Buying a house is a big deal for many of us. Owning a home is the ultimate symbol of personal success. It’s the reward for years of hard work, smart planning, and sticking to your financial goals. It means finally having a space that’s all yours—a place where you can kick back, grow, and make countless memories. But the thrill of chasing homeownership comes with its share of surprises, from the rollercoaster of market prices to figuring out loans and sifting through a mountain of paperwork. We hope to make your journey smoother by sharing common mistakes made by first-time buyers. We will provide key insights and practical tips so you can avoid pitfalls and make better-informed decisions.

Not Getting Pre-Approved for a Mortgage

Getting pre-approved does a couple of big things for you: it gives you a clear picture of what you can afford and makes sellers take you seriously. Imagine falling head over heels for a house only to find out it’s way out of your budget. Talk about heartbreak! Worse yet, stretching beyond your means can lead to a tough financial situation down the line. Sellers are more inclined to consider your offer seriously if they know you have financial backing.

Your credit score is a key factor lenders consider. Ensure it’s in good shape, as higher scores can secure you more favourable loan terms. If your score needs improvement, take steps to bolster it by paying down debts and correcting any errors on your credit report. Don’t settle for the first lender you meet. Compare rates and terms from multiple lenders to find the best deal. Each lender may offer different rates and fees, so shopping around can save you money in the long run.

Overlooking Additional Costs

A common oversight among first-time buyers is focusing solely on the down payment and monthly mortgage payments, neglecting the myriad of additional costs that come with homeownership. Closing costs, which can range from 2% to 5% of the home’s purchase price, property taxes, homeowners association fees, home insurance, and ongoing maintenance costs, can significantly impact your overall budget. By keeping these in mind, you’ll steer clear of financial surprises down the road so you can enjoy your new home without the stress of unanticipated bills.

Neglecting the Need for a Home Inspection

Skipping a home inspection to save a bit of time or money might seem like a shortcut, but it’s a risky move that can end up costing you more than you bargained for. A thorough inspection can reveal all sorts of hidden problems, from structural issues that compromise the house’s safety to outdated electrical systems that need a complete overhaul or even plumbing nightmares waiting to happen. A comprehensive home inspection can also highlight issues with the land itself, such as drainage problems that could lead to basement flooding or foundational shifts. These are concerns that not only affect your wallet but also your home’s livability. Uncovering these problems before you close the deal gives you a powerful negotiating tool. You can ask the seller to handle the repairs or to lower the price to cover the costs you’ll have to shoulder.

Letting Emotions Drive the Decision

Letting your heart rule over your head when you find a property you love is tempting, but you should keep your emotions in check to make a wise investment. Before making an offer, take a step back and consider the practical aspects. One useful strategy is to bring along a friend or family member during viewings—someone who can offer a fresh perspective and highlight things you might overlook when you’re smitten with a property. Make a list of non-negotiables for your new home to keep your priorities straight, so you don’t compromise on essential features for the sake of emotional attachment. Before you make an offer, research the local market thoroughly to understand the value of homes in the area. This will help you make an informed offer that’s in line with current market conditions, preventing overpayment.

Failing to Consider Future Needs

First-time homebuyers often get caught up in what they need right now without thinking much about what life might look like in the next 5 to 10 years. Big life changes, like adding to your family, switching jobs, or even just changing up how you want to live, can impact how well your home fits your life. Picking a place that meets your needs today and down the road can save you from the hassle and expense of moving or remodelling later on. When you’re looking for your home, it’s wise to think about the location, how big it is, the layout, and whether there’s room to grow or change things up. Keeping an eye on the future while you choose your home can help make sure it’s a good fit for the long haul.

Steer clear of the common hurdles in the home-buying process with RE/MAX, Canada’s leading real estate organization with unrivalled market share in nearly every region. Start your path to homeownership with our guidance, ensuring no detail is overlooked. Reach out to a REMAX agent today.

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Source: https://blog.remax.ca/avoid-these-common-mistakes-made-by-first-time-home-buyers-2/

Homeowners may benefit from refinancing their mortgage by lowering monthly payments, accessing equity, or consolidating debt. In spite of this, refinancing is a complex process that requires careful consideration in order to avoid potential pitfalls. Here are some pitfalls to watch out for when refinancing a mortgage in Canada.

Ignoring the Associated Costs

Refinancing often involves various fees and expenses that need to be considered to determine the financial feasibility of the process. Some standard costs associated with refinancing include appraisal fees, legal fees, application fees, and potential prepayment penalties from the existing mortgage. These expenses can quickly add up and impact the overall cost-effectiveness of refinancing.

By ignoring these costs, homeowners may underestimate the true financial impact of the refinancing decision. Homeowners must take the time to calculate the expenses involved in refinancing, considering both the upfront costs and the long-term financial implications.

Not Shopping Around

Different lenders offer varying rates, terms, and conditions, and failing to compare options can leave homeowners paying more than necessary. Homeowners may be unaware of better rates elsewhere by neglecting to explore multiple lenders, including banks and mortgage brokers. Even a slight difference in interest rates can substantially impact the mortgage’s overall cost.

Shopping around allows homeowners to gather quotes from different lenders and compare interest rates, closing costs, and loan terms. This information empowers them to negotiate and secure the most favourable terms for their refinancing needs.

Focusing Solely on Interest Rates

While interest rates are essential when refinancing a mortgage, focusing solely on this can be a potential pitfall. Homeowners should consider the following:

The reputation and reliability of lenders – Working with a reputable lender who offers excellent customer service and a smooth refinancing process is essential to ensure a satisfactory experience.

Their financial goals and plans – If they anticipate selling the property or paying off the mortgage soon, focusing solely on interest rates may not be as crucial. Evaluating the potential savings against the costs associated with refinancing can determine if refinancing aligns with their long-term objectives.

The terms and conditions of the loan – Some loans may have adjustable interest rates or other unfavourable terms that could result in higher costs in the future. Evaluating the entire package, including the interest rate, loan duration, and potential risks, helps homeowners make an informed decision.

Failing to Consider the Long-Term Implications

While refinancing may offer immediate benefits such as lower monthly payments or accessing equity, it is essential to evaluate the long-term impact on the overall cost of the mortgage. Failing to consider the long-term implications can lead to unintended consequences and financial setbacks. Homeowners should consider the following implications:

Paying More Interest – Extending the mortgage term may reduce monthly payments, but it can also result in paying more interest over the life of the loan. Homeowners should carefully assess whether the short-term savings outweigh the potential long-term increase in interest payments.

Altered Financial Plans – If they anticipate selling the property or paying off the mortgage in the near future, refinancing may not be the most cost-effective option. In such cases, the expenses associated with refinancing may outweigh the potential benefits.

Failing to Requalify

Requalifying is the process of reassessing your financial situation and ensuring that you meet the lender’s requirements for refinancing. Neglecting this step can lead to disappointment and wasted time if you cannot secure the desired refinancing terms.

During the requalification process, lenders will review factors such as your credit score, income stability, debt-to-income ratio, and the appraised value of your property. If any of these factors have changed since you obtained your original mortgage, it could impact your eligibility for refinancing.

Homeowners should take the time to thoroughly assess their current financial situation and gather the necessary documentation to demonstrate their ability to meet the lender’s requirements. They should also be aware of any changes in their credit score and work to improve it if necessary. A lower credit score can impact your ability to qualify for favourable refinancing terms or result in higher interest rates. A financial advisor can help assess your eligibility for refinancing and provide guidance on steps you may need to take to improve your chances of requalification.

Refinancing a mortgage in Canada can be a beneficial financial strategy, but it is essential to navigate the process cautiously to avoid potential pitfalls. Ultimately, by being proactive and well-informed, homeowners can successfully navigate the process and reap the rewards of a refinanced mortgage that meets their financial goals and improves their overall financial well-being.

"Refinancing your mortgage is a great way to pay down some debt when unexpected events happens or when you just need to pay down some credit.  Call us to help you through the process!"  Pat Dell - Verico Crown Mortgage 

Source: remax.ca

Renters across Canada have been struggling with  rising rent costs  and wondering how they will be able to save for a down payment while renting. However, with some money management tricks and modification to your daily living, you can save for a down payment. It might go slowly, but every little bit helps. Here are some tips to save for a down payment while renting.

1. Make a Budget and Stick to It

Making a budget is the easiest way to make your financial goals happen. When you have a plan for where your money is going, it puts the power back in your hands and gives you an idea of how long it will take to save for a down payment.

To make a budget, write down your monthly income. Then, list your monthly expenses, including your savings goal. Your expenses should always be less than your income; otherwise, you are going into debt. Track your spending to ensure your budget is accurate. But the trick is that if you want to save enough for your down payment, you must ensure you stay within budget as much as possible.

2. Get Rid of Your Existing Debt

Qualifying for a mortgage does not end with saving enough for a down payment. Mortgage lenders will also look at your debt-to-income ratio (DTI), the percentage of gross income used to pay minimum monthly debt payments. If you have a high DTI, you are a risk to the lender, who will be less likely to approve you for a mortgage. However, if you work to cut down your existing debt while saving for your down payment, you can get approved for the house you want.

3. Cut Unnecessary Spending

Another way to boost your down payment savings is to cut back on a few luxuries. For example, consider buying groceries and making meals instead of ordering in, working out at home for free instead of paying for a gym membership, or taking public transit. Then, take the money you would have used on those splurges and put it into your savings account for the down payment.

Some people might be willing to sacrifice just about everything to have their house sooner, but most of us would rather not sacrifice our quality of life. Make a line in your budget for fun things like a night out with friends, and ensure you don’t go over budget. Saving for a down payment is not worth sacrificing your mental health.

4. Lower or Eliminate Rent Costs

Your most considerable monthly expense is likely your rent, so an effective way to save for a down payment is to cut your rent costs. Although moving is not fun, it can save you thousands of dollars annually. Renters who work from home can choose a location with a lower cost of living, while those who work in an office can find a cheaper apartment closer to their work, saving them expenses for both housing and transportation. Then, take the difference in your expenses and put it in your savings account for your down payment.

5. Add Extra Income

While cutting expenses is an effective way to create room in your budget to save for a down payment, another way to save is to take on a side hustle. There are many opportunities for part-time work, such as driving for Uber or Skip the Dishes or becoming a tutor. You could also start your own home business cleaning houses, pet sitting and dog walking, or doing yard work. It doesn’t have to be fancy if it earns you extra money for your down payment.

6. Immediately Save Any Bonuses or Gifts

If you receive regular bonuses at work or a tax return each year, these can easily be contributed toward your down payment savings without sacrificing your quality of life. To take it up another notch, ask for down payment contributions in place of gifts for your birthday or Christmas. If you feel you are missing out on fun for yourself, set aside a predetermined percentage or amount to use as you want, and put the rest in savings.

With these tricks, you can save up for a down payment while renting. Set up a savings account dedicated solely to your down payment and watch as your efforts pay off – literally!

Source: remax.ca

When you purchase a home, a down payment is typically applied to the purchase price, and the balance is to be paid off over your term of the mortgage. The loan you receive from a lender in order to pay for the house is called a mortgage.

Simply put, a mortgage is a legal and binding agreement between a lender and a borrower for a specific amount of money that must be paid back within a predefined amount of time. The mortgage is a secured loan in that the house you are buying is collateral for the loan. This means that, should you not meet your mortgage repayment obligations, the lender has the right to take the property.

Purchasing a home and taking on a mortgage is a big commitment. In addition to the amount borrowed, the interest rate you receive is also a factor in assessing affordability. Shopping for a better interest rate could save you tens of thousands of dollars over time.

10 tips to help you get the best mortgage rate in Canada

1. Research Mortgage Interest Rates

There is no one-size-fits-all approach to getting a mortgage. There are a few different types of mortgages, each of which will impact the interest rate you receive, based on a few of the factors we will be touching on later.

The first, and also the best option, is a prime mortgage. These are offered to borrowers who are considered less risky by lenders. These borrowers typically have a credit score of at least 670, have contributed a down payment of between 10 and 20 per cent, and have a low debt-to-income ratio. The most significant perk of a prime mortgage is a lower interest rate, which will help the borrower save thousands of dollars over the loan’s lifetime.

The other is a subprime mortgage. These are offered to borrowers with a lower credit score, typically between 580 and 669. Subprime mortgages carry higher interest rates because borrowers are seen as “riskier.”

By knowing your credit score before speaking with a professional, you can be sure to get the appropriate interest rate.

2. Decrease Your Debt-to-Income Ratio

A simple way to get the best mortgage rate in Canada is to decrease your debt-service ratio. This represents the percentage of your gross monthly income used to pay off your debts. Lenders use this value to assess the risk you carry when borrowing money. Canada Mortgage and Housing Corporation recommends keeping your Gross Debt Service (GDS) ratio (your monthly household income that covers your housing costs) below 39 per cent, and your Total Debt Service (TDS) ratio below 44 per cent.

To decrease this ratio, make larger payments on your debts, reduce debt by purchasing only what you can afford in cash, or increase your income. By decreasing your debt-to-income ratio, you signal to lenders that you are less of a risk.

3. Improve Your Credit Score

Improving your credit score takes time, but it can be done. Some easy ways to accomplish this are to make larger payments on your outstanding credit card bills, pay off any collections that may be on your credit report, get caught up on all your bills, and keep outstanding balances on credit cards low.

4. Increase Your Income Stability

Income stability signals to a lender that you’re less likely to default on your mortgage. First, sit down and run an honest assessment on how much money you bring in every month versus how much you spend, to improve your income stability. Then, look for ways to spend less and earn more. This can be accomplished by cutting out frivolous expenses, asking for more hours at work or taking on a side hustle.

5. Gather Your Employment History

Before meeting with a mortgage lender, gathering your employment history is key. Mortgages are large loans, and lenders want to know that you are serious about paying them back and are a low risk for default on your payments. Compiling your employment history shows the lender that you have a track record of gainful employment and are unlikely to be unemployed in the foreseeable future.

6. Save More and Increase Your Down Payment

By contributing a larger down payment, you can reduce the size of your mortgage and attract a more favourable interest rate. Typically, if your down payment is greater than 20 per cent, you will receive a better interest rate than if you put down only five per cent.

7. Use Cash Reserves

Lenders will look at your savings account to ensure you have enough cash in reserve to cover your mortgage in case of job loss. They like to see a few months worth of mortgage payments tucked away in your bank account. This also shows lenders that you are suitable and fiscally responsible. Consider saving up three or four months worth of mortgage payments to get a more favourable mortgage rate.

8. Consider Interest Rates

Currently, interest rates are exceptionally low. Consider timing the purchase of your home during a time when interests rates are lower, to reduce your monthly payments and the interest paid over the lifetime of your loan.

9. Low- Versus High-Ratio Mortgages

If you have less than 20 per cent as a down payment on the home you plan to purchase, you’ll need mortgage loan insurance. This serves as an added layer of security for lenders, should you default on your loan. This fee can be paid up-front or added to your monthly payments. To avoid this expense, save up at least 20 per cent for your down payment.

10. Shop Around

Finally, once you have completed all the steps above to get the best mortgage rate, it is essential to shop around. Some lenders can give you a better borrowing rate than others, and it is vital to know all the options available to you before you commit to one of the most significant investments you’ll make in your lifetime. While you’re at it, research lenders, too, as they may offer different mortgage terms that can affect your bottom line. Finally, consider working with a mortgage broker. This is a third-party intermediary between the lender and the borrower. A mortgage broker will collect your financial information and “shop around” for you, to find the best mortgage rate and terms from their pool of lenders. And the best part? A mortgage broker’s services don’t cost the borrower a thing.

Sources:

Canada.ca

• https://www.canada.ca/en/financial-consumer-agency/services/credit-reports-score/improve-credit-score.html

• https://www.canada.ca/en/financial-consumer-agency/services/mortgages/interest-on-mortgages.html

Forbes

• https://www.forbes.com/sites/robertberger/2015/05/07/6-tricks-to-getting-a-great-mortgage-rate/?sh=3aab6ed93f0f

remax.ca 

      https://blog.remax.ca/10-tips-for-getting-the-best-mortgage-rate-in-canada/