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First time homebuyer

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  • Jul 27th, 2006 10:54 am
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Deal Addict
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Oct 31, 2002
1119 posts
168 upvotes
Waterloo

First time homebuyer

Hey guys, as the title states I'm a first time homebuyer and I was just looking for some assistance.

First off, my mortgage broker stated that he can give me a fixed mortgage rate of 5.5% and I was wondering if that is considered good at this time?

I wanted to actually go with a variable rate however due to my student debts, the bank will not issue me that. In case I can't cover the payments if rates were to increase too much.

2nd question is, I'm buying a used home so is there a fee I need to pay my real estate agent or is that only paid by the seller of the home?

Thanks in advanced!
14 replies
Newbie
Jun 8, 2005
60 posts
Interest rates are kind of a "research it yourself" deal. All the banks post the various mortgages and rates which can change on a daily basis. If you go and get "preapproved" by your bank, you can lock in at a current rate in case rates go up before you close the deal.
eg. http://www.banking.pcfinancial.ca/a/rat ... eRate.page
Looking at this there doesnt seem to be a lot of difference btwn the variable and fixed rates right at the moment...

Always ask for a better rate than they offer...and dont be afraid to play one bank against the other. You should be able to get a quarter percent off the posted rate...at a minimum...

But if you are using a mortgage broker, he should be explaining and taking care of a lot of this stuff for you....Actuallly, you can get 5.5% online at PC, so I dont know what your broker is doing for you???

The vendor pays the 6% commission on the sale of their house. This commission is normally split between the vendor's agent and the buyers agent, 50/50. So,no, you dont have to worry about it.

But you do have other costs: Home Inspection (usually a very good idea!), legal, land transfer taxes, surveyors costs, CMHC mortgage insurance, appraisal fees (ask bank to eat them). Again, lots of good sites out there detailing this type of information.
Deal Addict
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Oct 31, 2002
1119 posts
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Waterloo
Excellent information. Thanks a lot! :)

I will look into getting some other quotes as well.
Sr. Member
Dec 22, 2005
751 posts
5 upvotes
Dundas
Mortgage rates are also tailored to the individual. Banks tend to give lower rates to people with really good credit scores. The higher the risk you are the higher the rate will be.

You mentioned that the bank won't give you a variable rate, this suggests the bank might consider you a higher risk. Regardless 5.5% rate doesn't seem that bad.


Also, in terms of fees you might also want to consider Title Insurance. THis will protect you against fraud or possible land disputes in the future. IMHO it is well worth the cost.
Sr. Member
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Aug 10, 2005
538 posts
22 upvotes
Ironballz wrote:Hey guys, as the title states I'm a first time homebuyer and I was just looking for some assistance.

First off, my mortgage broker stated that he can give me a fixed mortgage rate of 5.5% and I was wondering if that is considered good at this time?

I wanted to actually go with a variable rate however due to my student debts, the bank will not issue me that. In case I can't cover the payments if rates were to increase too much.

2nd question is, I'm buying a used home so is there a fee I need to pay my real estate agent or is that only paid by the seller of the home?

Thanks in advanced!
Only sellers pay the fee, Buyers never pay the commission fee
You do have closing cost, lawyer fee to pay though

We just bought a townhouse in Kitchener 2 months ago, through great REMAX agent, and she just sold our condo privately, at an awesome price in 2 weeks. :D
Deal Fanatic
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Dec 24, 2002
7197 posts
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Budget approx 2% of the value of your purchase for closing costs (includes land transfer tax) + you need to worry about CMHC insurance premium if you are putting less than 25% down -
Deal Fanatic
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May 8, 2002
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lizziejean wrote:But you do have other costs: Home Inspection (usually a very good idea!), legal, land transfer taxes, surveyors costs, CMHC mortgage insurance, appraisal fees (ask bank to eat them). Again, lots of good sites out there detailing this type of information.
is there a ballpark figure for all around fees when purchasing a house, as in a percentage.

someone once told me that it was around 2 - 3 % of the cost of the house. for example if you bought a $300,000 home, you would end up paying around $6000 for transfer fees, agent fees, etc.
Deal Addict
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Jul 1, 2004
2778 posts
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Sudbury
joshmxpx wrote:is there a ballpark figure for all around fees when purchasing a house, as in a percentage.

someone once told me that it was around 2 - 3 % of the cost of the house. for example if you bought a $300,000 home, you would end up paying around $6000 for transfer fees, agent fees, etc.
Again, if you are buying a house, there should be no agent fees. The fees are the sellers.
"What an emotionally wrecking of the stomach game"
Sr. Member
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Aug 2, 2005
746 posts
10 upvotes
Georgetown, ON
joshmxpx wrote:is there a ballpark figure for all around fees when purchasing a house, as in a percentage.

someone once told me that it was around 2 - 3 % of the cost of the house. for example if you bought a $300,000 home, you would end up paying around $6000 for transfer fees, agent fees, etc.
The lender will require you to verify that you have at least 1.5% of the financed amount readily available for closing costs. To be safe, 2 - 2.5% should be more than adequate, better to be safe.

Check here for Closing Costs

And as someone stated above: what exactly is your broker doing for you? The rate is acceptable but he doesn't seem to be educating his clients very well. As a broker, I make certain thatmy clients have a full gamut of information before you even considered purchasing a home for the first time.

Education is key :!:

See here if you wish to learn more and proceed to the Online Purchase Classroom Home Purchase

Best of luck!
Sr. Member
Nov 1, 2004
766 posts
26 upvotes
If you are first time home buyer, make sure you take advantage of RRSP - Home Buyer Plan too.
Deal Addict
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Oct 31, 2002
1119 posts
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Waterloo
Basically I was told that my income to debt ratio isn't very good and I just qualify for my loan which does make me high risk.

I have a $30,000 student debt which has quite an effect and is one of the reasons why they can't grant me a variable rate. If interest rates were to rise too high, I wouldn't be able to cover the costs is basically what they said.

And I do have some money set aside for closing costs which should be ok.

I've talked to a couple of other mortgage brokers as well and they gave me the same rate so I guess I'll have to go with 5.5% which doesn't seem high at all :)
Sr. Member
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Aug 2, 2005
746 posts
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Georgetown, ON
As a first time home buyer, I would recommend you not even consider Variable Rate Mortgages. While I highly recommended these for several years, I hardly ever do today, and definitely not to first time homebuyers.

Many savings were realized over the past few years with VRM's (myself included), but the spread between these and fixed rates is no longer significant and the risks are too high, IMHO. As a first time buyer, you need to be as certain as you can what your fixed monthly costs will be and ideally for as long as possible.

VRM payments will fluctuate based on the Prime rate (fixed rates are based on the bond market) changing and no one is certain if the increases have ceased as yet. No increase was issued at the last meeting for the BoC and the indications are they have ceased for the near future, but that can change at any point. The prime rate has increased seven time since September 2005!

It is tough to budget when you are uncertain what the next month brings and even tougher to sleep at night if the next mortgage payment increase will put you in an uncomfortable financial postion. The VRM "game" is simply not worth it for most people TODAY.


My recommendation would be to lock in for at least three and ideally five years. 5.50% is the "broker rate" as of yesterday for five years fixed, but you can still do a little better (5.35%) if you ask the right people ;)

Good Luck!
Deal Addict
Mar 31, 2003
4250 posts
155 upvotes
Cambridge
Ironballz wrote:Basically I was told that my income to debt ratio isn't very good and I just qualify for my loan which does make me high risk.

I have a $30,000 student debt which has quite an effect and is one of the reasons why they can't grant me a variable rate. If interest rates were to rise too high, I wouldn't be able to cover the costs is basically what they said.

And I do have some money set aside for closing costs which should be ok.

I've talked to a couple of other mortgage brokers as well and they gave me the same rate so I guess I'll have to go with 5.5% which doesn't seem high at all :)
If your banker is telling you your income to debt ratio isn't very good then it probably isn't. They like to loan money, and like to loan as much as they think you can handle. Especially on home property where they can be sure of getting their money out of it should you be unable to make payments.

I agree variable rate is too risky for you if you're maxed on debt. Trust me you don't want to lose your house or feel like the bank owns you.

On the plus side, congratulations on buying your first house. It is a big step and you get to build equity while you pay for something you would have to pay for anyway (pay yourself rent as it were).
Deal Addict
User avatar
Oct 31, 2002
1119 posts
168 upvotes
Waterloo
I agree, the VRM is probably too risky for me. I've decided to definitely go with the Fixed rate for 5 years and maybe after that I'll consider the VRM more.

Hubster, you mentioned 5.35% is doable if I ask the right people......so where can I find these "right" people??? :D
Sr. Member
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Aug 2, 2005
746 posts
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Georgetown, ON
Ironballz wrote:I agree, the VRM is probably too risky for me. I've decided to definitely go with the Fixed rate for 5 years and maybe after that I'll consider the VRM more.

Hubster, you mentioned 5.35% is doable if I ask the right people......so where can I find these "right" people??? :D

My aplogies for the delay. In the interim since my post, this "special rate" has risen to 5.45% :( and is a 30 day rate hold only.

PM me if this is any benefit to you ironballz.

GL

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