Mortgage Motivation: Are You Prepared

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First Time Homebuyers Mortgage Motivation

Are you ready to buy a new home? Before deciding to obtain a mortgage in Calgary, first look at what is motivating you. If you feel like you should buy a home only because everyone around you is, that’s probably not a good reason to tie yourself into a home loan.

By definition, purchase motivation is described as the psychological reasons behind making certain purchases. One of those purchases is the decision to buy a new home. While owning your home can be exciting, this big-ticket item can also be scary.

Homeownership will impact your life and financial picture for a long time. That’s why talking with a mortgage broker in Calgary is always a good idea.

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Start By Doing Research

Many people looking to buy a home spend a lot of time researching every detail first. Like any other life decision, you want to gather information, specifically about mortgages. Speak with your peers, family members, professional banking services, and mortgage brokers.

Speaking with friends or others who have recently purchased a house will give you a good insight into your potential purchase. They will be able to provide you with a rough idea of property taxes for their home, utility costs, and more.

Watch Out For Buyer Mentality

While searching for a home, you will spend a reasonable amount of time online, gathering mortgage loan information and looking at potential homes. It can be easy to fall into a buyer mentality with targeted ads shown to you on mortgages, real estate agents, and possible home listings.

Other Factors To Consider When Buying A Home

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Many buyers watch interest rates and monitor the availability of homes before they make a purchase. Still, there are other considerations people use to justify taking out a mortgage too.

Emotional factors can influence what you want or need when looking at potential home purchases.

Sellers and realtors will target these emotional flags when they are selling homes. So it is crucial to take stock of your needs and wants in addition to assessing your financial matters before you sign mortgage documents.

You Are Here

The best place to start when looking at emotional factors is to describe your current stage of life.
These won’t be the same for all people, but a generalization sets the stage to think about what changes you want.

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It can also define your future needs and wants for your first home. For example,

  • Are you a single person who just landed that full-time job and are looking to own not rent?
  • Maybe you just got married, have two incomes, and now you can afford a joint mortgage loan.
  • It could be you just had a baby and need more room for a nursery.
  • Or do you have a growing family and are running out of living space in your current accommodations?
  • You might have a multi-generational household and need a larger lodging with more than one living area under the same roof.
  • For older singles and couples, you may be downsizing or looking for accommodation that will allow caregivers to help you when you need care later in life.

As you can see, there are many reasons why you might be looking at buying a new home.

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Demographics For First Time Homebuyers

  • 80% Are Employed Full Time
  • 49% Are Single
  • 45% Are Between The Ages Of 25-34
  • 40% Are Married
  • 61% Purchase A Single Detached Dwelling & Have An Income Between $60,000 & $90,000
  • 21% Are New To Canada

Some Canadian demographics indicate percentages for first-time buyers.
They are:

Motivations For Purchasing A Home

When looking at your mortgage motivations for homeownership, consider which of these emotional factors apply to you and how they shape your wants and needs.

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  • A Desire To Become Independent
  • Looking For Stability
  • Increasing Your Comfort Leve
  • Finding Something More Convenient
  • Providing A Safe Living Space
  • Expanding Your Socialization Potential
  • Meet Changes In Medical Conditions
  • Wanting Financial Growth
  • Desiring Prestige
  • Gaining Fulfillment Through Ownership

Proceed With Caution

When you are aware of these goals, you can analyze them and apply that data to the reality of the purchase you are considering.

There is a caution here that it is important. Don’t sign up for a mortgage based wholly on emotional factors that override the realities of your financial means.

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For example, you may crave prestige and look for a home in a high-end area, only to realize you don’t currently have the money to meet the asking price of the house. An assessment like this can help you find ways to improve your financial means so that you can purchase a similar home at a later date.

There is a good article by Matthew Kassel in the Wall Street Journal that highlights some of the pitfalls first-time buyers should avoid when considering their wants and needs list.

Evaluating Your Current State

Another lifestyle evaluation used by realtors and sellers is matching demographics with psychological factors by creating a category of types for home buyers.

It is called the VALS Framework. It breaks down factors identifying buyers as innovators, thinkers, believers, achievers, strivers, experiencers, makers, and survivors. Just for fun, take a look at this website and see what describes you best.

If searching for your home overwhelms you, there are professionals out there that will help you match your wants and needs to your available resources. A good realtor, bank, or independent mortgage broker can take your collected data, which include emotional factors, and match mortgage plans to your desired goal.

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Our professional mortgage brokers at The Mortgage Group in Calgary would be happy to help you analyze the data you have collected and answer any questions you may have about mortgages. Give us a call, 403-571-8142, or fill out our secure contact request form today.

How To Tell If You’re Ready For A Mortgage

how to tell if you're ready for a home mortgage

You may be at a stage in your life that buying a home looks like a good idea. According to recent realty statistics, 78% of Albertans own their own homes. The fact that your peers and the majority of the province have committed to a buying a home may not be the best way to determine if you are ready for a home mortgage loan.

How To Know If I Am Ready For A Home Mortgage Loan?

Make a list of financial factors to give yourself a good snapshot of your financial readiness for a mortgage. The New Year is an excellent time to assess your finances. This is when people begin collecting their yearly financial data to complete income tax.

Look At Your Gross & Net Income

Lenders want to know that as they base how much of a mortgage they will lend you on your yearly income. They like you to have a steady income but will factor in your average income based on your tax return record. You can book an appointment with a bank manager or mortgage broker to determine how much they will lend out based on that yearly income. You can also do a quick evaluation is using an online mortgage calculator

Assess your savings before applying for a mortgage
It is important to assess your savings before applying for a mortgage

Look At Any Savings You Have

Lenders require a down payment on the mortgage loan. Most lenders require at least 5% of the home price for a down payment and up to 20% on higher-value homes. The legal and realty costs are also extra costs related to the buying process. The lenders may figure those costs into the amount of the mortgage they lend you.

How Much Debt Are You Carrying?

Lenders look at debt along with what you currently spend on monthly on housing and utilities. These factors help the lender ensure you can afford the mortgage payments of the new loan. Those two costs shouldn’t exceed 25% to 36% of your gross monthly income. You can get a credit rating report that banks use to look at your debt by following the instructions from the federal government site under ordering your credit report and score. Make sure to go through it to be sure it is correct. Sometimes companies don’t clear debts you may have paid, or you might appeal scores and mediate a better rating.

Take A Look At Your Current Monthly Budget

Do you have room to include the extra things that come with homeownership? You may need to factor in more money for increased utility costs, home and mortgage insurance, taxes, HOA fees, home development, and maintenance costs.

Other Factors To Consider

Finances are not the only thing to consider in being ready to commit to a home mortgage loan. You want that financial commitment to give you the quality of life you will enjoy.

Do You Know What Kind Of Home You Want To Buy?

There are a lot of choices out there. There are condos, apartments, townhouses, duplexes, single-family homes, acreages, and farms. If you list the features of where you are currently living and note the things you dislike, those points can help you evaluate what type of home would suit you best.

Where Do You Want To Live?

Is it an area closer to your work? Maybe you want to move your family to a community with good schools and lots of other children. You may have certain values that play into your choices. You may want a sustainable living situation with community planning and lots of green space. Cultural factors and entertainment may also be important to your lifestyle. Can you afford the house prices in your ideal spot? Some areas are going to be more expensive than others depending on the availability of housing in those areas. You may have to adjust your ideals to meet your lifestyle goals.

Will You Need To Move Repeatedly Or Can You Settle In One Place?

It takes five years to start to begin to get any equity in your home purchase. If you need to move and sell, you may not gain a profit from homeownership. Some people keep their homes and rent them out when they have to move. If this is the case, rework your budget to ensure you have enough to meet the mortgage and your new living accommodations. Renters can bring a higher maintenance cost than expected as tenants may damage the home.

What Are Your Life Goals?

Some people want to downsize to spend more time traveling. Maybe you want a larger home to raise a family. Perhaps you are buying several properties for investment gains, or you want an additional vacation home. You should examine if the mortgage you are considering fits into those life goals. Again, a good mortgage banker or mortgage broker will be able to help you forecast some factors and present options in achieving those goals, so you can determine if you are ready for the mortgage type that supports your life goals.

Seek Outside Advice

Once you have answers to some of these questions and have factored in your finances, you should have some concrete facts to weigh the pros and cons of taking out a home mortgage loan. You can ask for advice, but it is best to get several opinions from people who know you best, other homeowners, and professional mortgage specialists. 

Ultimately, it comes down to you to decide. If the answers point to the negative, but you still have a goal to purchase a home or investment property, talk to your mortgage banker or broker. They have many suggestions that can improve your ability to qualify for a home mortgage loan in the future.

For any questions or information you need, the brokers at The Mortgage Group will be happy to help. Give us a call anytime, or fill out our online application. 

Taking Part In The First Time Home Buyer Incentive

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What is the First Time Home Buyer Incentive?

For homebuyers looking to break into the Calgary housing market, the stress test and other changes have made it a challenge. That is in part why the federal government put the First Time Home Buyers Incentive in place. Participants of the program, which kicked off on September 2, will see the funds released as early as November to get them into a home.
The government has invested $1.2 billion into the Incentive, which they hope will run for three years. However, it will close once all of the funds have been allocated.

How Does The Incentive Work?

The loan sharing program contributes 5 to 10% of the home purchase price to qualified applicants. The contribution will lower the overall net price of the mortgage, resulting in lower monthly payments for the buyer. The plan administrators think this will lower payments by $100-$300 a month. The savings makes owning a home much more affordable and means that buyers can qualify for a higher amount.
The Incentive covers three property types: new construction, existing homes, and new or resale mobile homes. With new construction, the government will contribute 5 to 10%. For existing homes and mobile/manufactured homes, the government will contribute 5%. Buyers are not allowed to purchase the house to rent it out. It must be their primary residence.

First Time Home Buyer Incentive qualifications include:

  • You have not purchased a house previously
  • You must have the minimum down payment
  • The purchase must be in Canada
  • It must be your primary residence and not a vacation home
  • In the last four year’s you did not reside in a house owned by you, your spouse or common-law partner
  • You are a Canadian citizen, a legal permanent or non-permanent resident authorized to work in Canada
  • Your household income cannot be over $120,000

Additionally, people who are separating from their spouse or common-law partner would also qualify, even if they do not meet the other incentive requirements.

First Time Home Buyer Incentive
Starting on Sept. 2, 2019 Canadians can now buy a home with government help under the First Time Home Buyer Incentive

How Can I Apply?

Applying is relatively easy. There is an online application that can be filled out. However, the first practical step is to assemble a real estate team. You’ll need to apply for a mortgage pre-approval to see what you qualify for. Then, with the help of a real estate agent, it’s time to shop for a home. Once you find a home you’re ready to make an offer on, then it is recommended you fill in the application forms. As mentioned above, you will still need to come up with a minimum of 5% for the down payment.

At The Mortgage Group, we can assist you with the pre-approval process and filling out the paperwork. Our mortgage brokers in Calgary will help you submit the firms to the government administrator. They will then contact us – or whomever you have help submit the forms – when you are accepted. From here, your real estate lawyer will likely become involved as everything is arranged to close the agreement with the government. They will submit all of the documents, and ensure that the government’s contributions are paid to the mortgage upon confirmation of title transfer and possession date.

Is The First Time Home Buyer Incentive Right For Me?

The money the government is giving is not a grant or free; it is a home equity loan. It is a second mortgage on your property, though it has no regular principal payments, nor is it interest bearing.

The loan over a 25-year duration and you can repay it at any time. If homeowners don’t pay it off before 25 years, or they sell the home, the government takes a cut of 5 to 10% of the fair market value price of the home. The percentage is based on how much they put in initially. If it was 5%, then they will only expect 5% in return. The Incentive cannot be ported onto a new property. If you decide to port the mortgage and move into a new home, you will have to pay off the Incentive.

Any increases to the value of your home are shared with the government at final payout or sale. If housing values go down, the government also takes a loss in the final sale. There can be joint mortgagees, but all parties are then responsible for the loan. There are also ways to refinance the loan without triggering a need to repay the government’s money early.

While the cap may not be enough to put you in your forever home, this can be a great way to get into a starter family home. The Incentive is not ideal for everyone. If you have any questions and want to learn more, give us a call. We would be happy to look through the options with you and help you find the perfect mortgage product.

An Upside To Calgary’s Falling House Prices

Real Estate - Buying a home mortgages

Written by Robson Fletcher · CBC News · 

Based on income and benchmark prices, report finds most people here could afford a single-family home

For nearly five years now, Calgary’s real estate market has been described as slow, flat, listless.

Compared with long-term averages, fewer homes are being bought and sold these days. And those that do sell are often going for well under the asking price.

By one common measure, prices for single-family homes are now about seven per cent lower than they were back in October 2014. When you factor in inflation, the losses are even greater — on paper, at least — for those who bought at the peak, in real-dollar terms.

This is often framed in the media, by real estate agents, and in casual conversation as bad news. And indeed it is, if you are like most Calgarians and own a home. (This city has one of the highest home-ownership rates in the country.) It’s especially bad if you’re currently looking to sell.

But the flip side of the equation is that home ownership — including the idealized detached home with a yard and garage — is attainable for far more people here than in other major cities.

“If you’re a first-time buyer and you want your first home to be a detached house, based on our numbers, you’ll have a better chance of accomplishing that in a market like Calgary,” said Penelope Graham with Zoocasa, a Toronto-based real estate firm.

That’s according to a recent report from the firm, which, based on income data from Statistics Canada and sales data from various real estate boards, estimates that more than 50 per cent of income earners in Calgary could afford a typical, detached home at current prices.

Compare that with Toronto, where only the top 10 per cent of income earners are in the same boat. Or Vancouver, where it’s a mere 2.5 per cent.

So, especially for a first-time buyer in Calgary, the recent real estate news might not seem so bad.

'Seeing Value'

Alim Charania has been working as a mortgage broker for nearly 20 years in Calgary, and while business may have been brisker in the past, he says there’s still plenty of interest from first-time buyers these days.

Many “are seeing value” in the market, he said, which he personally believes is now one of the best for affordability among major cities.

“Pricing-wise, versus the rest of Canada, for a great city to live in? You probably can’t beat it, to be honest,” he said.

Still, many would-be buyers are in no hurry to pull the trigger.

“They’re still scared,” Charania said. “There is still some uncertainty in the market. They don’t know where Alberta’s going to go; they don’t know if this is the bottom. So that’s usually top of mind.”

Looking over the Zoocasa report, he raised an eyebrow at some of its assumptions when it comes to determining what’s affordable. The firm assumed people would be making a 20-per-cent down payment, and paying a 3.75-per-cent mortgage rate over a 30-year amortization.

Charania said most clients he meets aren’t putting that much money down, and the relatively new mortgage “stress-test” rules would require them to prove they could pay a higher interest rate in order to qualify for a loan.

But, all those assumptions being equal across the various markets being compared, he said the report does highlight how much more attainable home ownership is in Calgary compared with other major centres.

“Affordability-wise, definitely we rank quite high, for sure,” he said.

Buyer's Market — If You Can Get A Loan

Lori Grill, an associate with The Mortgage Group Inc., says it remains a “buyer’s market” in Calgary.

And while the decline in house prices over the past several years may be appealing for first-time buyers, in particular, she said home ownership is still unattainable for many Calgarians.

That’s in large part due to the stricter lending rules, but Grill said more and more of her clients seem aware of the new mortgage environment.

“They do come to us saying, ‘Oh, I don’t know if I can qualify,'” she said.

“And some of them are pleasantly surprised and they leave my office feeling quite happy … and then others go, ‘OK, well, I guess I have some work to do. I need to get some credit cards paid off. I didn’t realize that was going to have the impact that it does.'”

The data in the report, Graham noted, is aggregated from real estate boards in each local market and the typical home price is based on the “benchmark” in each region. That means many houses will cost more than that — and many will cost less.

“We don’t want to put out the message that some of these markets are completely unaffordable for everyone,” she said. “There’s always going to be options that are below the average in these markets. So it’s important to keep that in mind — that we’re looking at aggregate data.”