Making Smarter Down Payments

Mortgage Insurance Premiums. Many people know what they are- an extra cost to you the borrower. But not many people realize how they are calculated. Understanding the premium charges and how they are calculated will help lead you to making smarter down payments.

• 5%- 9.99% down payment of a purchase price is a 4% premium
• 10%- 14.99% down payment of a purchase price is a 3.10% premium
• 15%- 19.99% down payment of a purchase price is a 2.8% premium

So, that means with a $300,000 purchase price and a $30,000 down payment (10%), you would have a 3.10% premium added to your mortgage, making your total mortgage amount $270,000 + $8,370 for $278,370 total. The $8,370 being 3.10% of your original $270,000 mortgage.

Now let’s say you have a down payment potential of $60,000 and have the income to afford a $350,000 purchase price but you found one for $325,000. Using your entire $60,000 down payment (18.46%), your new mortgage amount would be $272,420, where $7,420 of it represents the mortgage insurance premium.

But what if you change that $60,000 (18.46% down payment) to say $48,750 and have a down payment of exactly 15%? Well, your premium is still the exact same as it would be with an 18.46% down payment because your premium is still 2.8% of the mortgage amount. That means you will now save $11,250 (difference in down payments), while only paying $7,735 in premiums (an increase of $315).

I don’t know about you, but if someone told me I could put $11,250 less down and it would only change my insurance premium by $315, I am holding onto that money. You now have more cash for unexpected expenses, moving allowance, furniture, anything you want. You can even apply it to your first pre-payment against your mortgage and pay the interest down while taking time off your loan. Obviously if cash is not an issue, putting the full $60,000 would be better seeing as you are borrowing less and paying less interest. However, if cash is tight, why not hold onto it and pay that difference over the course of 25 years?

Consult with a Dominion Lending Centres mortgage professional when it comes to structuring your mortgage request with a bank. It is small little things like this that make all the difference.

Ryan Oake

Dominion Lending Centres – Accredited Mortgage Professional

Why We Chose a Mortgage Broker – Our House Magazine

The Dolejsi family needed more than just the purchase price of their new home. Their DLC broker made it easier for them to ask the “dumb questions.”

Lindsay Dolejsi and her family are finally getting settled into their forever home. The three-bedroom, 2,000 square foot townhouse in south Surrey, B.C., is the perfect place for the family of three, her husband Ryan and their daughter Violet.

“It’s just amazing,” Lindsay tells Our House magazine. There’s plenty of space outdoors for Violet to play and be a kid before she grows up. (Their daughter had spent the previous five years in an apartment, Lindsay notes.) But getting to this stage wasn’t easy.

After their bid on the home was accepted in March, the place needed a total renovation. Several months and thousands of dollars later, the work is complete. And the couple is quick to credit their Dominion Lending Centres mortgage professional for helping them through the process.

Our House: Why did you choose a mortgage broker?
Lindsay Dolejsi: I was a service adviser at the time for BMW. My broker was my customer and he sold me on [using] a mortgage broker. When we had bought a pre-sale they kind of set it up for you and so he said he could do better than that. So he did! He came in with better numbers. My mother-in-law at the time was trying to get a mortgage on the pre-sale plus her house, so he happened to come up with two mortgages [including] hers. Basically I met someone who was a mortgage broker and that’s how I learned about having a mortgage broker.

OH: How was your experience working with a mortgage broker?
LD: He helped us out to figure out how we were going to get there and what that looked like. He’s helped us ever since we got the mortgage to now. It’s awesome. They do everything for you. I can ask lots of dumb questions and they just fill in the blanks.

OH: What advice would you give to someone in your situation?
LD: I think there’s a lot of people who don’t think they would qualify or don’t know what it takes. I have a couple of friends who are late in the game, but I know they have a good amount down and they’re scared. Just talk to somebody. Find someone you connect with, mortgage-wise, and it flows from there. Don’t be afraid to just ask questions and see. It’s better than asking a bank. A lot of people think you have to go through a bank and it’s not as personal.

4 Signs You’re Ready For Homeownership

While most people know the main things they need to buy a home, such as stable employment and enough money for a down payment, there are a few other factors that may help you realize you’re ready, perhaps even earlier than you thought!

As a mortgage broker, it is my job to ensure that each one of my clients is getting the best service I can provide. Part of this means educating as much as possible when it comes to buying a home, which is why I’ve put together a list of 4 signs that may tell you that you are ready to become a homeowner.

You should have more funds available than the minimum of a down payment
This one may seem obvious, but it’s something that people may not realize until they actually think about it. It’s very difficult to afford a home if you only have enough money for a down payment and then find yourself scrambling for day-to-day living after that.

If you have enough money saved up (more than the minimum needed for a down payment), you may be ready to start house-hunting.

Your credit score is good
This might seem obvious at first glance, however, if you don’t have a good credit score, chances increase that you could be declined altogether or stuck with a higher interest rate and thus end up paying higher mortgage payments. If you have a less-than-optimal credit score, working with a mortgage professional can help you get on the right track in the shortest time possible. Sometimes a few subtle changes can bump a credit score from “meh” to “yahoo” in a few short months.

Breaking the bank isn’t in your future plans
Do you plan on buying two new vehicles in the next two years? Are you thinking of starting a family? Are you considering going back to school?

Although you may think you can afford to purchase a home right now, it’s extremely important to think about one, two, and five years down the road. If you know that you aren’t planning on incurring big expenses that you need to factor into your budget anytime soon, then that’s something that may help you decide to buy a home.

You are disciplined
It’s easy to say, “it’s a home, I’m going to have it for a long time so I may as well go all-in!”. While that would be nice, that’s rarely the case!

You must have a limit that you’re willing to spend. Sitting down with a mortgage broker or real estate agent and analyzing your finances is crucial. It’s important that you know costs associated with buying a home and what the maximum amount is that you can afford without experiencing financial struggles. IMPORTANT: This is not the amount that you are told is your max!

This is the amount that you calculate as your max based on your current monthly budget and savings plan. It’s quite frequent where I have clients tell me that their max budget is, say, $1200 and then when I run the numbers they could actually be approved for much more. Low and behold suddenly these guys are looking at homes that are hundreds of dollars a month higher than their initial perceived budget. It is up to you (with my help or pleading, when necessary) to reel things back in and make sure that you aren’t getting into something that affects the long-term livelihood of a well thought out budget or savings plan.

Conclusion

These are just four signs that you may be ready to purchase a home. If you’re seriously considering buying or selling, talking with a Dominion Lending Centres mortgage broker, such as myself, can help put you on the right path to a successful real estate transaction.