Experienced Home Buyers
If you've already been through the home financing process, you understand that an experienced mortgage broker can be one of your best allies.
When it comes to buying your next home, there are numerous considerations that can impact your decision-making process. From budget to re-qualifying and porting your mortgage, it is important to evaluate each aspect and make an informed decision. I will highlight some key factors to consider, ensuring that you find the perfect mortgage that aligns with your long-term goals.
- Mortgage Pre-approval
- Porting Your Mortgage
- Porting Your Default Insurance Fee
- Bridge Financing
- Writing the Offer
Getting pre-approved is an essential step when planning to buy your next home. It allows you to understand not only your budget but also your financial options. Will you have to sell your existing home? Can you keep your existing home as a rental property? Can you keep your existing home and sell it after you move? How much does your existing have to sell for in order to qualify for the next home? These are all questions that are answered when applying for a mortgage pre-approval.
Porting Your Mortgage
Porting Your Default Insurance Fee
If your previous home was insured by CMHC, Genworth (now known as Sagen), or Canada Guaranty, you have the option to "port" your current default insurance if you do not have a 20% down payment. It's important to note that this is separate from "porting" your existing mortgage rate and term, mentioned above.
You maintain the same amortization and outstanding mortgage balance by porting your default insurance fee. The port has no specific timeframe, but the amortization will continue to decrease. If you choose to increase the mortgage amount, the default insurance company will charge a top-up premium. This option may save you from repaying the entire premium, potentially saving you thousands of dollars. It's worthwhile to explore the possibility of increasing your amortization to lower your new mortgage payment. I will present you with all of your options.
Bridge financing is a valuable mortgage strategy for those whose timeline for selling their current home do not align with the purchase of their next home. This type of financing "bridges" the gap to provide the necessary funds to buy the new house before receiving the proceeds from the sale of the existing home. To qualify for bridge financing, an unconditional sales agreement prepared by a real estate agent for the current home is required. The bridge loan is secured by the current home and is repaid when the sale is finalized. It's important to note that there needs to be available equity to pay off the bridge loan once the sale is complete.
It's worth mentioning that bridge financing typically involves higher interest rates due to its short-term nature. Lenders offer interim financing as a courtesy product to aid clients during the transition period, and it is not a standalone solution.
Writing the Offer
Unlike the first home you bought, now you must consider your current home plans. If you plan on selling your home or need to sell your home to qualify, you must include the condition "subject to the sale of existing home" on your offer. This condition protects you in the event that your home does not sell. Speak with your real estate agent about writing an offer on a new home before selling your existing home. Depending on the type of market you are shopping in, this is not always recommended.