First-time Halifax Home Buyer? Know How Much You Can Afford!

Before you even start looking for a home, you need to know exactly how much home you can afford – otherwise, you could spend time looking at homes that are out of your price range. If that happens, it's hard not to be disappointed later when you view less expensive homes.

To get an idea of what you can afford, you'll need to take into account the following:

• Your down payment
• Your household income
• Your current debts (liabilities) and your monthly payments associated with those debts
• Your estimated monthly housing-related costs, including mortgage payment, property taxes, property insurance, condominium fees, school taxes, utilities and maintenance costs
• Your anticipated closing costs and other one-time costs
• Your current spending practices

Look closely at ALL your expenses.

You've got to put food on the table, clothes on your back and gas in your car-and have a little fun now and then. You also need to be prepared for emergencies as well.

Your mortgage specialist will help you make sure you have money left over to pay for the necessities of life, as well as some of your lifestyle choices. 

Find out more at the RBC Mortgage Centre!

Mortgage Down Payment Options

From a low down payment mortgage to using your Registered Retirement Savings Plan (RRSP) as a source of funds, buying a home has never been easier.

The down payment is that portion of the purchase price you furnish yourself. The balance is obtained from a financial institution in the form of a mortgage. The amount of the down payment (which represents your financial stake, or the equity in your new home) should be determined well before you start house hunting.

Conventional Mortgage

A conventional mortgage requires a down payment of at least 20% and is offered on either a fixed or variable interest rate basis. Conventional mortgages have the lowest carrying costs because they do not have to be insured against default.

Low Down Payment Insured Mortgage

Most lenders now offer insured mortgages for both new and resale homes with lower down payment requirements than conventional mortgages-as low as 5%. Low down payment mortgages must be insured to cover potential default of payment; as a result, their carrying costs are higher than a conventional mortgage because they include the insurance premium.

Mortgage default insurance is a one time premium paid when your purchase closes. You can pay the premium or add it to the principal amount of your mortgage. Talk to your mortgage specialist to find out which option is best for you.

Using Your RRSP as a Down Payment

Under the federal government's Home Buyer's Plan, first-time home buyers are eligible to use up to $25,000 in RRSP savings per person ($50,000 for couples) for a down payment on a home. The withdrawal is not taxable as long as you repay it within a 15-year period. To qualify, the RRSP funds you plan to use must have been in your RRSP for at least 90 days.

Even if you already have enough money for your down payment, it may make sense to access your RRSP savings through the Home Buyers' Plan.

For example, if you have already saved $25,000 for a down payment-and assuming you still had enough "contribution room" in your RRSP for a contribution of that amount, you could move your savings into an RRSP at least 90 days before your closing date. Then, simply withdraw the money through the Home Buyers' Plan.

The advantage? Your $25,000 RRSP contribution will count as a tax deduction this year. Use any tax refund you receive to repay the RRSP or other expenses related to buying your home.

However, the money you borrow from your RRSP won't earn the tax-sheltered returns it would if left in your account. Ask your financial planner if this strategy makes sense for you.

Visit the RBC Mortgage Centre to read the entire article.

Credit Rating Basics

A credit bureau score is used by banks, or other companies - like cable providers, insurance companies or landlords - to determine how risky it is to do business with you. It gives them a picture of how well you manage your money because it's based on information pulled from all the lenders you do business with.

The better the credit score, the more attractive you are as a client. And this means you're more likely to qualify for that loan or mortgage you're applying for, or even to get a preferred rate or package from a cell phone company.

So how does it work exactly? Well the first time you borrow money, a credit rating report is created. They are maintained by credit reporting agencies and include whether you've paid your bills on time, whether you've missed payments, and what your outstanding debt is. Over time, this data will form a pattern of how well you pay - or don't pay - your debt. Information that appears on your credit rating is kept for 7 years.

This is why it is important that you pay all of your bills on time, even the ones that seem small and insignificant. And even if it is just the minimum payment. Regularly staying on top of your bills reflects a good pattern of behaviour.

If you often - or even sometimes - miss bill payments, this can negatively impact your credit score. And a lower score means you're less likely to qualify for financing down the road. If this is a concern, consider setting up automatic transfers on payday so you don't let a payment slip by.

Your credit score is your score. It is good to know what your current score is. You can request a copy of your credit report from either of the two agencies in Canada - Equifax or TransUnion. It's actually a good idea to review your credit report once in a while, in case of any errors or fraudulent activity.

If you keep on top of your credit information, and maintain good credit habits, you'll benefit in the long run.

Thanks to Gurnek, Credit Specialist at the RBC Advice Centre.

How can you pay off your mortgage faster?

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.

Thanks to Leanne, Branch Manager.

Visit the RBC Advice Centre for more information on paying off your mortgage.