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