Calgary home prices and Mortgages

[Aegis]

Originally Posted by SpongeG

Can you put 0 Down in Alberta?

BC now has 0 down - which is insane

Yes, but the financing fees & interest rates on 0% down are a rip-off. Scrounge up the 5%...

[m0nkyman]

And don't forget, you can empty up to 20,000$ of your RRSP tax free to use as a downpayment...

Yeah, I didn't have 20,000$ either.

[ScottFromCalgary]

I believe you can now get 30 and 35 year mortgages with ATB. It may make your payment more manageable, but you are going to pay substantially more in interest (about double) compared to a 25-year mortgage.

[freeweed]

Originally Posted by ScottFromCalgary

I believe you can now get 30 and 35 year mortgages with ATB. It may make your payment more manageable, but you are going to pay substantially more in interest (about double) compared to a 25-year mortgage.

I think the idea here is that (in theory) your income will rise over the years, so *eventually* you will be able to start paying down more of the principal, thereby shortening your mortgage, thereby paying less in interest. In theory. I'm hoping to knock my 25-year mortgage down to 15 (or maybe even 10) in this fashion, but it's going to depend heavily on future income. I'm having a hard time right now imagining when a $1500-2000 mortgage payment seems "small", and easy to top up, but who knows. Effective minimum wage in Calgary might be $25/hr in 10 years (average annual increase of 10%, not out of the question) if things don't settle down a lot.

However, I shudder to think about someone starting a 35 year mortgage when they're 30 years old (which is the only way a LOT of Calgarians can currently afford ANYTHING), and waiting until the very end to pay it off. Good luck saving much for retirement when you still have mortgage payments.

Then again, a lot of money-smart people say it's better to pay the very minimum on your mortgage, and invest the rest, as you can often get a higher rate of return with RRSPs, etc than your mortgage rate costs you.

[RiverRat]

If possible, try to get 10% down. With 5% down, your downpayment is almost entirely insurance expense, throw in 5% realtor fees and other costs for selling, and well, it might very well take 3+ years before you can sell your place and not expect to lose money compared to just renting a place with nearly the same monthly cost. On a $300k purchase, the difference in CMHC fees between 5-10% down is about $4,500.00

Some tricks to boosting your downpayment and mortgageablity:

- If you have less than 20k in your RRSP, contribute the missing amount ASAP. You will be able to withdraw it, under the HBP, after 90 days (Make sure your possession date is later than 90 days away from whenever the money went in). Consider even taking out an RRSP loan to achieve this. You will have to repay the loan before getting the mortgage, but depending on your income, you might be able to coax 3 to 7 thousand dollars of extra tax savings that can be put down on a place.

- Plan to sell your car if you have a car loan. Add the money to your downpayment, and then rebuy a cheaper car or get dealer financing after you get your mortgage. It is easier to get a car loan with a large mortgage, than it is to get a large mortgage with a car loan.

- See if your realtor knows any tricks for coaxing downpayment cash out of a deal. Rather than reducing their price, the seller may agree to provide a "cash-for-repairs" allowance. Write it into the offer, and they can forward this amount to your lawyer, and it gets added to your downpayment. Many sellers probably won't go for this, and it may not even be strictly legal, but i've heard of stuff like this happening, and it's worth a shot.

Also, I really like the following website for doing home purchase analysis:

http://www.canadamortgage.com/

They have a series of mortgage calculators (see drop down on top right side of screen). The "Finance your purchase" calculator will give you a good estimate as to how much money the banks will lend you. Also the rate they show as "their best rate", is a pretty good indicator of the interest rate you should expect to get for your mortgage if you shop around.

The rent vs own calculator is a real eye opener. It takes interest and ownership vs rent expenses and tells you how much your house has to increase in value in order for ownership to be a financially more viable option then renting.

[CalgaryRealtor]

JohnnyC -

If you haven't gotten i touch with a mortgage broker yet (do NOT use a bank or credit union .... most will charge you at least 100 basis points more for the same mortgage product), get in touch with me and I'll set you up.

Some of the information above is just plain incorrect. Depending on your credit history and current income, you can buy a principal residence (a place you intend to live yourself) for as little as 5% down, or even finance it 100% *at a higher mortgage rate*. The premium for taking a high-ratio mortgage is always added onto the mortgage, and ranges from less than 1% (at 75%) to 2.75% (at 95% financing). Hardly the hit that some would have you believe.

Prices continue to rise in Calgary - house prices are up almost 16% since the end of December ... and there's likely another 5-10% coming before summer *April & May are always the strongest months for Calgary Real Estate* see http://www.jimsparrow.com/market-stats.php

To purchase a $250K condo *the avg Calgary condo now costs just under $310K* at 5% down you'll require $12.5K cash and your mortgage will cost you about $1,465/mth.
See: http://www.jimsparrow.com/mortgage-rates.php

[Rusty van Reddick]

you can only do the RRSP transfer ONCE in your lifetime and only for a FIRST home purchase. You do not have to repay before you get your mortgage- you have 15 years to repay. But those "repayments" are amortized to be an equal amount per year for each of those 15 years; you cannot, say, take 10k out of your RRSP and then sock 10k back into it the next year and think that you're even. Only 1/15 of the 10k counts as "repayment." I don't know why this works this way, but it does.

[Calgarian]

Thanks guys,

I was more curious how much money i am going to need to save up so I can stop living in apartments and giving my money to someone else.

[Champion3]

...and if you go with a long term mortgage, you'll be giving it all to your bank instead.

[The_Bachelor]

I would just add that you should definitely use a mortgage broker. They do all the work of shopping your mortgage around to the banks for the lowest bidder and you don't pay them a dime, the bank actually pays their fee for bringing them the business. Also the mortgage broker is on your side, it's nice to have someone pushing hard at the bank to get your application through because if it falls through they don't get their commission.

Just my experience, being 22 when I bought a house it helped reduce the stress of it all.