My First House

Buying a home is the second largest investment most people will make over their lifetime. (The largest is the investment they make in themselves.)

Why is buying a home such a good investment?

monthly mortgage payment is a form of forced savings
leveraged investment
gains when sold are tax free
not emotional roller coaster stocks can be
held for long term (the longer your investment horizon the higher your return)

What Can You Afford?

Down payment + borrowed money - closing costs = maximum price

Down Payment: cash saved. Usually required by lending institution to be at least 5% to 10% of the purchase price of the home.

Borrowed money: how much you will be able to borrow as a mortgage loan will depend on your family’s current income and debts and your credit history.

Closing costs and other “last minute” costs.

What is a Mortgage?

Sets out the terms and conditions for the loan and its repayment.

What is an Amortization Period?

How many years the loan is going to be paid back; typically 20 or 25 years. The longer the amortization period you choose, the lower the regular payment will be. However, The faster you repay any money borrowed by choosing a shorter amortization period, the more you reduce the total cost of borrowing.

What is a Term?

Most mortgage loan contracts only permit the regular payments to continue for a specified term which is shorter than the amortization period. The term can be as short as six months or it can be five years or more.

How Much Can You Afford to Pay in Mortgage Payments?

Gross Debt Service Ratio (based on your income): a general guideline is to allow no more than 30% of your gross monthly income (before deductions) to make your monthly housing payments.

Total Debt Service Ratio (based on your other financial obligations): a general guideline is to allow that no more than 40% of your gross monthly income (before deductions) to make the total of your monthly debt payments (mortgage, credit cards, car loans etc).

Useful Web Sites

Buying a Home (Real Estate Council of BC)

Price History (Real Estate Board of Greater Vancouver)

Current Listings (Realtylink)

Types of Housing Structures

Single Family, Detached Home – no common walls with other residential structure, resting on its own land.

Townhouse – one of a group of dwellings (most often two-storey) joined together by common walls, each with its own entrance from the outside.

Apartment – one of several dwellings (most often single storey, built one above the other) joined together by common walls, each having its entrance from a common hall. The building containing the apartments may be from three or more storeys.

Types of Housing Ownership

Freehold – owner has full use and control of the land and the buildings on it, subject to any local bylaws.

Strata Title – provides exclusive use and ownership of a specific housing unit (the strata lot) which is contained in a larger property (the strata project), plus shared use and ownership of the common areas such as halls, grounds, garages, elevators, etc. This type of ownership is used for townhouse complexes and apartment blocks. As ownership of the common space is shared, the owners also share financial responsibility for its maintenance.