HOW MUCH CASH WILL I ACTUALLY NEED?

Down Payment + Property Transfer Tax (PTT) + Closing Costs = Cash Required Up Front



DOWN PAYMENT

A 5% down payment is required for a purchase price of up to $500,000. Anything over $500,000 requires 10% on the portion over $500,000, up to $999,999.

For example, a purchase price of $550,000 means a down payment of $30,000 is required, not $27,500.

If a down payment of less than 20% is used, this will trigger mortgage loan insurance. This is generally wrapped into the total mortgage. Maximum amortization on a mortgage with mortgage loan insurance is 25 years.

When do I need to come up with the down payment and where do I actually pay it?

This transaction is completed at your solicitor's office shortly before your closing date.

I don't have my full down payment yet, but will pretty soon. Can I still get a pre-approval to find out my max purchase price while I continue to save?

Yup! Start an application here.

RRSPs

As of April 2024, maximum of $60,000 can be used per person, provided each individual meets the government's First Time Home Buyer criteria. If you've been out of the market for awhile (years), you still may qualify as a FTHB.

Be sure to speak to your Financial Advisor while you are getting your pre-approval in place.

Consider:

• Are the funds locked in?
• Are there penalties to withdraw funds?
• A form (T1036) is required to be submitted to CRA and this typically takes 3-5 business days.
• Funds must have been seeded for 90 days before your purchase if using the HBP.

GIFTED FUNDS

Gifted funds from parents, grandparents or siblings can be used. A gift letter will need to be provided confirming there is no expectation for these funds to be paid back.

The letter template will come from your lender during the financing stage of your purchase.

The funds do not need to be in the purchaser's bank account at the time of your accepted offer, but they do need to be transferred before closing.

PROPERTY TRANSFER TAXES

Be sure to confirm with your lawyer or notary on all matters related to Property Transfer Taxes (PTT). For FTHB, there have recently been updates to the exemption limits as of April 1, 2024.

For purchases up to $500,000, FTHB are exempt from any PTT. For purchases up to $835,000, PTT is only payable on the difference above $500,000 at a rate of 2%. Partial exemption is available for purchase prices between $835,000 - $860,000.

Anything above a $860,000 purchase price, the tax must be paid in full. PTT is paid up front and cannot be wrapped into the mortgage. 

My spouse is not a FTHB but I am. 

Do we still have to pay PTT?

Speak to your lawyer or notary to determine what costs can be expected to incur for your specific situation.

CLOSING COSTS

Closing costs may include lawyer fees, title insurance, appraisals, home inspection, moving costs, buyer's portion of property taxes (if required) and any other costs that may arise during the purchase.

Be sure to contact your lawyer or notary to confirm their fee. We generally budget a minimum of around $2,500 for these costs.

PRE-APPROVALS

Getting a pre-approval in place before you begin house hunting is a smart, buyer-savvy move. As a bonus, your realtor will be thrilled!

You get most of the heavy lifting completed up front, i.e. the paperwork, so that when you get your accepted offer, you don't need to worry about gathering a ton of documents during an inevitably stressful time.

Once your pre-approval is in place, Flawless Financing will provide you a financing letter to be submitted with your bid, to help strengthen your offer.

How long is my pre-approval valid for?

Typically 3 - 4 months.

CAN I GET A BALLPARK FIGURE ON MY MAX PURCHASE PRICE?

Sure can.

Check out our calculator here.

OUR PRE-APPROVAL PROCESS

1. Open a file with us and complete an application.

2. Submit your documents. Once your application is complete through our online portal, a list of required documents will be emailed to you. The documents requested will be tailored to your unique situation.

3. Flawless Financing reviews your file in detail.

4. A follow up chat is scheduled so you can talk through numbers and options.

5. Your file is submitted to secure your rate-hold and pre-approval.

6. Flawless Financing receives your pre-approval back from your lender and will get in touch to review it with you.

7. Happy House Hunting!

With your financing letter now in hand, be sure to keep us in the loop on any properties you are interested in.

HOW DOES QUALIFYING WORK?

Lenders review many factors when determining an applicant's eligibility for a mortgage. The most important pieces are your Gross Debt Servicing Ratio (GDS) and your Total Debt Servicing Ratio (TDS).

GDS takes into consideration the debts associated with making payments on your theoretical home. This includes principal and interest payments on your mortgage, property taxes, heat, and any applicable strata/maintenance fees. This ratio generally cannot exceed 39% of your total annual income.

TDS takes into consideration the above mentioned liabilities as well as any monthly liabilities already incurred (auto loans, credit cards, etc). This ratio generally cannot exceed 44% of your total annual income.

What about the Stress Test?

The stress test is used to ensure that if interest rates were to rise, you as a borrower would still be able to make your mortgage payments. When qualifying for a mortgage, you're required to qualify at the greater of the Mortgage Qualifying Rate (MQR) or your contract rate plus 2%.