Mortgages

2 WINNIPEG FREE PRESS, WEDNESDAY MARCH 11, 2020 SPECIAL SECTION MORTGAGES & HOME BUYING 1. Determine how much you can afford before you start house- hunting. The last thing you want to do is fall in love with a place only to find out you can't afford it. Work with an advisor to determine how much of a mortgage you qualify for before you even start house-hunting. Carefully consider how much money you actually want to spend, and make sure you stick to a comfortable budget. It can be tempting to take your house- hunting to the next level, but never leave yourself cash-strapped and unable to enjoy your new house. 2. Don't fixate on the rate. While getting a good interest rate is important, there are other variables to consider. Prepayment penalties (where your lender charges you for paying your mortgage off early) can vary immensely. If for some reason you have to sell your house before the mortgage term is up, the penalty could be thousands of dollars. Look for good prepayment privileges. 3. Be prepared. Your financial institution will need a lot of paperwork from you including identification, pay stubs, letters of employment, T4s, notices of assessment, plus the amount and source of your down payment. The sooner you provide this to your advisor, the quicker and less stressful the approval process will be. 4. Less than a 20% down payment? Consider insurance. In a conventional mortgage scenario, if you were to purchase a $300,000 home, you would need $60,000 to make a 20% down payment. If your down payment is under 20% (and as low as 5%), you can still qualify for a mortgage, but you will have to take out mortgage loan insurance. Buying the same $300,000 home with a 5% down payment of $15,000, you would have to pay an insurance premium of $11,400. This insurance premium can be added to your mortgage rather than paid up-front, making this an attractive option. 5. RRSP or gift options. Under the Home Buyers' Plan you can take up to $25,000 out of your RRSPs to put towards your down payment. While you'll have to pay your RRSP back with annual payments over 15 years, this could give you a much-needed boost and provide sufficient time to make the repayment. You can also use money from a gift for your down payment, but there are some rules. The donor has to be a close relative and they will need to provide a letter stating that it is a gift and not a loan. 6. Don't forget closing costs. Closing costs can be 1.5% to 2% of the purchase price of a home, which can add thousands of dollars to your final costs. These additional fees can include: • A HOME INSPECTION: Worth its weight in gold if it uncovers a major problem in your potential new home. • AN APPRAISAL: A requirement for most conventional mortgages. • LAND TRANSFER TAX: For a $300,000 home you would have to pay $3,720 in land transfer fees. • LEGAL FEES. Be sure to have enough to cover all closing costs along with your down payment, as most advisors won't offer you a mortgage without it. SIX TIPS FOR FIRST-TIME HOMEBUYERS Buying your first home will be one of those rare times that you'll feel excited and nervous all at once. And securing a mortgage might be the biggest cause of worry. First-time homebuyers can follow these tips to help relieve some of the pressure. M LS market analyst Peter Squire is optimistic that 2020 will be anoth- er strong year following on the heels of a busy 2019. "We've expanded our reach south into the Morden-Winkler area, which is an impor- tant development for Manitoba realtors. That was one reason we had more success than we thought we'd have, since we added a major play- er in our market," he said. "We added 230 new members throughout 2019, so now we've got over 1,900 realtors and 2,000 active members. For the first half of 2020, we're expecting to see increased sales from that ex- panded region." Putting it in perspective with a backwards glance, 2018 was a slow year — especially for first-time buyers due, in part, to the mortgage stress test. Then in 2019, mortgage rates dipped slightly lower than expected, which made it somewhat easier for people to qualify. By then, buyers also had time to adjust their expectations due to the mortgage stress test. In addition, 2019 marked a milestone as the first year with more than $4 billion in MLS transactions in the Winnipeg Realtors' market region, including vacant lots and commercial activity. Squire predicts that it's possible to reach that milestone again in 2020 — and per- haps even surpass it. So far this year, mortgage rate conditions re- main favourable, he added. "Banks aren't calling for increases," Squire said. "We might even see a bank benchmark rate de- crease in the spring, given that global economy and national economy have been weak lately." To start the year off, January boosted confidence with a total sales increase of 15 per cent compared to last year. Then the first half of February brought a 10 per cent gain in MLS sales, although it's been a slower start for condos. In April, the federal government might tweak the mortgage stress test, which would make the market even more dynamic, he added. "Instead of just going to the highest Bank of Canada five-year fixed-term mortgage rate, they're looking at taking the median of the competitive STRONG START FOR 2020 By Jennifer McFee This year is already off to a strong start, and real estate experts forecast a modest uptick in sales in the market for 2020. Peter Squire, MLS market analyst Continued on next page >

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