If you're looking to buy a home, you'll probably need a mortgage, since most people cannot afford to pay the full price of a home. The mortgage principal is the amount you'll need to borrow (purchase price minus your down payment and any required mortgage insurance).

To suit your personal finance needs, there are a variety of mortgage types.

Conventional Loans

Down payments on homes are required, but a large down payment is usually recommended anyway to qualify for a better rate and reduce the overall interest paid.

A minimum 20% down payment is required for a conventional loan. With this percentage, your mortgage is lower-risk and eligible for a conventional mortgage. Otherwise, your loan is considered higher risk and requires insurance. The premium is added directly to your mortgage amount. People who can't afford large down payments, or want to take advantage of good rates or prices can benefit, with a minimum 5% down.

The Canada Mortgage and Housing Corporation, similarly to the US Federal Housing Finance Agency, sets requirements like this; it's also involved in mortgage insurance rates and policy on housing affordability and accessibility.

Mortgage Terms and Amortization

The mortgage term is the period your mortgage contract is in effect. Payments are based on amortization. All details are outlined in the mortgage agreement. Terms range from a few months to 5 years or so. In the end, you'll probably have to renew for another term, until you're able to pay off the debt completely.

The amortization period is how long it takes to pay your mortgage fully. A shorter amortization means a higher monthly payment but less interest paid. In Canada, down payments of 20% or more let you amortize up to 30 years; otherwise, the maximum is 25 years.

Monthly Mortgage Payment Frequency

Monthly mortgage payments are common, but more frequent payments, like a bi-monthly payment, let you pay down mortgages faster and reduce interest. It may also be required that property taxes are automatically deducted through the financial institutions.

Interest Rate

A higher interest rate means higher mortgage loan payments. Rates change when you renegotiate and renew mortgage terms.

The interest rate is like a lender's fee for borrowing money. A minimum credit score is required. Mortgage loans are secured; if you fail to pay, your mortgage lender may take possession. On the other hand, you get lower interest rates compared to unsecured loans.

Mortgage rates are impacted by your term length, credit history, employment situation, whether it's for a home loan or investment property, as well as other factors.

Fixed rate mortgage

A fixed rate mortgage is likely to have a higher rate than a variable rate. With a fixed interest rate, though, your payments stay the same throughout and interest payments are consistent. Fixed rate mortgages are better if you are more conservative and want the security of consistent rates.

Variable rate mortgage

Also known in the US as adjustable rate mortgages, these have variable interest rate fluctuations during your term. Typically, variable rate mortgages have lower rates than fixed. You can choose fixed payments, which stay the same, despite the varying actual interest, or adjustable payments so your payments change with rates.

Hybrid or combination

Hybrid or combination mortgage rates have fixed and variable interest rates, sometimes with different terms for each. The fixed portion partially protects when interest rates rise, while the variable portion partially helps when rates fall.

Types of mortgages

Mortgages can be portable, where you keep your mortgage when buying another property, or assumable, when you pass your existing mortgage to someone buying your property. There are different types of mortgages available.

Open mortgages

An open rate is usually higher than on a closed mortgage with a comparable term length, but it allows more flexibility if you may make extra payments.

Closed mortgages

A closed mortgage interest rate is usually lower than a comparable open mortgage one. Closed term mortgages usually limit the amount of extra money, or pre-payments, you can put toward your mortgage.

Convertible Mortgages

These allow the type of mortgage to change, usually to allow you to start with an open mortgage and then lock into a closed mortgage. It offers lower rates than an open mortgage with the flexibility to switch to a closed term.

Hybrid Mortgages

A hybrid mortgage allows more than one type of mortgage to be covered in one contract.

Reverse mortgages

If you're 55 and own your home, you can convert home equity into lump sum or monthly payments by borrowing against your home equity.

Mortgage Lenders That Help

Buying a home is a huge investment. At Circle Mortgage Group, we protect your best interests, and understand your financial situation and goals are unique.

If you're self-employed, a first-time buyer, or looking for commercial mortgage or self-employed mortgages, finding your perfect solution is especially complex, but we'll guide you through the mortgage process for your home loans. We can also help you with a mortgage renewal, remortgage, or reverse mortgage.

Whether you need a traditional mortgage or something more complicated, we'll get you better rates so you pay off your mortgage balance faster.

If you are selling your house, you may be wondering which projects will add to the value of your home's sale price, and which aren't worth the expense and hassle. Alternately, you may be researching home improvement ideas for your forever home, choosing to spend money only on projects that add the most value.

Research shows not all improvement projects increase a home's value. If you aim to build or maintain the value of your home, be sure to balance the expense of the upgrade against the potential value increase.

Rewarding Renos

Although DIY projects save on labour costs, consider your own time investment as part of the overall cost.

Below are some cost-effective home improvements to add style, boost your home's curb appeal, and provide good return on investment (ROI) according to the Appraisal Institute of Canada (AIC).

Add Usable Space

An unfinished basement means potential space is being wasted. Finishing a basement is complicated but worth the effort as it increases the usable square footage of a home, effectively giving you a larger house. Converting an unfinished space costs around $50 - $90/ft2 with a 75% ROI.

Energy Efficient and Environmentally-Friendly Upgrades

Soaring energy costs and rising interest in eco-friendly houses mean energy-efficient upgrades are more desirable than ever to potential buyers.

Projects improving energy efficiency are worthwhile, especially switching old windows to more insulated ones and replacing the front door with steel. You can expect a 50 - 100% ROI on these.

Adding a smart thermostat or smart home technology to minimize energy usage will boost your home's efficiency. Additionally, with 'green' renos, you may qualify for government incentives, which help to give you a 60% ROI.

Clever Kitchen Renos

A major renovation to your entire kitchen is costly, but a minor remodel still boosts your home's appeal without lots of effort. Simply replacing cabinet fronts and pulls is cheap and easy, but makes a big difference. Facelifts like these recoup a higher percentage than full overhauls. Remodels cost $20,000 - $50,000; minor upgrades sit at the lower end of the scale and yield a ​75 - 100% ROI.

Bathroom Boosts

Simple bathroom upgrades are effective, too. Replacing old light fixtures, faucets and knobs can refresh dated or cheap-looking bathrooms. Most fixtures can be upgraded for under $100 each, with a 75% ROI. Also, save money by reglazing the tub instead of replacing.

Flooring Fixes

Replacing worn carpeting and flooring with wood or laminate planks is another DIY project that has a strong impact.

Laminate flooring costs start at about $3 per square foot. It is appealing, and cheaper and tougher than hardwood floors.

Great Outdoors

A more usable yard increases space and home value, so decks and patios are in demand. Decks from cheaper materials like wood or composite cost roughly $20,000 with a 70% ROI. Including a fire pit can cost about $6,000, but stretches use of your outdoor space into winter and yields a 67% ROI.

A new garage door, or a stone veneer facelift, can provide a 92% ROI.

For very little money, though, you can upgrade your house dramatically through basic landscaping. Simple yard care, such as cutting and fertilizing the grass, controlling weeds, and trimming bushes, costs about $340 with a 539% ROI.

Painting

A simple, low cost job is adding a fresh coat of paint. Even little touch-ups or targeted painting of doors and trims is effective. If selling, neutral, lighter colours are recommended.

DIY interior painting costs $2 - $3/ft2. Painting exterior surfaces is a little more at $2 - $4/ft2, but is especially important to protect against mold and other damage. Painting has an excellent ROI of 50% to 100%.

Keep it Clean

An easy fix is deep cleaning to improve the overall look of your home's exterior and interior, breathing new life into your home's appearance.

Power wash exterior surfaces to remove dirt and mold and spruce them up. For just $300, power washing may add $4,000 to resale value.

Assess for Biggest Impact

When deciding on what projects to start with, assess your house for what would make the most impact; a real estate agent can help you with this. Focus on your most dated or worn areas first. If an upgrade adds convenience or refreshes a shabby space, it is likely a safe bet.

Upgrades matching your neighbourhood's profile are most impactful. Big expenditures on fancier items that are significantly more luxurious than commonly found in the area will not add as much value as upgrades to catch up with neighbourhood standards.

Financing Home Improvements

Real estate agents can help you choose which upgrades significantly add to house value.

Consider taking out a home equity loan to complete needed projects, whether you are selling or staying in your home. Circle Mortgage Group has the best home equity loans; they can help you get a great rate so you can tackle these projects. Improve your home today and get an excellent return on your investment.

So, you're looking at buying your first home and have set up a mortgage appointment. The steps in the home buying process can sometimes seem intimidating and confusing – especially for first-time home buyers. But they don't have to be! Your dream home is just a few steps away!

Seeking professional mortgage advice is a foundational step that will help push your plans to purchase a home forward. Knowing what kind of documents and identification you need to bring, as well as knowing what questions to ask can make your mortgage appointment informative and the mortgage process beneficial.

The following information will be extremely handy when starting your journey as a first-time home buyer. It’s always helpful to prepare all of these documents before your mortgage approval meeting so that it can go as smoothly as possible.

4 Things To Bring To Your Appointment

Here are some suggested and mandatory documents you should bring and know before walking into your mortgage broker's office for your appointment.

1. Personal Identification and Credit Score

One of the most basic but essential things you'd need to bring to your mortgage appointment is proof of identification and current address. This will likely mean bringing your driving licence or passport.
It's recommended that you bring two pieces of ID in case the mortgage broker requires more than one piece. Other pieces of identification might include permanent resident cards, health cards, or a valid certificate of Indian status. For proof of address, you might bring your lease agreement, credit card statement, bill, driver's license, etc. As well, you will need to have your current credit score available. This can be found through your bank account.

2. Financial Statements

Like any loan, the party who will be providing the money will want to know about your financial habits and whether you will be able to pay back the loan with interest within a set time period.

Proof of Income

Mortgage professionals will require some financial information including a proof of income through pay stubs, employment letter, or tax documents. If you're self-employed, these documents will be a bit different. As well, they will likely need a proof of available funds for the down payment and monthly payments. This can be provided through bank statements from savings accounts like an RRSP, TFSA, or a high interest savings account. If applicable, you can also provide a list of assets with estimated value with depreciation included.
These documents will be extremely helpful when it comes to leveraging your home buyers plan to use for your down payment.

Any Outstanding Debts

Along with your income, you will have to provide any debt documentation. Your mortgage lender will not only need to know where you are getting your income, but also where your debts are. Are the bills on your credit cards piling up? Do you have another property that you are paying a mortgage on? Do you have student or car loans that are still outstanding? These are all details that are taken into consideration when it comes to your mortgage approval. These records can be seen on your credit report, as well as credit card statements, tuition receipts, etc.

3. Property Examples

When you are hoping to finance a house as a first-time buyer, you're encouraged to bring some property examples in with your meeting so that you can give your mortgage broker an idea of the size and price of the house you're looking for. This can also determine the size of the mortgage you will need before you get pre-approved. Having a couple of properties and price ranges in mind will be extremely beneficial for the entire mortgage process.

4. List of Questions

The mortgage process can be confusing – but it doesn't have to be. Whether you're hoping to get your mortgage pre-approval, completing the finishing touches, or just getting started, there are always questions that arise. Your mortgage broker is well equipped to provide professional mortgage advice and can confirm whether you are able to get your pre-approval. Seeking mortgage advice about what you can afford from a broker will prepare you for the rest of the purchasing process.
After the initial appointment, there will be more documents to fill out, more meetings to be had, and more steps to take in order to prepare your mortgage. Asking questions when you have them will help you understand the various steps in the process.

Contact Circle Mortgage Today

Here at Circle Mortgage, we help clients in the Burlington and surrounding area with all of their mortgage questions. Our team of professional and licensed mortgage brokers is here to provide answers, details, and resources to assist in your buying journey. We focus on providing the right services for whatever you may need! Contact us today to set up an appointment with one of our many professionals.

It costs a lot of money to buy a house. Qualifying home buyers need a minimum 5% down payment to purchase a home, and with rising real estate prices, buyers need to have more money saved to afford a down payment.

Thankfully, the Canadian government understands the pressure and financial strain that many Canadians are under. As a result, they have created the RRSP Home Buyers' Plan to help make affording a down payment a bit easier.

This blog will explain what the Home Buyers' Plan is, how it can help first-time buyers, and its benefits and downsides to help you understand and take advantage of this program.

What Is The Home Buyers' Plan?

The Home Buyers' Plan (HBP) is a program that allows first-time homebuyers to withdraw from their registered retirement savings plans (RRSPs) to either buy or build a qualifying house for themselves or a related individual with a disability. The maximum withdrawal amount is $35,000 per person. If two spouses are purchasing or building a house together, both can take advantage of the program and have $70,000 at their disposal.

The Benefits of Using Your Registered Retirement Savings Plan

Utilizing your RRSP account to pay for your first home is a smart decision. Many advantages come with using your RRSP funds to pay for your down payment. We will touch on these benefits below.

1. Tax Benefits

If you’re 18 years of age or older, you can contribute 18% of your annual income (up to $29,210) to your RRSP, tax-free. The contribution room carries over every year, allowing you to save more money for retirement. Every RRSP contribution is tax-deductible, meaning that you will receive a tax refund for the amount you contribute to your retirement fund.

You will be taxed on each RRSP withdrawal if you take money out of your registered retirement savings fund before retirement. Thankfully, RRSP withdrawals under the First-Time Home Buyers' Plan do not have to be claimed on your income tax return. In other words, you will not have to pay tax on the withdrawal. You can receive a tax refund by saving for retirement and you can use that money tax-free to pay for your first home. It’s a win-win situation.

2. Save Less Money

It can be challenging to save for a home and retirement when paying your bills. But, with the HBP, you don’t have to stretch yourself thin trying to save money for your retirement and your first home purchase. You can focus all your additional earnings on your RRSP contribution and use your RRSP for your first house.

3. Pay For Your Down Payment

The obvious benefit of the Home Buyer's Plan is a down payment! You will have the funds to purchase a home. Additionally, the HBP will allow you to have a substantial down payment. The larger the initial payment, the smaller your mortgage loan will be. This is beneficial because you won’t have to worry about compound interest building up on an additional $35,000 to $70,000 of your mortgage loan. However, you may have to worry about being taxed if you do not repay your RRSP withdrawal when your repayment schedule is complete.

Repay Your RRSP Contributions

It’s important to note that the funds that you withdraw from your RRSP have to be repaid; the Canada Revenue Agency requires every first-time home buyer to repay their withdrawal. Otherwise, it will be considered RRSP income and you will be charged tax.

Thankfully, you do not have to start paying it back within the same calendar year or anytime soon after that. The following year after your purchase, you must make your first repayment installment. You then have 15 years to complete repayment, paying back the remaining balance you had withdrawn from your RRSP.

Determine Your Eligibility

To take advantage of the HBP, you need to meet their eligibility requirements:

• You must be a first-time homebuyer
• You have a written agreement to buy or build a qualifying home for yourself or a related person with a disability
• You must be a Canadian resident
• You must intend to use the home as your principal residence within one calendar year of buying or building it. If you buy or build a home for a related person with a disability, they must use the home as their primary residence within one year.

Get A Mortgage Loan

Circle Mortgage Group is an award-winning mortgage brokerage located in Burlington, Ontario. We have access to a wide range of loans with fantastic mortgage rates. Rather than go to your financial institution, shop for a loan with our help. We can help you get the financing you need with the mortgage rate you want. Call us today!

Many homeowners are not aware that they can take out a second mortgage on their properties.

A second mortgage, also called a home equity loan, is a second loan taken out on a property that is already mortgaged. In simpler terms, it’s when homeowners have two mortgages for one property.

What Is A Second Mortgage?

Second mortgages are secondary loans that homeowners can take out on a property with a primary mortgage. However, this money is not to pay off the cost of the property. Instead, the funds cover other expenses like credit card debt, auto loans, and home renovations.

Homeowners receive a lump sum payment of their second mortgage upfront. They then need to make payments on both their first and second mortgages at the same time. However, second mortgages are typically interest-only payments. Interest payments help pay off the interest earned on the loan which depends on the loan interest rate. Interest rates on a second mortgage will generally be higher than the first loan secured. Seconds mortgages are available at either a variable or fixed interest rate.

Primary Mortgage vs. Second Mortgage Loans

A primary mortgage is an original mortgage used to buy a house. It’s the home loan that covers the cost of the property beyond the down payment and some closing costs. Typically, primary mortgages will make up anywhere from 95% or less of homes' purchase price. A second mortgage is much different.

A second mortgage loan is not equal to the cost of your home. Instead, the amount of money that you can borrow will depend on the amount of equity in your home. The total of a first and second mortgage can be as much as 80% of your home's value, minus the balance of your primary mortgage.

What Is Equity?

Equity is the market value of your unencumbered interest in your home. In simpler terms, it is the amount of money that you have paid for your home, outstanding mortgage balance not included.

For example, you paid a $20,000 down payment on a $400,000 house. Your first mortgage covered the remaining $380,000. You have paid $25,000 in monthly mortgage payments since you first purchased the property. When you first bought the home, your home's equity was $20,000. After paying off a portion of your existing mortgage, the value of your home equity is $45,000.

How Is A Second Mortgage Different Than A Line of Credit?

A second mortgage is much different than a home equity line of credit (HELOC) despite its reliance on equity.

First, a HELOC is a line of credit secured against your home. It works like just any other credit line; you take out money during the draw period and spend it. Then, you pay it back before you can borrow again. HELOCs are like high-interest credit cards. In contrast, second mortgages are loans with mortgage rates. They are used to consolidate debt into a single loan that can be paid off monthly payments alongside a monthly mortgage payment.

The main similarity between second mortgages and HELOCs is the collateral: your home. You risk losing your home if you do not pay back the money you borrow.

How To Get A Second Mortgage

A home equity loans are ideal for debt consolidation. Rather than pay off personal loans and your mortgage separately, you can combine them into first and second mortgages. This will help fix your bad credit, transfer high-interest debts to a lower interest rate, and boost your low credit score.

Here is how you can apply for a second mortgage:

1. Pay down your first mortgage. Mortgage lenders require homebuyers to have over 20% equity in their homes before borrowing money. They also need to be able to pay their monthly payments without exceeding their Total Debt Service Ratio.
2. Find a second mortgage lender. A second mortgage must be with a different lender than the primary lender. Many mortgage lenders and credit unions are willing to help.
   Apply. Visit your financial institution to apply for a second mortgage. You will need to provide personal finance information.
3. Pay and spend. Borrowers will need to pay several fees to get a second mortgage. They will need to pay origination fees, homeowners insurance (rates vary), title search fees, legal fees, and appraisal fees. After, you have your home equity loan to spend.

Find A Second Mortgage Lender With Circle Mortgage

At Circle Mortgage, we make getting a second mortgage simple. Call us today to speak with our mortgage broker. We can answer second mortgage FAQs and help you decide whether an additional loan is right for you.

Every person wants to buy their dream home, but the current real estate market is amping up the pressure. There is a shortage of homes and a large pool of potential buyers, thus ramping up the competition and prices.

In order to keep up with the red hot market, many buyers are opting to skip home inspections to sweeten the deal and sway sellers to choose their offer over another. In fact, according to real estate brokerage Redfin, more than 13% of buyers have waived the inspection contingency. More people are offering to waive the home inspection because they know the seller can benefit; it speeds up the closing process and is not invasive.

While skipping the inspection does allow the buyer to increase their chances of having their offer accepted, it does have its downsides; waiving the inspection contingency waives the buyer's ability to request repairs or cancel the sale if issues are discovered.

Before you and your real estate agent decide to skip the inspection, read more about it below. You may come to realize the benefits of having a property assessed before you close.

What Is The Purpose of A Home Inspection?

A home inspection is a professional assessment of a home's current condition done by a trained home inspector. The inspector assesses the inner workings of a house, including its plumbing, electrical, and heating and cooling systems, to provide the buyer with an in-depth report on the state of the house. Home inspectors can also provide an estimate for repairs,

Reasons Why You Should Never Skip A Home Inspection

A home inspection is an incredibly useful assessment when it comes to buying a new home. We will explain why you should never skip a home inspection below to help you learn why it is so important.

1. You can be stuck with costly repairs

When you skip a home inspection, you do not know about your new home's major problems. Therefore, you lose your power to negotiate; you can't negotiate with the seller to either have them lower the home price or fix any issues before the sale is finalized. You have to purchase the house as-is.

That means you will have to pay the repair costs if you encounter major issues in the near future. This can be incredibly expensive depending on the repairs and your budget. If you have just spent a lot of money on your down payment, you may not have enough to cost the cost of repairs. Then you could be left living in an unsafe house or in debt.

2. Overlooked issues can pose health and safety hazards

Your home is supposed to be a safe place. But, without a home inspection, you may never know if any health and safety concerns threaten your family and their wellbeing.
An inspection can identify a wide range of safety issues, including but not limited to:

• Outdated electrical wiring
• Deteriorating plumbing
• Structural problems with the foundation
• HVAC system deficiencies
• Missing carbon monoxide and smoke detectors
• Mould

3. Inspections reveal illegal additions or installations

A home inspection can reveal whether the seller altered or added rooms, garages, or decks to their property without the proper building permits. An inspection can also determine whether additions or installations do not comply with the Ontario Building Code.

If a buyer were to purchase and take over a mortgage for a property with illegal additions or structures, they may have difficulties obtaining insurance. Or, the new owners will have to begin the time-consuming and expensive task of obtaining permits.

4. An inspection can uncover issues hidden below the surface

A thorough inspection is critical because painting, surface-level fixes, and staged open houses can make any house look as if it is in great health. In reality, there could be many deal-breakers just below the surface.

A home inspector will look for more than just cracked walls; a home inspection means a thorough assessment of the home, including all of its systems below the surface. You will be aware of how your home is beyond surface-level appearance.

5. You can estimate future costs

After an inspection, you will receive a home inspection report. This report will detail any future repairs that will need to be done to the property. If you do not make a deal with the seller to have them fix it, you can estimate the costs of repairs.

In most cases, the home inspector will offer an estimate. They can also explain the type of work that will need to be done, allowing you to gauge whether you are willing to do the work for the house.

6. Ensure you qualify for home insurance

Did you know that some home insurance companies may not insure a home if a home inspection is not completed? An insurance company wants to ensure that their investment in your home is not risky and not knowing its pre-existing issues is a risk to their investment.

Additionally, not having insurance will leave you at risk of having to pay for damage, theft, or any other home issues that arise. This could be very expensive in the long run.

7. Peace of mind

When you waive a home inspection, you sacrifice your peace of mind for your new home. You may stay up all night wondering about the potential problems that your house may have. You may even wonder whether it was right to purchase your home without knowing what issues it has.

Maintaining the inspection contingency can reduce your stress levels and provide you peace of mind.

Thanks to a home inspection, you can sleep well at night knowing that you know everything about your home's condition. There are no unpleasant surprises; you know all of the nitty-gritty details about your home's current condition for better or worse.

The first step in establishing a down payment fund is to identify your goal. How much do you want to save? Do you want to make a bigger down payment so you have smaller monthly mortgage payments?
To help you get started, we explain the two types of down payments below. After, we share 6 ways that you can save money for a down payment.

The Conventional Down Payment

In Canada, the conventional down payment is 20% of a home's purchase price. That means if you are buying a home with a property value of $500,000, you will need to have $100,000 saved. This is a large down payment that may require years of saving to achieve.

With the rising home prices in Canada, 20% can feel impossible. Thankfully, first-time buyers can opt for a smaller down payment.

Minimum Down Payment

Depending on your credit history and financial health, you can qualify for a mortgage with a minimum down payment of 5%.

5% is the minimum amount of down payment allowed. When you choose a 5% payment, it means that your mortgage covers the remaining balance of 95% of the home price.

Opting for the minimum down payment affects your risk as a borrower; lenders tend to mark you as high-risk. As a result, you will have to budget for other payment requirements, particularly insurance.

Mortgage Loan Insurance

When you put down money on a home, you will also purchase mortgage default insurance. Mortgage default insurance, also known as mortgage insurance, is a type of insurance that protects your lender if you ever defaulted on your mortgage payments. It is required on high-risk mortgages where the loan is more than 80% of the total purchase price (in other words, buyers had a down payment amount of less than 20%).

If you cannot afford a larger down payment, you will need to budget to buy mortgage loan insurance. The insurance premium varies, but it typically depends on the home price.

Closing Costs

At the time of purchase, buyers need to pay more than just their down payment. There are land transfer taxes, real estate agents and legal fees. Budget these costs in with your down payment.

6 Ways To Save For A House

1. Budget, budget, budget

After outlining your financial goals, you will need to create a budget to help get you there. We recommend creating a budget to outline your monthly income, expenses, and savings. Here are some things that you should include:

• Rent
• Car expenses (payments, insurance, gas, maintenance costs, etc.)
• Debt (student loans and credit card payments, etc.)
• Phone bills
• TV and media expenses (streaming subscriptions, etc.)
• Monthly income
• Savings contributions (RRSP, TFSA, etc.)

Your best bet is to work with a financial advisor from Royal Bank, TD, or CIBC to create a realistic budget.

2. Take advantage of savings

The Government of Canada has many incentives for first-time homebuyers. The Home Buyers' Amount and shared equity mortgage are just a few to name.

The Home Buyers' Amount is a provincial sales tax credit valued at $5,000. It is a non-refundable income credit designed to make paying your taxes easier. The Home Buyers' Amount is available to buyers purchasing a qualifying home.

While many credits like the are not available until after you have purchased a home, they will help alleviate the financial burden of buying a home.

3. Pay down your debt then start saving

Before you start saving, take a look at your debts. Student loans and credit card debt can pile up and make it have additional money to put away. Potential buyers should pay off their debts before they put away money for a home.

Additionally, a large amount of debt can make it difficult to qualify for a loan. The rule of thumb is that your debt load should not be more than 44% of your gross annual income. Even if you have a large lump sum saved for a house, your debt may disqualify your mortgage application.

4. Set up a separate savings account and automatic withdrawal

When your savings are done manually or in a single TFSA, it can be hard to reach your goal.

Set up a new tax-free saving (TFSA) for your solely for your down payment. A dedicated fund with automatic contributions will keep you on track. You will not have to worry about moving money around, it is all done for you. It's simple, easy, and a great way to build up savings!

5. Borrow from your registered retirement savings plan

Buying a home is a big purchase that costs a lot of money. That is why Canada offers first-time homebuyers an easier way to save and pay for a house.

The Home Buyers Plan (HBP) is a program that allows Canadians to withdraw up to $25,000 from their registered retirement savings plans (RRSP) to either put towards a down payment on an existing home or build a newly constructed home. If spouses are buying together, each can pay $25k out of their retirement plans, providing $50,000 for use.

The Home Buyers Plan is a fantastic opportunity for first-time buyers. It is tax-free, interest-free, and a great way to get one step closer to home ownership. The only requirement is that the money needs to be paid back within 15 years.

6. Adopt a more affordable lifestyle

Sometimes, you just need more money to save. The best way to find more money is to adopt a more affordable lifestyle. You can save money for a home by making these lifestyle changes:

• Instead of buying new books, utilize your local library's services.
• Take public transit instead of calling a cab.
• Shop the sales while grocery shopping to save some extra money.
• Cut the times you eat out to only a week. Make sure you use coupons to lower the total cost of the meal.
• Rather than buying new clothes, try shopping second-hand either at the thrift store or on online shops like Depop.
• Opt for a vacation near home rather than one across the country or on the other side of the world.
• Consider starting up a side hustle. Not only will you be self-employed, but you can earn some extra cash along the way.

The first step in establishing a down payment fund is to identify your goal. How much do you want to save? Do you want to make a bigger down payment so you have smaller monthly mortgage payments?

To help you get started, we explain the two types of down payments below. After, we share 6 ways that you can save money for a down payment.

The Conventional Down Payment

In Canada, the conventional down payment is 20% of a home's purchase price. That means if you are buying a home with a property value of $500,000, you will need to have $100,000 saved. This is a large down payment that may require years of saving to achieve.

With the rising home prices in Canada, 20% can feel impossible. Thankfully, first-time buyers can opt for a smaller down payment.

Minimum Down Payment

Depending on your credit history and financial health, you can qualify for a mortgage with a minimum down payment of 5%.

5% is the minimum amount of down payment allowed. When you choose a 5% payment, it means that your mortgage covers the remaining balance of 95% of the home price.

Opting for the minimum down payment affects your risk as a borrower; lenders tend to mark you as high-risk. As a result, you will have to budget for other payment requirements, particularly insurance.

Mortgage Loan Insurance

When you put down money on a home, you will also purchase mortgage default insurance. Mortgage default insurance, also known as mortgage insurance, is a type of insurance that protects your lender if you ever defaulted on your mortgage payments. It is required on high-risk mortgages where the loan is more than 80% of the total purchase price (in other words, buyers had a down payment amount of less than 20%).

If you cannot afford a larger down payment, you will need to budget to buy mortgage loan insurance. The insurance premium varies, but it typically depends on the home price.

Closing Costs

At the time of purchase, buyers need to pay more than just their down payment. There are land transfer taxes, real estate agents and legal fees. Budget these costs in with your down payment.

6 Ways To Save For A House

1. Budget, budget, budget

After outlining your financial goals, you will need to create a budget to help get you there. We recommend creating a budget to outline your monthly income, expenses, and savings. Here are some things that you should include:

• Rent
• Car expenses (payments, insurance, gas, maintenance costs, etc.)
• Debt (student loans and credit card payments, etc.)
• Phone bills
• TV and media expenses (streaming subscriptions, etc.)
• Monthly income
• Savings contributions (RRSP, TFSA, etc.)

Your best bet is to work with a financial advisor from Royal Bank, TD, or CIBC to create a realistic budget.

2. Take advantage of savings

The Government of Canada has many incentives for first-time homebuyers. The Home Buyers' Amount and shared equity mortgage are just a few to name.

The Home Buyers' Amount is a provincial sales tax credit valued at $5,000. It is a non-refundable income credit designed to make paying your taxes easier. The Home Buyers' Amount is available to buyers purchasing a qualifying home.

While many credits like the are not available until after you have purchased a home, they will help alleviate the financial burden of buying a home.

3. Pay down your debt then start saving

Before you start saving, take a look at your debts. Student loans and credit card debt can pile up and make it have additional money to put away. Potential buyers should pay off their debts before they put away money for a home.

Additionally, a large amount of debt can make it difficult to qualify for a loan. The rule of thumb is that your debt load should not be more than 44% of your gross annual income. Even if you have a large lump sum saved for a house, your debt may disqualify your mortgage application.

4. Set up a separate savings account and automatic withdrawal

When your savings are done manually or in a single TFSA, it can be hard to reach your goal.

Set up a new tax-free saving (TFSA) for your solely for your down payment. A dedicated fund with automatic contributions will keep you on track. You will not have to worry about moving money around, it is all done for you. It's simple, easy, and a great way to build up savings!

5. Borrow from your registered retirement savings plan

Buying a home is a big purchase that costs a lot of money. That is why Canada offers first-time homebuyers an easier way to save and pay for a house.

The Home Buyers Plan (HBP) is a program that allows Canadians to withdraw up to $25,000 from their registered retirement savings plans (RRSP) to either put towards a down payment on an existing home or build a newly constructed home. If spouses are buying together, each can pay $25k out of their retirement plans, providing $50,000 for use.

The Home Buyers Plan is a fantastic opportunity for first-time buyers. It is tax-free, interest-free, and a great way to get one step closer to home ownership. The only requirement is that the money needs to be paid back within 15 years.

6. Adopt a more affordable lifestyle

Sometimes, you just need more money to save. The best way to find more money is to adopt a more affordable lifestyle. You can save money for a home by making these lifestyle changes:

• Instead of buying new books, utilize your local library's services.
• Take public transit instead of calling a cab.
• Shop the sales while grocery shopping to save some extra money.
• Cut the times you eat out to only a week. Make sure you use coupons to lower the total cost of the meal.
• Rather than buying new clothes, try shopping second-hand either at the thrift store or on online shops like Depop.
• Opt for a vacation near home rather than one across the country or on the other side of the world.
• Consider starting up a side hustle. Not only will you be self-employed, but you can earn some extra cash along the way.

In Ontario, debt consolidation is just one of the different options available to someone who has a lot of debt and doesn't know how they will be able to pay it.

How Does Debt Consolidation Work?

Debt consolidation means taking out a new loan to pay off multiple debts. This new loan is typically at a lower interest rate than the rates on the individual debts, so it can save you money in the long run. Debt consolidation can also simplify your monthly payments since you’ll only have one bill to worry about instead of several.

How To Consolidate Your Debts

There are many different debt consolidation options. You can work with a company that offers debt consolidation services, take out a consolidation loan, or use a home equity loan or line of credit. It’s important to weigh the pros and cons of each option before deciding which is best for you.

Debt Consolidation Companies

Many companies offer a debt consolidation service, including debt consolidation loans, credit counselling, and debt management programs. Their dedicated credit counsellors can help you consolidate your debts and develop a debt management plan. This plan will help get your finances back on track, helping you save money and pay more than your minimum monthly payment. In addition to helping you get out of debt, they can help you plot out a way to improve a poor credit score.
Professional help is a great debt consolidation option if you have a large debt to income ratio, a bad credit score, or a history of high credit card balances.

Personal Loans

If you have a good credit report, you may be able to take out a personal loan to consolidate your debts. Look for a loan that has a lower interest rate than the loans you’re consolidating, as well as a lower monthly payment.

Be sure to read all of the fine print before signing on the dotted line! A personal debt consolidation loan is unsecured debt, meaning that the loan is not backed by collateral. An example of this is credit cards; you do not have any collateral linked to your credit card, you are simply allowed to spend, and only the worry of having a decent credit score will encourage you to pay off your credit cards. This is why many people develop credit card debts.

Unsecured debts, also known as unsecured loans, have much more risk involved for your financial institution. As a result, they typically have higher interest rates and interest payments than other consolidated debt.

Home Equity Loans or Mortgages

One of the most popular debt relief options is a home equity loan but only if you have ample equity in your home. This type of loan allows you to borrow money against the value of your home. You can consolidate credit card debt and use your home equity to help pay it off!

Choose A Home Equity Debt Consolidation Loan

A second mortgage is a great debt management plan that is available to almost everyone, no matter your financial situation. The only criteria are that you own a property with significant equity.

There are many benefits to using a mortgage for debt settlement, including:

• A lower interest rate. When you take out a mortgage to consolidate your debt, you typically get a lower interest rate than you were paying on the individual debts.
• A better loan. If you have trouble qualifying or don’t want to consolidate all of your existing debts at once, a home loan can be a good option. This type of loan typically has looser qualifications than other types of loans, so you may be able to get a better interest rate and terms.

However, there are drawbacks to using a mortgage for debt settlement. These drawbacks are:

• Two loan payments per month. You'll have to pay off your new debt consolidation loan and your mortgage each month.
• The possibility of losing equity in your home. When you take out a second mortgage, there’s no guarantee that you’ll get all of your equity back.

Why Should You Consolidate Debts?

Lower monthly payments. Debt consolidation can simplify your monthly budgeting because you’ll only need to make one payment instead of several. This makes it easier for you to stick to your budget, and it can help prevent late or missed payments.

Lower interest rates. When you consolidate your debts, you typically get a lower interest rate on the new loan than you were paying on the individual debts. This can save you money in the long run and help you pay off your debt faster.

One monthly payment. With debt consolidation, you’ll only have one loan payment to worry about, which can make things easier for you. You won’t have to keep track of multiple bills or miss a payment due to disorganization.

Get Help Consolidating Debt

Are you trying to get debt-free but struggle to eliminate debt? Contact us today. Our brokers can provide you with debt consolidation resources. We can also help you consolidate debt with a home equity debt consolidation loan.

First-time home buyers often encounter new (and confusing) jargon when they are applying for a home loan. "Conforming loan," "fixed-rate," and "funding fee" are just a few to name. However, the most confusing term by far is "conventional mortgage."

What is a conventional mortgage? If there are conventional mortgages, what are unconventional mortgages? What is the difference between these two types of home loans? We will answer these questions and more in this blog post.

What Are Conventional Mortgages?

A conventional mortgage, also known as a conventional loan, is a home buyer's loan that funds 80% or less of the purchase price of the property. Since the loan limit is 80%, buyers need to have a 20% down payment saved up and available to them to qualify for a conventional loan.

For instance, a couple looking to buy a $450,000 house should have $90,000 saved for their down payment.

While saving this much may be possible for some people, many first-time homebuyers have a hard time saving up such a large down payment amount because they have debt (e.g., outstanding student loans).

Since the maximum loan amount is 80% of the mortgage, conventional mortgages tend to not have any form of high-ratio or mortgage insurance premiums. We'll touch more on that later.

What Are Unconventional Mortgages?

Unconventional, non-traditional, or high ratio mortgages are the exact opposite of conventional mortgages. Unconventional mortgages cover more than 80% of the total closing costs.

A home buyer may not qualify for a conventional loan for many possible reasons, including but not limited to:

• A poor debt to income ratio (how much money a person spends paying off debt in comparison to their monthly income)
• An unstable source of income
• Smaller down payment saved
• Lower credit scores

In these cases, a buyer's loan options become extremely limited because banks and mortgage companies are wary of lending their money to individuals with these types of financial portfolios. As a result, buyers must choose mortgages supported by the federal government.

Fun fact: Non-traditional mortgages must be backed by a government agency. These types of mortgages help protect the lender, not the borrower.

Are Conventional Mortgages The Standard?

It is important to note that conventional loans are not the standard; buyers are required to have a minimum down payment of 5% for a primary residence or 20% for an investment property. You can still purchase a home without having a 20% down payment saved up, but it may have additional loan limits and regulations you need to follow.

The Benefits of Conventional Loans

Conventional loans have many benefits that you can enjoy. We'll go into depth on some of the benefits you can enjoy if you save enough to receive a conventional loan.

1. A Larger Down Payment = More Equity

A conventional loan is more beneficial for homebuyers because they have more equity right at the beginning of their loan.

Since buyers with a conventional loan have paid a larger down payment for their property, they have more equity in their homes. More equity can be extremely beneficial because it provides owners with access to a larger home equity loan or home equity line of credit.

2. Don't Pay Mortgage Insurance

Mortgage insurance protects lenders in case the borrower defaults on their mortgage payments. Insurance typically costs 2.8% to 4.0% of the total mortgage amount. When you pay private mortgage insurance (PMI) on top of your mortgage loans, it puts a strain on your ability to make your monthly payments.

Thankfully, mortgage insurance is usually only required for any loan that is over 80% of the home's purchase price or market value. Therefore, homeowners with conventional loans don't have to buy mortgage insurance.

3. More Relaxed Lending Requirements

The mortgage industry has requirements that borrowers need to meet and follow. These requirements include proving your credit score, source of income, and more. While these terms are usually the same, they can differ depending on whether you are receiving a conventional or high ratio mortgage.

Unconventional mortgages are given to buyers who have a low down payment, poor credit score, etc. Since buyers do not have what lenders consider a 'stable financial portfolio,' they receive stricter lending requirements. As a result, they may have to go above and beyond to prove that they are responsible borrowers.

4. Lower Mortgage Rates

Often, borrowers can receive lower interest rates when they have a conventional mortgage rather than an unconventional one. The interest rate that you receive is an important determinant of your finances. Interest rate affects the amount of your monthly mortgage payment and, as a result, the cost of your total loan.

For example, if you secure a 25-year mortgage for $400,000 with a 3% interest rate, you can expect to pay $146,963.60 in interest in the 25 years. You will have to pay $253,187.39 in interest if you receive the same loan with a 5% interest rate.

Borrowers usually only receive lower rates when they have a good credit score and a low debt to income ratio. We recommend bringing your credit report to lenders to learn what interest rates they can offer you.

How Do You Get A Conventional Loan?

The first thing that you need to do is to gather all the materials required by lending services. You should have a copy of your credit report, proof of employment and any financial records to show to potential lenders.

Once you have that information collected, visit private lenders like banks, credit unions, and mortgage companies to inquire about a mortgage loan. We strongly recommend speaking to a mortgage broker because they will help you find the best rates.

Trans Union Canada is another consumer credit reporting agency providing credit reporting services to Canadian consumers. Trans Union Canada is also a great source of credit-related information.