Determining What You Can Afford
If you are thinking of buying a home, or transferring or refinancing you existing mortgage, you can use the Mortgage Calculator to determine:
- How much you can afford to spend on a home purchase
- What your mortgage amount and payments will be and compare different ways of paying off your mortgage faster
- Whether you can transfer or refinance your existing mortgage
- What you can afford for home improvements or cash take-out on your home
The Mortgage Process
A pre-approved mortgage certificate is a written commitment that you will get a mortgage for a set amount of money, at a specific rate of interest that is guaranteed for 60 to 120 days depending on the financial organization you choose. The commitment is made subject to the financial assessment and property appraisal. The service is offered by all mortgage providers (banks, mortgage brokers, etc.) free of charge and with no obligation.
Why is it a good idea to get pre-approved for a mortgage?
Getting pre-approved for a mortgage gives you an edge. Before you even go house hunting, you will know the size of your mortgage, the interest rate, and the size of your monthly mortgage payments. With your financing already mapped out, you can concentrate on finding the right home in your price range.
A pre-approved mortgage also puts you in a strong bargaining position when it comes to making an Offer to Purchase. If the seller wants to make a quick sale, you may be able to negotiate to a lower price because the seller knows you are a serious buyer and ready to go through with the purchase. On the other hand, if there are several people bidding on the home you will be able to put your best offer forward because you already know you can get financing up to a specific amount, to beat out earlier offers.
Making an Offer to Purchase
When you find the home that is right for you, your next step is to make an offer to purchase the home from the current owner. The owner can accept your offer, make changes to the offer and present you with a counter-offer, or reject the offer.
The Offer to Purchase
The Offer to Purchase is a legally binding agreement between you and the person selling the property. It sets out:
- your name
- the seller's name
- the address and legal description of the property
- the price you are prepared to pay for the property including the deposit you will put down
- the amount of your cash deposit
- the items you expect to be included in the purchase price
- your financing arrangements, such as your mortgage
- the closing date
- specific terms and conditions that must be met as a part of the purchase
- a time limit on meeting those conditions
You may want to discuss the Offer to Purchase with your lawyer before you sign it if it has not been drafted by a licensed REALTOR®. Remember, it becomes a legally binding agreement the moment it is accepted.
If you decide to cancel an offer that has already been accepted, you could lose you deposit and the person selling the property could sue you for damages.
If the seller does not accept the offer, your deposit will be returned to you.
When Your Offer is Accepted
Your offer has been accepted. Good. You are now on the home stretch - finalizing the details of your mortgage and closing the purchase of your new home.
Call your assigned Mortgage Specialist. Your Mortgage Specialist will need to receive the following documents and information:
- a copy of the real estate listing (your REALTOR® will provide)
- a copy of the accepted Offer to Purchase (your REALTOR® will provide)
- information on the source of your down payment
- income verification if you are employed
- a letter from your employer verifying your place of employment and income, or T4's and Notice of Assessment, or T1 General Tax Return and Notice of Assessment
- income verification if you are self-employed
- 3 years of Financial Statements and 3 years of Notice of Assessments, or 3 years of T1 General Tax Returns and 3 years of Notice of Assessment
Processing The Mortgage Application
Your Mortgage Specialist will want to verify the value of the property you are buying, your current financial picture and your credit history, so a property appraisal and credit report will be ordered.
Also, if your down payment is less than 25%, you would qualify for a high ratio mortgage on which you would have to pay insurance premiums. You decide whether you want to pay the premium in cash or have the lender add it to your mortgage amount. Your Mortgage Specialist can contact Canada Mortgage and Housing Corporation (CMHC) or GE Capital Mortgage Insurance Company of Canada (GEMI) to make the arrangements.
Be prepared to pay fees for the mortgage application, credit report and property appraisal.
Closing The Purchase
Closing day is the day you become the official owner of your home. However, the closing process usually takes a few days.
Typically, you visit your lawyer's office to review and sign documents relating to the mortgage, the property you are buying, the ownership of the property and the conditions of the purchase. Your lawyer will also ask you to bring a certified cheque to cover the closing costs and any other outstanding costs.
Once your mortgage and the title for the property are officially recorded and transferred into your name, you become the official owner of the property.
Congratulations! You have just bought a home!