KANETIX Provides Tips for Homeowners on Mortgage Down Payments
TORONTO, ON (PRWEB) July 28, 2013 -- Many Canadians dream about homeownership. However, a major task for many is saving for a down payment which can range from five to 20 per cent. The majority of Canadians will obtain a mortgage loan in order to get their dream home says KANETIX.
Existing Home Equity
First, if someone is already a home owner and are planning to sell their existing home when buying a new home, they can use the equity in their existing home as a down payment. In most cases, their existing home will need to be sold, and they will need to have cash in hand before they can close on their new home loan. However, this is a source of funds that many existing homeowners can benefit from. They can speak with a real estate agent to learn more about the value of their home and to estimate the equity they have available.
Personal Savings
If someone does not have enough home equity for the full amount of a down payment and closing costs, or if they are not a first-time homebuyer, they may need to save money to obtain the full amount of funds needed. Those who are saving their money in a personal savings account to use as a down payment should consider the benefits of an automatic funds transfer from their employer into their savings account with each paycheck.
A Gift
Some lenders will allow a gift of funds from a close relative. They may have a limit on the amount of funds that can be gifted, and the giver of the funds may need to sign a statement stating that the funds are not going to be repaid by the recipient. There may also be limits on the total loan amount, the monthly payment for the mortgage loan and other factors.
RRSP Savings
Canadians may also be able to use funds in their Registered Retirement Savings Plan, or RRSP. This is a retirement account that most Canadians participate in, and most first-time homebuyers may be eligible to use at least a portion of the funds in their RRSP as a down payment. For individuals, up to $25,000 from the RRSP may be used for this purpose. For couples, the maximum limit is $50,000. The funds must be repaid within 15 years, or the amount that was withdrawn from the RRSP will be subject to taxation. Furthermore, the funds must have been in the RRSP for at least 90 days before withdrawing them.
How Much Does a Potential Homeowner Need?
It is important to consider how much money one will really need. For starters, one can take a closer look at what real estate prices for the type of home they want, then, calculate mortgage payments to ensure that the mortgage is appropriate to ones budget. This basic planning effort is important to create a realistic estimate of the total down payment and closing costs needed.
Developing a Plan
After one has an approximate estimate regarding how much money they need to save up, take stock of the funds that are currently available. Consider the savings and retirement account balances and the equity in their home. Also, consider talking to a relative who may be interested in giving a gift for a purchase. The difference between the total amounts of funds they need and the total funds they currently have available is the approximate amount of money they need to save.
It is important to note, once one gets closer to reaching their savings goals, they should consider speaking with a mortgage lender. Their mortgage lender can review their financial situation and can help to firm up the amount of money needed to close on a loan. Once the full down payment amount is saved up, they can get pre-qualified for a mortgage and can begin hunting for the home that is right for them.
About KANETIX®
Launched in October 1999, KANETIX was Canada's first online insurance marketplace and today provides over a million quotes per year to consumers looking for insurance, as well as comparisons for mortgage rates and credit cards.
The KANETIX comparison service is a one-stop shopping environment for consumers. Each day, thousands visit the KANETIX website at http://www.KANETIX.ca to comparison shop their various financial needs. Shoppers choose what they want to compare, obtain a quotation and complete an online application or, with the help of KANETIX connect with the provider to purchase or apply for the product over the phone.
Through its Software as a Service team, KANETIX is also the leading provider of online insurance quotation technology, developing online quotation systems, mobile solutions, actuarial tools and websites for many of Canada's largest insurance brands.
For more information, visit KANETIX.ca or contact:
Natasha Carr
416.599.9779 ext. 343
publicrelations(at)KANETIX(dot)ca
KANETIX Ltd.
Cathy-Anne O'Brien, BlueSky Communications, 416.929.2506, [email protected]
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