Things to Consider when House Shopping

It's a Personal Decision

While you may qualify for a certain mortgage amount, you should also consider how it will impact your lifestyle and other things that are important to you.

Will you be able to maintain your current lifestyle with the mortgage payments you're considering. Are there changes to your current spending that you can make to be able afford that new home?

Be Honest

Be honest in deciding what you can afford! Small minor changes to your lifestyle are likely doable - however major changes really need to be considered.

Look hard at your current lifestyle - how much do you spend on going out to dinner, movies, travel, etc. You may decide to eat at home more often, watch movies at home instead of going out; whatever your change, you need to assess how drastic is this change in your lifestyle. Will you be satisfied with the changes you've made? A dramatic change in your lifestyle would not be recommended or may not necessarily happen. You still need to lead your life!

Future Considerations Too!

It is also important to think ahead. Where will you be in a few years - kids, new job, etc. How this will affect your future cash flow? Future changes to consider:

The impact of family changes will affect cash flow and your ability to meet your monthly financial obligations. For example, the birth of a child can mean less income coming in due to maternity leave, increased expenses with new clothes, furniture for the baby's room, strollers, car seats, etc.

Look at your employment situation - will you be getting a salary increase soon? Is your spouse/partner going back to work? You may then want to look at stretching yourself now, for the added flexibility later - getting into that home you really want now.

Some additional thoughts - if you have never owned a home before think about the additional costs associated with owning a home that will impact your cash flow:

• Utilities - heat, hydro, internet, etc.
• New fencing, deck
• New furniture, window coverings
• Shovels, rakes, etc.

Think About Balance

So you will need to decide. Is the starter home right for you? Something that will allow you to be a home owner now, understanding that in a few years as your family grows and changes, you may need a larger home. Or do you want to stretch and get that dream home now - and potentially never have to move again.

You'll be living with this decision beyond today so you need to think about balance. Remember you want to be able to sleep at night knowing you can make your payments!

For more information, please visit the RBC Advice Centre

What everyone wants is to pay off their mortgage quickly. Here’s Leanne with tips on how you can pay off your mortgage faster!

Leanne - Branch Manager

Being mortgage free is a dream of many Canadians. Here at RBC we have many flexible payment options to help make that dream a reality.

For instance, if you come into a lump sum amount of money or you get a raise, or your finances change at all, we could help you change your mortgage payments in order to pay that mortgage off even faster.

One of the simplest options is to actually do a double up payment. One double up payment can actually save you tens of thousands of dollars of interest over the course of your mortgage. So that's one payment out of your entire year.

The double up option allows you to increase your monthly or bi-weekly payments. From your original amount you can add on $100 up to the exact amount of your bi-weekly or monthly payment. For example, if your bi-weekly payment is $1,000 you can increase that payment by an additional $100 to $1,000. Those additional funds going right to your principal reducing your overall amortization period.

Another option available is to put 10% down yearly as a lump sum payment directly to your principal. This lump sum is 10% of your initial value of your mortgage.

So for example, if you had a $200,000 mortgage, you have the ability to put a $20,000 lump sum directly to your principal every single year. Therefore you're putting that 10% right to your principal payment and reducing those overall mortgage costs.

Visiting our website you can see all the different options to help pay your mortgage off even faster.

For more information, please visit the RBC Advice Centre

Spring is finally here meaning time for renovations! Here are some tips on managing your renovation budget!

Renovating your home can be a great investment. Not only can a smart reno improve the overall value of your home, but at the end of it, you also get to live in a new and improved space that’s been custom made for you! But renovating can be expensive, and many people find that when they add up all the costs, they’ve spent more than they initially hoped or expected.

So how do you keep your costs under control? Well, there are a few ways to efficiently plan and budget for your renovation, and keep track of your costs along the way.

First, estimate how much your reno will cost you before starting out. To get a realistic gauge of your costs, go and price out some of the things you’re considering for your new space – like flooring options, appliances, and even accessories like faucets and door handles. And don’t forget to price out things like underpadding and scrap removal – many people miss budgeting for those less visible costs.

Once you’ve established a ballpark price tag, you can set up your budget. As your renovation gets under way, monitor your expenses and regularly compare them to what you’ve planned, to make sure you stay on track.

One suggestion is to set up your budget to include a reserve fund of at least 20% for unexpected costs. Even the most thorough budget can get derailed by hidden damages, plumbing issues or electrical surprises. A good tip is to keep this amount separate from the budget you share with your contractor. That way, it truly remains an emergency reserve.

And after all of this planning, renovations can still come in over budget. Sometimes it’s simply unavoidable. So it’s important to have a contingency plan – whether it’s savings you can draw from, or financing you set up with your bank. Whatever the case, be sure to have all of your funding in place before you start, so you have the money you need to finish the job.

Home renovations can be exciting, but also a little stressful. By properly planning out the financial side of your renovation, you’ll have one less thing to worry about. And, you can focus your efforts on say, choosing the right counter top… or maybe on trying to get your contractor to work just a little bit faster!

For more information, please visit the RBC Advice Centre!

How to balance your mortgage payments with your lifestyle

Roozbeh - Senior Account Manager

With the purchase of a new property there are a lot of things for you to consider. For example, property taxes, condo fees, maintenance of your lawn if you're in a house.

Those are the kind of things that if you're renting you're probably not paying out.

So it's very important for us to realize what those extra costs are and to find out what is the right balance between having your property and maintaining the lifestyle that you're comfortable with because your financial situation is very unique.

At Royal Bank we can help you find out what that right balance is and how we can help you enjoy your property over a long period of time.

It is important to realize that with what you're about to take on with the purchase of your new property, it is a long term plan and your budget and your lifestyle would change through time.

For example marriage, having a newborn or even a new job, and with a new child in your family, you may have a reduction in income because your spouse might be on a maternity leave, or extra expenses on things like daycare or diapers. We need to make sure that we plan for those kind of things.

With all this in mind you can find the right balance of having a mortgage payment that you're comfortable with. You could either pop in online and play around with some of the numbers that may give you an indication of how much you can afford or you can come into the branch, go through the calculator together, and at the same time have a look at doing the pre-approval for you to make sure that everything is set in place when you're looking to find that ideal property for yourself.

For more information, please visit the RBC Advice Centre

Here are some points to consider when deciding whether to rent or to buy a home.

Rohan - Account Manager

Purchasing a home is a big decision, and it is important to take the time to understand if you are ready to make the move from renting to buying your home. It is a personal decision and there are many factors to consider that are unique to you. Owning a home will most likely be the biggest investment in your lifetime.

The earlier you can re-direct your rent payments into a mortgage payment the faster you will start building equity in your home. Equity is the difference between the value of your home and the amount you owe on your home, and as you pay down your mortgage, or the housing market changes, your equity has the opportunity to grow.

But this doesn't mean that home ownership is the right fit for everyone. If your move is short term, or you are not sure yet of where you want to live it may be worthwhile to continue to rent. Owning a home is a long term commitment.

On our website we have a rent or buy tool that you may want to take a look at to understand what your current rent payment would equate to in a mortgage amount. For example:

If you are currently paying $1000 a month in rent, based on today's 5 year interest rate, amortizing the full amount of your mortgage over 25 years, and making a 10% down payment, this could equate to a house valued at close to $200,000.

It is important to keep in mind as a homeowner there are extra costs you need to account and budget for which may include: property taxes, property maintenance costs, utilities, and condo fees.

Weigh the pros and cons and determine when you are personally ready to make the move from renting to buying. If you are ready, or need help to determine if now is the right time for you, contact one of our RBC Mobile Mortgage Specialists to help you work through the numbers.

For more information, please visit the RBC Advice Centre.

Buying a home in Canada – terms to know

As you begin the process of buying your first home, you’ll probably come across a number of new terms and phrases. Here are some of the ones you’re most likely to encounter.

Amortization period. The length of time it takes to pay off the entire amount of your mortgage.

Down payment. The amount of your own money that you use to buy your home – it’s often expressed as a percentage of the purchase price.

Interest rate. The rate of return the lender (i.e. your bank) receives for letting you use the mortgage money for a specified term. The interest rate is usually expressed as an annual percentage rate.

Variable rate mortgage. Where the interest rate changes with your lender’s prime rate. Your payment stays fixed for the term, so if interest rates go up, your interest cost will too. But if interest rates go down, so will your interest cost.

Fixed rate mortgage. Where the interest rate is set for the length of the mortgage term. Fixed rates offer security so even if interest rates in general rise, your mortgage rate is locked in for the term.

Mortgage. A loan for the purposes of financing a home purchase where your home functions as security for repayment of the loan.

Mortgage default insurance. This insurance is mandatory for borrowers with a down payment of less than 20%. Mortgage insurance gets automatically added to your mortgage amount if required.

Prepayment charges. Money you need to pay your lender to compensate for the prepayment of a closed mortgage in part or in full before the end of your term.

Principal. The amount of the loan or mortgage you owe to your lender at any specified time, not including interest.

Term. The length of time during which your mortgage agreement is effective. The term can be closed or open.

Closed mortgage is a mortgage agreement that has restrictions on refinancing or prepaying the outstanding amount before the end of the term. Closed mortgages are a better choice if you don’t plan to move in the short term.

Open mortgages can be repaid either in part or in full at any time, without prepayment charges. Interest rates for open mortgages are generally higher than for closed mortgage because of the added prepayment flexibility.

For more information, please visit RBC Advice Centre

Conventional or High Ratio mortgage - which one is right for you?

Victor - Mobile Mortgage Specialist

When buying a home you have two options. You have a conventional, what we call a conventional mortgage, which is when you have 20% down or more. Or a low down payment mortgage with as little as 5% down you can buy your home.

When you have a low down payment mortgage, you are charged a premium on closing which we call a mortgage default insurance premium.

What we'll do is work with you to find out what the ideal down payment amount is for your financial situation and then work through those specific costs for you for closing.

That default insurance premium is also subject to a provincial sales tax and that is all calculated for you so that you have no surprises on closing when you purchase your home.

Buying a home and getting a mortgage is one of the biggest investment decisions you'll make. So making sure that you have had expert advice not only on the mortgage side and the financing side but on the investment side is very important. And at RBC we have all the relationship partners available for you to meet with to get the advice to make you feel comfortable with this purchase.

For more information please visit the RBC Advice Centre!