Mortgages

buying-first-homeOttawa Mortgages – Buying Your First Home?

You finally did it! For years, you’ve probably been dreaming, just like most people, about having your own house in Ottawa. No more giving money to a landlord. No more asking permission about having a pet in the apartment. It’s all yours!

But wait, you still don’t have your first house keys in your hands. You’ve just realized that you need a good credit score, a fairly big amount of cash for a down payment – not to mention that you need to consider mortgage rates, understand mortgage conditions and the terminology used by mortgage lenders. Plus, you still need to get approved for a mortgage loan.

Discouraging? It sure can be. We haven’t even begun to talk about home inspections, home insurance & property taxes. The entire process of buying a house, from the mortgage application to the approval, can be very intimidating. Maybe you are saying to yourself: “I’m not a First Time Homebuyer Mortgage Expert”! That’s ok because we have put together this guide to help you, as a first- time homebuyer, to get approved and be at peace on one of your biggest purchases in your life. With this information, you will be able to find the best Ottawa mortgage Broker that suits your mortgage needs.

4 Important Tips for First-Time Homebuyers

  • Be smart – Save money for a down payment to avoid interests on cash back mortgages.

Some financial experts suggest that a down payment can mean the difference between getting approved or denied for a mortgage. This is true especially for first-time buyers who never had a mortgage in the past.

Today, it is way more difficult, not to mention next to impossible than ever for a first time homebuyer with no down payment to get a mortgage in Ottawa. The $0 down mortgage programs where cancelled and since 2012, the minimum amount first time homebuyers are required for a down payment is 5%. This is where cash back mortgages come in handy.

Cash back mortgages are a really good alternative to the $0 cash down mortgage programs in the past but they are not free. Cash back mortgages tend to have an interest rate of approximately 1% higher than a regular mortgage program. This is why the higher the down payment you can put away; the less interest you will end up paying on the long-run. Having a good down payment could increase your chances of getting approved. We also recommend getting a Free Credit Report Analysis before starting your first house hunting processes.


  • Determine your budget for your first home

determining-house-budgetKnowing how much you can spend for your first time new home purchase is more important than some think. This step will help narrow your house hunting process, save you lots of time and, help you find a house that you desire and fit within the budget you have made. Being prepared is the key to have a smooth mortgage processing experience.

Topics to look at to help you in this process are: the total amount of the house, what the monthly payments will be (you can use a mortgage calculator to get an idea), house insurance, annual taxes, and home inspection.

The bank or the mortgage lender will give you an amount that you are pre- approved with but we recommend doing your own homework because at the end of the day, you’re the one making the payments and trying to make the ends meet. Plus, the pre-approved amount is usually way higher than most buyers comfort zone.

One of the top mistakes people do on their first home purchase is they tend to miscalculate the amount to borrow. They expect that their income will increase after a couple years and that the repayment process of their mortgage will go smooth. Thus, they apply for the maximum amount. However, this method will result in more expenses on the long run.

Know your limit. If the mortgage company says you can pay up to two thousand dollars per month but you know that will be a tight squeeze for you, then know what is your maximum you are willing to pay per month. Don’t go beyond this figure unless you are positive that your income will increase in the next few years.


  • Get a basic understanding of interest rates and loan periods

interest-rates-and-loans.Over the years, interest rates will go up and down. Some financial experts are even saying that interest rates in Canada will rise significantly. That’s just reality. Plus, first time buyer mortgage terms and conditions may vary since property markets differ from one city to another. The bottom line is this: every time you get low interest rates, you save money! Plus, if the interest rates are low when you are planning to purchase your first home, it should make it easier for you to qualify and get approved.

Most home buyers, especially if they are buying their first house, will aim at a longer term like 30 years, to help them fully repay both the cost of the house and the mortgage interest. This being said, some Ottawa home buyers with better means may opt for a shorter term like a 15-year mortgage, or even a 20-year mortgage. One should choose what is more practical for their reality & budget. Ideally, your mortgage repayment program should be predictable.

First-time homebuyers usually become too preoccupied with the mortgage process that they do not give much thought to the different types of mortgages available to them in the market.

There are different main types of mortgages in Ottawa with regards to mortgage interest:

1. Fixed Rate Mortgages

The Fixed interest rate mortgages plans tend to have higher interest rates then the variable. However, many choose the fixed over the variable to ensure a protection against economic conditions that could affect the monthly repayment. The fixed option is stable and you can plan your budget accordingly. When the loan amount is set on a fixed amount and will NOT increase unless notified by the lender; rate is prime minus 0.55% and so if prime is 3.00% results in 2.45% but the payment is set based on say a 6.0% rate. When the actual rate you are being charged is less than 6.0%, more of your payment is going to principal and saving you unnecessary interest.

2. Variable Rate Mortgages

If you are a person who likes to save money and are not afraid to take risks, then the variable option mortgage in Ottawa is for you. The risk you take should always be an informed decision however. It is not recommended to take a variable interest rate mortgage during economic downturn since financial institutions will often increase the interest rates. Where the payment amount changes each time there is a change to the prime rate. The discount amount does NOT change. For example, if your rate is prime minus 0.55%, then 3.00% results in 2.45%. But, if prime rate increases to 3.25% then the interest rate charged and payment amount goes up to 2.80%.

3. Capped Payment Mortgage

Capped Payment is where the total amount of the payment changes every time there is a change in the prime rate. With the capped payment option you do get a guarantee not to go over a certain amount.

4. Capped Interest Rate Mortgage

The Capped Interest Rate option means that there is an interest rate based on prime rate but you get assurance not to go over a certain percentage.

Other House Mortgage Financing Options:

  • alternate-mortgage-financingPurchase Plus Improvements

If you plan to do renovations or any other home improvements, the Purchase Plus Improvement lets you add the costs on your mortgage.

  • Convertible Mortgage

The Convertible Mortgage allows you, if the mortgage term is short, to convert to a longer mortgage term with absolutely no penalty given you stay with your original mortgage lender.

  • Combo or Multi Part Mortgages

You can choose diverse sorts of home loans and terms – where rather than one single home loan, you have upwards of ninety-nine unique parts. This is extraordinary on the off chance that you can’t choose whether to go altered, variable, open, or shut, or even a credit extension. This home loan is additionally re-advanceable.

  • Secured Lines of Credit

Even though it isn’t called a mortgage, it acts like one as it is registered on your property title as a loan. The interest rate will be variable based on the prime rate, with minimum payments of interest only so the lowest possible monthly payment you can have. It is also completely open and can be paid off in full with no penalty. The rate may be higher than a regular mortgage and is based on the prime rate like a variable mortgage.

It is beneficial to research lenders to find the best mortgage rates. In Ottawa, the interest rates and terms will vary from one mortgage lender to another, so you should seek out the lowest mortgage rates in Ottawa.

Find out the penalty if you choose to break your term to go to another lender. You should also keep in mind that you will be repaying your loan for years to come. You should seek for a lender you feel conformable with. If you recently moved to Canada, you might be eligible for a New to Canada Mortgage Financing program. Qualified home buyers who recently immigrated or even relocated to Canada within the last five years are eligible under Genworth’s New to Canada Program to purchase a property with as little as a 5% down payment.

  • Get educated about the types of mortgagestypes-of-mortgage

Types of Mortgage Plans in Ottawa

Please take note that the following list is not exhaustive but serves to point out some of the most common mortgage plans.

First, let’s look at different types of activities or assets you would need to search for the best insurance company:

  • Bridge Financing: Bridge financing is a great resource made accessible to borrowers when the cut-off date of the house they buy is before the cut-off date of the house they’re selling.

Usually, Bridge Financing is used for short-term mortgages, usually taken out for a interval of two weeks to three years pending the arrangement or longer- term financing.

In others words, a bridge-financing mortgage is interim financing for a person or company until financing is obtained to reimburse the original mortgage or other capital. Cash from the new financing is mostly used to reimburse the bridge mortgage.

We find that Bridge loans are usually costlier than typical financing, to compensate for the higher risks involved.

  • Second Home Mortgages

In today’s fast pace, one needs more house ownership options. Whether or not it’s a second house within the urban area to save time in the going back and forth, or perhaps a cottage on the lake for the weekends.

With the Secondary House Programs, Ottawa home homeowners can now buy a second home with an inexpensive month-to- month value with 5% down value.

  • Family Plan Mortgages

The Family Plan Mortgages option will allow close family to help buy a home those who have a good credit score but are unable to financially meet the GDSR/TDSR standards and requirements.

  • Non-Resident Mortgages

Non-residents looking to purchase in Ottawa, Canada will be eligible if the applicant is:

  • Considered a suitable credit score risk
  • Has a reference from his bank in his original
  • Country Standard confirmation of his/her revenue
  • Verification of property/assets
  • Thirty-five percent down payment is required
  • Rental assets must meet requirements
  • Appraisal Maximum amortization of 25 years
  • Construction Mortgage Financing

The building of your new house could be a really exciting and affordable project for you and your family. Often times, you will save big money by purchasing land and hiring the most affordable contractors out there. However, the Construction Mortgage Financing option is quite different from that of purchasing an existing home. This process although exciting can become at the same time a rigorous process for the person wanting to build his home. Mortgage companies and financial lenders will request additional information, and often times will probably ask you for more money up front. That being said, there are options available for you or the person wanting to build their own home, giving you the ability to choose an option that best suits your financial needs.

construction-mortgage-financingIn Ottawa, home buyers have the ability to build their house with a “Process- Draw” mortgage loan or a “Completion” mortgage loan or even a combination of the two options. With the Process-Draw mortgage loan, homebuyers apply for a mortgage loan that allows them to carry it through the building process. Completion mortgages loans will require the person to sign a contract and add a down payment. This option only requires that you make the full payment once the house is built.

  • Spousal Buyout Mortgage

If you are going through the process of a divorce or separating from your spouse, you are probably dealing with all kinds of stress right now and the last thing you want is more stress. The thought of selling your house certainly adds to that stress.

Thankfully, the Spousal Buyout Program might be something you may want to consider. It will definitely remove the stress of having to sell your home! In the common mortgage Refinance guidelines, you are solely allowed to refinance as much as 80% of the property’s worth. This leaves 20% of your equity tied up within the home. Usually, the only solution to access that revenue from the sale of your house is to promote the property so you can split it with your ex-spouse. The Spousal Buyout Program permits you to finance as much as 95% of your own house’s worth. Subsequently, you might be able to hold your own home and stay away from paying your ex-spouse their portion of the house’s value. This will help you with the stress and not have to worry about selling your house.

  • self-employed-mortgageSelf Employed Mortgage

This option is created for self-employed debtors are not able to offer the usual income verification requirements but have a confirmed 2-year historical past of managing their credit score and funds responsibly.

The eligible borrower will usually have a small business at least 2 years. They could confirm this with a document from a third-party that has no conflict of interest with the borrower. As well as, the borrower is required to declare their annual revenue and annual company income.

  • Health Insurance

As a smart house owner, searching for an insurance coverage for your house is an important factor that you can’t simply leave up to chance.

However, you’re also aware of the unpleasant pain that comes with house owner’s insurance coverage as you can see premiums going up an average of 7.4% in the recent years, plus, this is expected to rise over the upcoming years. Aside from the rates, another issue that house owners face today is that some insurance companies in Ottawa are limiting the protection in ways that homeowners before us would be shocked to hear about it. This is why it is essential to obtain sufficient information about insurance coverage and limitations.

  • Home Insurance

We could talk for hours about the importance of finding a good home insurance plan. But in short, here are some of the things that you can do if you are buying home insurance.

o  Obtain a home disclosure report

If you’re planning to purchase a brand new house, pay attention to the significance of getting a house disclosure report out of your agent or the vendor’s agent. This offers you adequate information about any issues the property has had early on. Issues like water damage and any indication of property structural defect might be able to cause you some trouble down the line and a home disclosure report will ensure you are protected in your new home purchase.

o  Maintain good credit

Keep a very good credit score as this can assist you get the protection you want at a rate you will be able to afford. Many insurers view negative credit score experiences as an indicator of future potential losses.

o  Pick from the top choices

As soon as you’re prepared to purchase your new home, it’s a good practice to select an insurance company from the top/best selections. You can accomplish this by getting a listing of insurance coverage companies from Consumer Reports, reviews of the best Ottawa Insurance companies, and testimonials from happy clients.

o  Know the right time in making claims

You might not be aware of this but most insurance coverage firms are aware of the revenue you file. This is why it is crucial for you to know when it is the most appropriate time to make claims.

o  Get a clue

CLUE stands for : Comprehensive Loss Underwriting Exchange.

Additionally, it is essential that you be able to verify your CLUE report as Insurance Coverage Firms monitor claims by address. They look for past claims like Complete Loss Underwriting Change. Any minor offense can have an effect on your insurance rate and insurance policy.

other-mortgage-feesUnfortunately, mortgage payments are not the final expenditure new home owners will face. Once in your new home, expenses like: repair costs, maintenance costs, and taxes will start coming up. If you are ready for this, it will run smooth for you. Sadly, many Ottawa home buyers don’t plan for this so they borrow more money to cover their unexpected costs, which leads them deeper into debt. They usually end up in the “Bad Credit mortgage refinance” category. This can happen to anyone who does not have an emergency fund in their budget and planning. Be proactive about it and you will be in the “Good credit mortgage refinance” group!

In conclusion, we recommend finding a good mortgage broker who will help you through the whole process. You will be able to make an enlightened decision and find your best mortgage renewal rates! Your experienced mortgage broker is key to making informed decisions on your mortgage and the purchase of your first home.