 Ensure
you can afford your condo mortgage
and the monthly expenses you will face as a result of your purchase.
From CMHC:
Your bank manager or financial advisor can help you customize your
mortgage to suit your financial goals and needs.
CMHC’s on-line Homebuying Step by Step
Guide can also help you to determine what you can afford. You can find
the guide on CMHC’s Web site at www.cmhc.ca. There are many different
types of mortgages, including conventional, high-ratio and second
mortgages. Take the time to discuss Consider Your Mortgage Options
Mortgage payments are made up of the principal sum (the amount you
borrow) and interest (the amount you pay to borrow the principal).The
best plan is to minimize the amount of interest you pay. Some options
include:
- A larger downpayment—a smaller
mortgage means less interest
- A shorter amortization period—the
faster you pay off the loan, the less interest you pay
- A weekly or bi-weekly payment
schedule— instead of monthly payments
- Optional Lump sum payments—on top of
regular payments to pay down the principal portion of the loan
Features of a condo mortgage
that you may wish to consider, include:
- Prepayment—ensure you can pay down
your mortgage with a lump sum without penalty
- Portability-allows you to transfer
the terms and conditions of your mortgage to your next home
Assumability-allows you to take over the existing mortgage on the
property, as it may have a lower interest rate than the current
market; an assumable mortgage may also be a selling feature for when
you decide to move
- Expandability-allows you to expand
upon the first mortgage at the lender’s agreed-upon rate of interest
- Flexibility-This allows you to skip
one or more mortgage payments a year-this may relieve some financial
pressure during a tight period, but skipping a payment will add a
month to your mortgage Federal legislation restricts banks from
providing mortgages of more than 75 per cent of the purchase price of
a home without mortgage insurance.
CMHC mortgage insurance enables
Canadians to purchase a home with as little as a 5 per cent down
payment. If the home buyer does not fulfill the terms of the mortgage
contract and defaults on mortgage payments, CMHC mortgage insurance
protects the mortgage lender (typically from losses on the mortgage.
This arrangement assures the lender that mortgage funds are not at risk
and the home buyer is in a position to purchase a home sooner.
The minimum 5 per cent down payment
must come from the home buyer’s own resources and the lender must verify
that the home buyer can cover the closing costs of at least 1.5 per cent
of the purchase price. CMHC mortgage insurance does not provide
insurance for other aspects of the home purchase such as property and
casualty insurance, housing quality or life insurance.
Application for mortgage financing
for the purchase of a condominium should be made directly through your
lending institution which, in turn, will forward the application for
mortgage insurance to CMHC on your behalf. The assessment of a borrower
is considered to be the most demanding task in the review of home
ownership loans. CMHC provides guidelines to lenders for assessing
borrowers. Based on your personal circumstances, your financial
institution can provide you with the information relating to the maximum
mortgage for which you would qualify. |