Tuesday, March 06, 2007

Not just any home - It's your FIRST home - HOUSING COSTS AND AFFORDABILITY - 2nd in a series of articles for first time buyers

Homebuying costs - This is Article 2 of a series of articles regarding purchasing a home for first time buyers

Buying a home involves many financial considerations. Some expenses are one-time costs and others are ongoing commitments. On top of that, there are other costs that you may not be aware of. Separated into four groups, they are:

1. The Down Payment – If you have a down payment of 25% or more, you may qualify for a conventional mortgage which does not require mortgage loan insurance. Anything less (minimum 5%) and the mortgage is a high-ratio mortgage and needs to be insured against default. This premium is usually added to your mortgage payment. CMHC and Genworth Financial are both mortgage insurers.

2. The Mortgage Payment – This is your regular mortgage payment. It includes the principal plus interest. The payment may also include a portion of the regular property taxes.

3. The Closing Costs – Many of these costs may be associated with your home purchase:
• Appraisal fee
• Survey fee
• Property Insurance
• Utility and tax adjustments
• Land transfer tax
• New service hook-up fees
• Lawyer (notary) fees
• Moving costs
• Home inspection fee
• Water quantity and quality certification
• Condominium fees
• New furnishings
• Decorating costs
• Renovations or repairs

4. New Homeowner Costs – the ‘oops – forgot I’d need one of those’ costs, like a lawnmower or snow blower to maintain your new property.

Generally, affordability can be estimated using two rules:

1. The Gross Debt Service (GDS) ratio – your monthly housing costs (principal, interest, taxes and heating) should not be more than 32% of your gross monthly income.

2. The Total Debt Service (TDS) ratio – your entire monthly debt load shouldn’t be more than 40% of your gross monthly income.

This article and series brought is courtesy of:
Marilyn Eidner, AMPMortgage ManagerHalton/MississaugaScotiabankCell: 647-271-7040Fax: 905-822-0811 marilyn.eidner@scotiabank.com www.scotiabank.com/meidner

For more information please contact A. Mark Argentino

A. Mark Argentino, Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc., Brokerage
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1

BUS. 905-828-3434
FAX. 905-828-2829
E-MAIL: mark@mississauga4sale.com
Website: Mississauga4Sale.com

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