Financial Breakdown for Active House Hunters

Monday Sep 12th, 2016

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As you already heard, the GTA property prices are up again. While the average Toronto price for all properties jumped to $710,410 in August, you can still buy a very nice property in the GTA for less than $650,000.  

If you’re actively looking for a still affordable house for your family, here is a nice semi-detached, corner house for you to consider in Newmarket, Ontario.

 

Within walking distance to schools, parks, grocery stores, shopping centres and public transit (Walk Score 61).

Highlights: 2 Full Bathrooms, Separate Entrance From Side Of Home and Garage to Finished Basement. New Patio Doors With Inserted Mini Blinds, Granite Counter-Top in Kitchen and Master Ensuite, Gas Fireplace, Large Deck With Gas Line for Bbq, Ceramic and Hardwood Floors Throughout Main and Upper Levels.

For more details, please follow thiss  secure link: http://www.homesbyolesa.com/122-warwick-cres-n3599852

Curious to know what it will take you to buy this house and how much will be your monthly mortgage payments and your closing costs? Keep on reading!

Financials: Listing Price $648,800

Property taxes: Annual $3,492.24 (2016), Monthly $291.02

Minimum Downpayment*: $39,880 (5% on $500,000 =$25,000 plus 10% on $148,800=$14,880)

Mortgage Default/Loan Insurance**: $21,921

Your total Mortgage: $630,841 = $648,800 - $39,880 (down) + $21,921 (default insurance)

Your Monthly Mortgage Payments: 25 Amortization*** Period, fixed 2.7% (current prime rate), 5-year term****:

$3,180.02  = $2,889 (mortgage payments) + $291.02 property taxes monthly

One Time Closing Costs include: legal fees and disbursements, prepaid utilities, property tax adjustments, title insurance. And, of course the biggest one time cost will be the Provincial Land Transfer Tax: $9,457 ($2,000 instant rebate for the 1st time home buyers).

Something really interesting to know from my point of view: In 5 years when it’s time to renew your mortgage and considering you never pre-paid any extra amount above your monthly payments. Your outstanding balance to be refinanced/renew will be $536,065.61.

You would repay a lender $97,775.39 of the mortgage principal and$78,574.88 in interest. Basically, your lender's gross profit for financing your house for 5 years would be $78,574.88.

In addition, don’t forget to budget for home inspection from $450 to $850 dending on the house you buy, moving costs, home owner insurance, and other costs. As a result, I advice my clients to be ready to spend for closing for up to 2.5-3% from the selling price.

I hope I answered as many of your questions as I could. If not, please don’t hesitate to contact me and I will be more than happy to clarify any of the above points and any new questions. Of course, you shoud remember that above scenario will not be the same to everyone.

The above calcualtions will completely change, if you decide to put 20% down payment,  in which case you will totally avoid paying the mortgage default insurance. In addition, your interest rate could be lower or higher depending on your credit score, credit history, consumer and other debts outstanding.  

 *As of February 2016, the federal government introduced new mortgage rules intended to cool down the real estate markets in some areas by requiring buyers to put down more than 5% on a home worth half a million dollars or more: New blended rate is 5 per cent down on the first $500,000, and 10 per cent down on any dollar value above that amount.

**Mortgage Default Insurance is financed through your mortgage and is mandatory for the down payments up to 19.99%. Unlike Closing costs it does not require a lump sum cash outlay at the time of your purchase. Instead, Mortgage Default Insurance Premium is added to your mortgage amount and paid off over the life of your loan. Cost to homebuyers 1.80% - 3.60% (as of June 1, 2015) of the mortgage amount.

***Amortization period: The total length of time it will take you to pay off your mortgage. If your down payment is less than 20 percent of the purchase price of your home, the longest amortization period allowed is 25 years. If it’s 20% or more than the longest period period allowed is 35 years.

****Mortgage Term: it’s the length of time you commit to the mortgage rate, lender, and associated mortgage terms and conditions. The term you choose will have a direct effect on your mortgage rate, with short terms historically to be lower than long-term mortgage rates. When the term is up, you must either repay the outstanding mortgage amount or renew your mortage at a new rate available at the end of the term.

 

Best wishes,

Olesa Islamova

Disclaimer: I'm not a mortgage professional and the examples I give are based on my own experience working in the real estate industry. I stronlgy recommned everyone to speak with licensed professionals before they make any serious financial decision.  


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