Mortgage Calculator: How Much Can You Afford?

January 3, 2008 · Filed Under Mortgages · 3 Comments 

How much of a house you can afford depends on a number of factors. The most important are your gross household income, your down payment and the mortgage interest rate. Lenders will also consider your assets and liabilities. Your own lifestyle and debt comfort zone also come into play.

This calculation is based on two simple rules that lenders use to determine how much of a mortgage you can afford. The first rule is that your monthly housing costs should not exceed 32% of your gross monthly household income. Housing costs include monthly mortgage payments, taxes and heating expenses. If applicable, this sum should also include half of monthly condominium fees.

Secondly, your entire monthly debt load s hould not be any more than 40% of your gross monthly income. This includes housing costs, and other debts such as car payments, personal loans, and credit card payments.

Feel free to use the mortgage calculator on our website for a quick calculation. For a more in depth assessment CanEquity will display an entire payment schedule for the life of a mortgage along with a summary of payments, interest, and balances within the mortgage term.

The average price in the current St. John’s Real Estate market for a single family home is about $150,000. Assuming a 5% ($7500) down payment. Interest rate of 5.79%

  • The amount you will need to mortgage is $146,418.75. This is amount has CMHC insurance fees included. The calculation is as follows: Purchase Price ($150,000) subtract Down Payment ($7,500) equals $142,500. To this amount we add a 2.75% insurance premium based on your Loan to Value (LTV) ratio of 95%. Therefore, 2.75% of $142,500 is $3,918.75 (cost of your insurance), plus $142,500 equals $146,418.75.
  • You will have 549 payments of $459.30 every 2 weeks for 21 years and 2 months, plus one final payment of $158.58 to payout a $146,418.75 loan with a rate of 5.79%.
  • Choosing biweekly accelerated payments will pay off your mortgage 46 months sooner, with a total of $23,264.48 in interest savings.
  • Mortgage balance remaining at end of term is $125,752.66.
  • By increasing your Down Payment you could lower your LTV ratio, therefore lowering your CMHC insurance premium of 2.75%.

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10 mistakes buyers make when purchasing a home

January 2, 2008 · Filed Under First Time Buyers and St. John's Real Estate · Comment 

1) Making an offer on a home without being pre-approved.

Being pre-approved will make your life easier so take the time to speak with a Mortgage Specialist. They will help you determine a price range you can afford and lock in a mortgage rate for a set period of time.

2) Not having a Home Inspection.

Trying to save money today can end up costing you tomorrow. A qualified home inspector will detect issues that buyers can overlook.

3) Limiting your search to open houses, ads or the internet.

Many homes listed on the website have already been sold. Your best course of action is to contact a Realtor. Call or Email Fraser & Stephen Winters. We have up-to-date information that is unavailable to the general public. The best resource to help you find the home you want.

4) Choosing a Real Estate Agent who is not committed to forming a strong business relationship with you.

Making a connection with the right Realtor is crucial. Choose a professional who is dedicated to serving your needs – before, during and after the sale.

5) Thinking there is only one perfect house out there.

Buying a home is a process of elimination, not selection. New properties arrive on the market daily, so be open to all possibilities. Ask your Realtor for a comparative market analysis. This compares similar homes that have recently sold, or are still for sale.

6) Not considering long-term needs.

It is important to think ahead. Will the home suit your needs 3-5 years from now?

7) Not examining insurance issues.

Purchase adequate insurance. Advice from an insurance agent can provide you with answers to any concerns you may have.

8] Not buying Title Insurance.
Title insurance is unlike any other kind of insurance. It is not house insurance which only protects the contents of your home or its structure and for which you have to pay a monthly or annual premium. Unlike house insurance, you only pay a one-time premium with no deductible.
Title insurance is distinctive in that it protects your ownership or title against losses incurred as a result of undetected or unknown title defects, for as long as you own your home. Even if you are the rightful owner of your home, there are instances such as real estate title fraud, when your title can come into question.

9) Not knowing total costs involved.

Early in the buying process, ask your Realtor or lender for an estimate of closing costs. Survey costs, home inspection costs, possible title insurance, possible CMHC fees and attorney fees should be considered. Remember to examine your settlement statement prior to closing.

10) Not following through on due diligence.

Buyers should make a list of any concerns they have relating to issues such as: crime rates, schools, power lines, neighbors, environmental conditions, etc. Ask the important questions before you make an offer on a home. Be diligent so that you can have confidence in your purchase.

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Strategies for Buying Real Estate in St. John’s

December 29, 2007 · Filed Under First Time Buyers and St. John's Real Estate · Comment 

Learn as much about market values as you can. Compare properties, not only the price but the condition of the property. Visit open houses. Arrange private viewings. Ask your Realtor to prepare a market evaluation of the property (this will tell you recently sold prices and active listing prices of similar properties). Email me and I will send you daily active listings as they are listed on the market.

Most offers are subject to two major conditions. 1) Home Inspection and 2) Financing

The Home Inspection is an option that you, as the buyer, can drop, but for the cost of the inspection versus the cost of the house I would not recommend this. I’ve seen time and time again a Home Inspection saving my clients thousands of dollars in unseen defects.
As for the financing, this option is a must. No financing = no mortgage = no house. Read my post from yesterday Arrange Your Mortgage – Get Pre Approved. The way the Real Estate market in St. John’s, Mount Pearl and surrounding areas are booming now, having your pre-approval in place is key.

Armed with this knowledge you will feel comfortable in writing an offer when the right house appears.

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Arrange your Mortgage – Get Pre Approved

December 28, 2007 · Filed Under First Time Buyers and Mortgages · 2 Comments 

Buying your first home? Second? Looking for an investment property in the St. John’s Real Estate market? The first step in buying real estate is obtaining a pre-approved mortgage.

The St. John’s real estate market is booming! Having your pre-approval in place will certainly work in YOUR favor.

A pre-approved mortgage is a mortgage for a set maximum amount and interest rate that is arranged by a lender (ie bank) prior to the purchaser finding a house.

With a pre-approved mortgage you will:

  • Know how much you can afford and what your payments will be
  • Lock in your interest rate at today’s rate (or lower if rates drop), usually guaranteed for 90 – 120 days
  • Demonstrate that you are a serious buyer, which can help in your negotiations with sellers and their agents

The key to choosing a mortgage is to know your options. The more you know, the more likely you’ll save money now and in the future. There are numerous types of mortgage options available, fixed rate, open rate, variable rate – they can even blend 2 different types to sort your needs.Payments can be set up on a monthly, bi-monthly, bi-weekly and even weekly basis. As well, you get to choose the date of the month to make the payment. By changing from monthly to a bi-weekly payments, a typical 25 year mortgage can be reduced to 21 years. Thats a LOT of interest saved.

A great way to save on interest costs and reduce the life of your mortgage is by making annual principal payments. $2000 extra a year on a 25 year mortgage will reduced the amortization period to 15 years.

There are lots of mortgage calculators on the internet. Play around with them. Try different scenarios.

Jeff Burton with RBC is a great resource when it comes to mortgages. Speak with your mortgage specialist today and determine the right options for you.

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