following:
You’ve looked at the house several times. On the surface, everything looks good, so you’re ready to buy. However, the home inspection professional you hired doesn’t agree. Significant problems such as unstable foundations or roofs will require a comparatively large output of labor and expense. In such a situation, discuss with your real estate agent what options are available.
Before you place an offer on a house, make sure you’ve looked at all the costs involved including fees for closing costs and your mortgage down payment. Depending on the price of the home you want to buy, these costs can be significant.
Similar to the home inspection, your final walk through as a buyer may reveal something unexpected. Maybe there was a throw rug placed over a hole in the floor or an appliance that doesn’t work. The final walk through is the last stop before purchase and if issues arise, discuss with your real estate agent what options are available.
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