Home Buying and Selling

How Mortgages Work

How Mortgages Work

Mortgages and the Down payment 

Have you been wondering how mortgages work? When it comes to buying a home we all have to think about how we’ll finance it. It’s a major purchase and one that is life changing, you’re becoming a homeowner, it’s exciting. First we should review how mortgages work. 

There’s a lot that goes in to purchasing a home, you need to do a mortgage stress test. This test will determine what sort of mortgage you qualify for, we’ll discuss more of that later. We want to make sure that you also understand the two different types of mortgages as well, open and closed. We’ll start by discussing the down payment. 

The Down payment 

The down payment is just one part of the whole sale process, it’s a way of letting the mortgage lenders know that you, the buyer, are able to handle the financial sound. It also let’s the lender know that you’re able to make the monthly payments. It’s important for you to start saving for the downpayment well in advance of making an offer on a home. 

When it comes to the first step that you’ll take in this process, after saving, will be to find a mortgage lender. What is a mortgage lender? They’re a bank or an organization that is willing to lend you the money you need to purchase your new home. 

In Canada, there are a few lenders to choose from, for example, The Royal Bank of Canada, Scotia Bank, etc. In order to be able to get a loan you need to be eligible, this is determined by completing the pre-approval process. In this stage it’ll involve the mortgage stress test. We actually covered this in a previous blog. We’ll do a quick review of that here. 

The Mortgage Stress Test  

What is the mortgage stress test? To get more details please also check out a previous blog. To answer this question, in short, the stress test is designed to determine and see whether you qualify for a mortgage. Most lenders will require you to supply government ID, proof of address, employment information, employment history, credit history, credit score, and that you have an account with a Canadian bank. 

The stress test will allow the lender to determine a budget and how much you’ll be able to afford. Which is very important when it comes to what price range you can look at when house hunting. It’s also important to know so that you can budget for each month, making sure that you can make your mortgage payments, along with other payments that go in to having a home. There are two types of mortgages and this test will also help determine which one might be best for you. 

What are Open and Closed Mortgages?

Did you know that there are two types of mortgages? In Canada, when it comes to how mortgages work, all mortgages are either open or closed. Each one has different terms, and these terms will determine what’s allowed and what’s not. The terms also decide how often payments can be made and how much can be paid off. You can prepare choosing what type of mortgage you want, you’ll need to review you finical situation to do this. 

Closed mortgages have lower interest rates, however, they have more payment penalties. The penalties will be outlined in the montage details and will state how much money can be paid for each payment. You can lowed the monthly payment in exchange for a longer amortization period. 

Open mortgages have payment privileges at a higher interest rate. In this case your monthly payments don’t have a limit to what the specific amount can be. You can make lump sum payments if you choose. With an open montage you’re able to pay it off faster in many cases. 

When you’re deciding what mortgage is best for you, you’ll need to ask yourself a few questions. Some of the questions you might want to ask yourself are; what is your financial situation, can you pay your mortgage off early, when do you plan on selling, do you plan on selling before the mortgage term is up, what mortgage rate will you be able to afford. These are just a few important questions you need to try and answer. The next step will be actually applying for a mortgage. 

Applying for a Mortgage 

Now you’re ready to apply for a mortgage loan, but how do you do that? When applying for a mortgage it can be pretty straight forward, and the current market is flexible. Because the market is flexible it means that it’s easier for homeowners, and new homeowners, to get a loan that will suit their needs. You’ll apply for your mortgage through the financial institution of your choice, we listed a few above. They’ll walk you through the process in greater detail.

If you want lower rates and more freedom with loans, you’ll need to compete the qualifying criteria and also prove that you are able to make the monthly payments, the stress test will help determine this. Then when you’re ready you can begin to look for the house of your dreams, this is the really fun part. I can’t want to help you along in this journey. 

Contact Lori VanDinther and Team 

Taking the step to look for your new home can be a big one for some, and I want to make sure that you have a wonderful experience. Myself and my team work hard to make sure that our clients are happy and in love with their new home. 

You can contact me either by phone to email and I will be happy to answer any questions about how mortgages work, and any others you might have. If you’ve been wondering what your home is worth, you can use my What’s My Home Worth calculator. I’m looking forward to working with you soon! 

Social Distancing Home For Sale Real Sign

Real Estate is an Essential Service

Social Distancing and Real Estate

Since March we have been practicing social distancing and it has had us make some adjustments to how we operate our real estate business. Since these measures were put in place, they have caused many business to close, and because of this, many people have wondered whether or not real estate is in fact an essential service.

The truth is, REALTORs are an essential service, as it has been classified in both Canada and the U.S., some believe that it isn’t an essential service. While that might come from a good place, it just isn’t true. The consequences of closing down this type of business would be detrimental to so many and for many reasons.

RE/MAX

It’s true that RE/MAX lobbied and continues to lobby for real estate during this time, that it is an essential service. With some agents advertising to their clients to hold off on selling, it’s important to understand that in a normal situation, waiting isn’t an option for many people.

One issue is that when someone has already sold their home and now has to look for a new one. It’s can be true that many of Canada’s housing markets were in the sellers territory earlier in the year, and with a low housing supply and a growing demand. it has motivated a lot of homeowners to list their property.

Anther issue is that, for some, it might be that they have to sell to finance the new home they’re already agreed to purchased. There might be a situation where a family is living in a precarious place, and have no choice but to sell and move. Other reasons could be that the neighbourhood has crime or there are unsafe conditions within the home, these issues along with many more, might be what forces someone to sell.

Spring 2020

It was reported recently that Canada’s unemployment rate in March 2020 reached 7.8%, that’s up from 5.6% in February 2020. Also, incomes are down, while monthly bills continue to come in.

This Spring has made it clear that the real estate market is not as busy as it would usually be. This is due to the fact that there is a global pandemic, preventing Open Houses to take place. The real estate industry has taken steps to ensure the safety of clients and REALTORs, but using virtual tours and other technologies to limit face-to-face contact.

Real estate agents have been able to adapt their business procedures to make sure they are following the guidelines set out by the government. These include digital listing presentations, virtual open houses and showings, video conferences, e-signatures and more. RE/MAX agents have been doing completely digital transactions, and clients have been open to these new ways of conducting business.

Contact Lori VanDinther

If you’ve been thinking about selling, buying, or have any questions about COVID-19 safety measures, please contact Lori today. We know this is an unprecedented time, Lori and her team are working hard to make sure clients safety is number one. 

Canadian Real Estate Market Home Sweet Home Welcome

The Canadian Real Estate Market Continues During COVID-19

The Canadian Real Estate Market

We’re all living through an unprecedented time and lots of people are wonder how this is effecting the Canadian Real Estate Market. And in this time of social distancing, it can be hard to see how the real estate market will fare. However, there are still sellers that need to sell and buyers that need to buy.

And there are some excellent solutions out there to help ensure the process isn’t interrupted. With the help technology we can continue to see the Canadian real estate market transactions continue.

There’s Great News For Buyers

There is a silver lining to COVID-19 in regards to the real estate market. That if it’s financially possible, this could be the perfect time to buy a house. Since the interest rates are at their lowest that we’ve seen in years. This lower interest rate is in response to COVID-19 by The Bank of Canada. They cut interest rates for Canadian’s by a full percentage point in March.

As a result of this lower percentage, home buyers that are looking to obtain a mortgage can now expect to be able to borrow at a lower rate. And with this fixed term mortgage rates also on the decline, home buyers now have the flexibility to borrow/move. They can also aim for a higher price or get a better mortgage rate with less expensive mortgage payments.

Technology and Real Estate

There have been some major leaps in technology which has ignited a shift in the real estate market. It’s now so easy to learn more about a home, condo, townhouse and any other kind of listing. Simply by going online and in many cases getting to have an entire walk through while still in the comfort of your own home.

These virtual tours allow the buyer to see the home and really get a feel for it. And during this time of social distancing, we need this type of technology more than ever. There could be a market increase in both recreational and serious buyers on this online marketplace. That’s why agents should make sure that their listings are well detialed.

360 Virtual Tours

Now is a good time to find a photographer that specializes in 360 tours and use them for your listings. More and more agents had been are starting to do this already. These tours create a captivating experience for your potential buyer.

You want to make sure that your tours are navigable, interactive and controller friendly. The ultimate goal here is that the virtual tour will replicate the experience of having an open house or a walk through. During this time, this is a highly recommended tool. And even after this period in time, it’s an excellent piece of technology to have in your tool box.

It’s Time To Go Paperless

Going paperless is never a bad idea, it helps the environment. And during this time of COVID-19 there really isn’t any other choice. There are numerous apps that you can use to make this process as easy as possible.

These apps allow signatories to sign a PDF or word document, using your phone or tablet. Many real estate agents have already been using these apps and they work wonderfully. You can ensure your clients that they can continue to work with you and safely social distance.

Face-to-Face Is Now Screen-to-Screen

We’re all practicing social distancing so having a face-to-face meeting just isn’t possibly anymore. So using the power of technology we can bring meetings to the comfort of our own homes. And there are lots of apps that are user friendly that you can use. Some of those apps are FaceTime, WhatsApp, Zoom and there are many more.

These screen-to-screen meetings can be much more effective than phone calls. And these types of calls can even be used to show the home to the potential buyer as well. You’re able to walk them through it and show them more than what the listing has and offer a more detailed look inside the home.

Contact Lori VanDinther

The pandemic we are currently living through is unprecedented and it’s important that we’re all taking precautions. I want to make sure that my clients are comfortable, safe and that we are meeting their needs.

If you have any questions regarding the real estate market or how we are working to meet the needs of our sellers and buyers, or if you’re interested in selling, please contact me today. I know that we will come through this time stronger and by supporting each other, we’re keeping ourselves safe and our communities as well.