Become an owner in 6 steps with @ELLEINVESTIT

IN COLLABORATION WITH @ELLEINVESTIT

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Step 1: Assess your borrowing capacity

The Canada Mortgage and Housing Corporation (CMHC) proposes to assess its financial capacity according to two rules[1].

Rule #1 – housing costs should not exceed 32% of gross monthly income

For example, for a monthly gross income (before taxes) of $5,000, housing costs should not exceed $1,600.

Housing costs include, in particular:

  • Monthly mortgage payments;
  • Property taxes;
  • Home insurance;
  • Heating and electricity;
  • Condominium fees, if applicable.

Rule #2 – the amount allocated to the payment of all debts should not exceed 40% of gross monthly income

The 40% includes accommodation costs, calculated according to rule no. 1, as well as all other types of debt, such as: monthly payments on a car loan, a student loan, credit card debt, etc.

Step 2: Determine the down payment amount

The down payment (MDF) is the amount of money that one must pay out of pocket when buying a property.

The minimum MDF depends on the purchase price of the property[2] :

down payment

Thus, it will be necessary to spend at least $17,500 to acquire a condo of $350,000.

In addition, when the MDF is less than 20%, mortgage insurance will need to be obtained from CMHC or Canada Guaranty Mortgage Insurance Company. The mortgage default insurance premium can be up to 4% of the loan.[3]

Step 3: Finance the purchase of your property

This step consists of making an appointment with a financial institution or mortgage broker to discuss financing options and confirm their financial capacity (calculated in step 1).

At the end of this step, a mortgage pre-approval letter will be issued. This document indicates the maximum amount of the mortgage loan, the monthly mortgage payments and the interest rate.

The pre-authorization letter is often required by sellers, in order to ensure the seriousness of a potential buyer.

Step 4: Shop around and choose your property

Since buying a property is a decision with a long-term impact, it is advisable to look for a house that will meet not only current needs, but also future ones, in 5 or 10 years.

For first-time buyers, it might be a good idea to do business with a real estate broker. This professional could improve the buying experience, using his knowledge and experience.

Step 5: Make an offer to purchase

The offer to purchase is a document that legally binds the seller and the buyer. Through this contract, the buyer offers to buy his property under certain conditions.

A real estate broker and/or a legal advisor (lawyer or notary) can help the buyer present an offer to purchase

Step 6: Complete and finalize the purchase

Once the purchase offer has been accepted and the conditions met, the final steps are:

  • Finalize the mortgage loan;
  • Insure the property;
  • Make an appointment with a notary for the deed of loan and the deed of sale.

I wish you to find the property of your dreams.

Cheers,

She invests

A lawyer by training, @Elleinvestit is passionate about personal finance. Her Instagram page’s main mission is to encourage women to master the management of their finances.

The investment world is traditionally built by people, for people. For its part, @Elleinvestit is a platform built by a woman, mainly for women, but also for the general public. Its goal is to popularize and explain finances with a dose of humour.

Her Instagram account: @Elleinvestit

Her Facebook page: @Elleinvestit

Read also :

Sources:

[1] “Buying a Home: Step by Step” (CMHC).

[2] “How much is needed for a down payment”, by the Financial Consumer Agency of Canada.

[3] “Mortgage Insurance and Premiums” by CMHC


#owner #steps #ELLEINVESTIT

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