HERE ARE SOME basic calculations YOU CAN DO THAT WILL help you determine exactly HOW MUCH HOUSE YOU CAN afford.
The Down Payment
If you have a down payment of 25% or more, you may qualify for a conventional mortgage loan which does not require mortgage loan insurance.
A minimum down payment of 5% is required for a high-ratio mortgage. These types of mortgage loans
for any amount in excess of 75% of the value of the
home –– are required to be insured against default. (See Step 6 on page 32 for the details.)
The federal government and some provinces offer incentive programs for homebuyers. You should consult an investment or tax advisor regard- ing the value of these plans for your particular circumstances.
T h e M o r t g a g e A f f o r d a b i l i t y Buying a home involves many financial considerations. Some home buying expenses are one- time costs and others are ongoing commitments. In addition, there are other costs that you may not be aware of or that you may forget to factor into your calculations. Check out the list on page 15. And don’t forget the extra costs, such as buying a lawn mower or new curtains for your new home. A mortgage is security for a loan on the property you own. It is repaid in regular mortgage payments which are blended payments. This means that the payment includes the principal (amount borrowed) plus the interest (the charge for borrowing money). The payment may also include a portion of the prop- erty taxes. Possible Extra Costs After You Move In Maintenance costs You may want to start a sep- arate maintenance fund –– particularly if you’re buying an older home –– by setting aside $500- $1,000 and adding to it regularly. This reserve can be used to cover the costs of anticipated or unex- pected repairs or replacement of such things as the roof or appliances.