Chapter 7 - Purchasing and financing a home Flashcards
What are some pros to buying a home?
*Homes tend to increase in value.
*Option to renovate
*A yard provides personal space
*Flexibility for pets
*More parking space
What are some cons to buying a home?
*Yard Maintenance
*Home insurance is more expensive
*Maintenance costs
Pre-Approval certificate
provides you with a guideline on how large a mortgage you can afford and an estimate of your mortgage payments based on your financial situation.
Mortgage stress test
A set of rules that federally regulated financial institutions might use to determine how large a mortgage loan you can carry.
Whats the qualifying rate for a mortgage loan?
The higher of the posted Bank of Canada five-year fixed insured mortgage rate or the rate offered by your lender plus 2%
Gross Debt Service (GDS) Ratio
Your monthly mortgage related debt payments (loan repayments, heating costs, property taxes, and half of any condo fees) divided by your total gross monthly house hold income. (Should be no more than 32 percent)
GDS Formula
household costs/gross monthly household income x 100
Total Debt Service Ratio (TDS)
Your mortgage-related debt payments plus all other consumer debt payments divided by your total gross monthly household income.
Whats the traditional rate for a realtor?
7% of first 100,000 and 3% of remaining value
Whats the flat fee structure for realtors?
2% of houses value or 2,500
What does the mortgage contract stipulate?
*The price
*Repairs to be completed by seller
*Completion of a home inspection
*The move-in date
*The approval of a mortgage
*Disclosure
Conventional mortgage
A mortgage where the down payment is at least 20% of the home’s appraised value
High ratio mortgage
a mortgage where the down payment is less than 20% of the home’s appraised value
Amortization period
the expected number of years it will take to pay off mortgage loan balance (max 25 years or 300 months)
Mortgage term
The period of time over which the mortgage interest rate and other terms of the mortgage contract will not change. (6 months, 1, 2, 3, 4, 5 and 10 years)
