Buying Your First Home - What You Should Know

Friday, May 25, 2018

Many of you know I work in finance and when I was looking for a job I looked for locally operated cooperative that supports community I live in - so I started working at Servus Credit Union. Servus is focusing on financial fitness, and while being financially fit means something different for everyone, at the end of the day financial fitness is all about being able to reach your goals. 

Even though, I do work at Servus, I sat down with my financial advisor (Hi, Amy!), to get the full financial fitness experience and to talk about my financial goals and what I was hoping to achieve.  I came up 3 things and Amy helped me prioritize them, and because a goal with a plan is just a wish, we put a plan of action for each of my goals. One of those goals was purchasing a home, so today I am sharing a few things you should know if you are buying a home and looking for home financing.

Budget. You have decided to buy your first home, that's great, start with a budget. Amy and I sat down and did a budget which included mortgage payment, property taxes, utilities, condo fees, home insurance, savings, and other debt repayment so I had a full picture moving forward. There is nothing worse than saying you can afford a $1,500 mortgage payment, then actually breaking it down to all the things you have to included. 

Credit History and Repayment. You will need a good reporting history and a beacon score in order to qualify for a mortgage. You require two trades reporting to your credit. Saying that, having too much non-mortgage debt can derail your plans of owning a home. Mortgage qualification rules in Canada change early this year, which pretty much means we all have to qualify at a higher rate, which lowers your buying power.

Down Payment. In Canada, you need a minimum of a 5% of your purchase prices saved before you even start looking. If you are putting less than 20% of your purchase down you are getting a high ratio insured mortgage and there is a fee added to your mortgage. When I met with Amy we started a pay-yourself-first-term where I contributed a set amount each month that went towards my down payment. 

Mortgage that does more.  Not all mortgages are created equal. Before my sister and I purchased our home, we did ton of research in order to find a mortgage that is a perfect fit. Many people will tell you that it should all be about rate, but those people would be wrong. Most financial institutions price their rates very competitively, so you want a mortgage that does more. A mortgage from Servus Credit Union give you more, and gets your money to go a little further. 

Servus will pay you for your mortgage, like cold hard cash, in form of profit sharing in your savings account, and who doesn't love that. You already need a mortgage, so why not get one that actually pays you. 

Second big difference Servus offers you is a 20/20 pre payment option. You can put 20% of your original mortgage down every year and increase your monthly payments by 20% each year without incurring any penalties. Any extra payment towards your principle saves you money in interest. This way when tax refunds or bonuses come I can apply them on my mortgage without a concern of a penalty. 

Third thing that sets Servus apart is that you can still do a 80% loan to value mortgage in form of a home equity line of credit. While this option is not for everyone, and designed for those who are disciplined with repayment, its a huge advantage over a traditional 65% LTV at other financial institutions.