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Moving up or down the property ladder

Jackson Middleton • April 15, 2019

At some point, the place that we thought would be our forever home for one reason or another just isn’t working. That’s the time to consider moving up in size or potentially downsizing depending on where you are in life.

If you’re feeling squeezed or have a little one on the way, your current digs may not be enough. If you want to upsize during your mortgage cycle, keep in mind you’ll be breaking your mortgage and will have to go through the entire qualification process again.

That means you will need to re-qualify at the current rates offered by lenders and be subject to government changes and recent “stress test” rules. You’ll also be breaking your mortgage which will come with a variety of penalties depending on the terms in your mortgage and the lender. You may be able to port the mortgage, essentially taking the existing mortgage and its terms and transferring it to another property, but not all mortgages are portable. You’ll need to talk to a mortgage broker to find out if this is an option for you.

Moving on UP

If you’re trying to move from a condo or apartment to a single-family home, it’s all about the pros and cons. First, you have to decide if you can afford to make the move and buy something bigger. A larger purchase price comes with larger closing costs. Depending on the province in which you reside, you’re Property Transfer Tax will be larger and you’ll be paying realtor fees on the sale of the home you’re leaving. Canadians typically pay between 2.5 and five per cent their home’s selling price in realtor fees.

Don’t forget the costs of owning a single family home. Unlike a strata, you are responsible for all the maintenance of your home. One rule of thumb is to consider saving one per cent of the purchase price of your home each year for maintenance.

If your home cost $500,000, that would mean $5,000 a year in savings. The good news is you won’t have to pay a monthly strata fee and you won’t be kept up at night worrying about a special assessment for major repairs on the building.


Scaling it DOWN

There comes a time when owning a home becomes a little too much to handle. The cleaning, the yardwork and the maintenance can be a pain. And why keep extra bedrooms when they’re just collecting dust? It may be time to downsize. If you’re mortgage free, depending on where you live, you could actually be sitting on a gold mine. While you may be in for a windfall, there are costs to selling your existing home for something smaller and cheaper.

  • Realtor commission (between 2.5 and five per cent depending on where you live in the country and what you are able to negotiate). In Toronto for example, the standard realtor rate is 5%. So for a $1,000,000 home, you would need to pay the realtor $50,000.
  • Closing costs and legal fees - approximately 1.5 per cent of the purchase price
  • Miscellaneous costs - $1,000-plus (moving expenses, upgrading appliances and buying new furniture)

You also need to consider strata or condo fees and the potential for special assessments on the building and all the standard costs that come with buying a place, even if there’s no mortgage.

Another more recent option to the real estate landscape is reverse mortgage. A reverse mortgage is a loan secured against the value of your home. It is exclusively for homeowners aged 55 years and older. It enables the homeowners to convert up to 55% of the home's value into tax-free cash. With a reverse mortgage, you maintain ownership of your home. You only have to repay the loan once you chose to move or sell.


This article was written for the DLC Newsletter in April of 2019, if you need any mortgage advice, any of our Canadian Mortgage Experts would love to talk with you, contact us anytime!

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RRSP As A Downpayment

By DLC Canadian Mortgage Experts • December 28, 2022
Did you know there’s a program that allows you to use your RRSP to help come up with your downpayment to buy a home? It’s called the Home Buyer’s Plan (or HBP for short), and it’s made possible by the government of Canada. While the program is pretty straightforward, there are a few things you need to know. Your first home (with some exceptions) To qualify, you need to be buying your first home. However, when you look into the fine print, you find that technically, you must not have owned a home in the last four years or have lived in a house that your spouse owned in the previous four years. Another exception is for those with a disability or those helping someone with a disability. In this case, you can withdraw from an RRSP for a home purchase at any time. You have to pay back the RRSP You have 15 years to pay back the RRSP, and you start the second year after the withdrawal. While you won’t pay any tax on this particular withdrawal, it does come with some conditions. You’ll have to pay back the total amount you withdrew over 15 years. The CRA will send you an HBP Statement of Account every year to advise how much you owe the RRSP that year. Your repayments will not count as contributions as you’ve already received the tax break from those funds. Access to funds The funds you withdraw from the RRSP must have been there for at least 90 days. You can still technically withdraw the money from your RRSP and use it for your down-payment, but it won’t be tax-deductible and won’t be part of the HBP. You can access up to $35,000 individually or $70,00 per couple through the HBP. Please connect anytime if you’d like to know more about the HBP and how it could work for you as you plan your downpayment. It would be a pleasure to work with you.

Is There A Difference Between A Deposit And Downpayment

By DLC Canadian Mortgage Experts • December 21, 2022
If you’re new to the home buying process, it’s easy to get confused by some of the terms used. The purpose of this article is to clear up any confusion between the deposit and downpayment. What is a deposit? The deposit is the money included with a purchase contract as a sign of good faith when you offer to purchase a property. It’s the “consideration” that helps make up the contract and binds you to the agreement. Typically, you include a certified cheque or a bank draft that your real estate brokerage holds while negotiations are finalized when you offer to purchase a property. If your offer is accepted, your deposit is held in your Realtor’s trust account. If your offer is accepted and you commit to buying the property, your deposit is transferred to the lawyer’s trust account and included in your downpayment. If you aren’t able to reach an agreement, the deposit is refunded to you. However, if you commit to buying the property and don’t complete the transaction, your deposit could be forfeit to the seller. Your deposit goes ahead of the downpayment but makes up part of the downpayment. The amount you put forward as a deposit when negotiating the terms of a purchase contract is arbitrary, meaning there is no predefined or standard amount. Instead, it’s best to discuss this with your real estate professional as your deposit can be a negotiating factor in and of itself. A larger deposit may give you a better chance of having your offer accepted in a competitive situation. It also puts you on the hook for more if something changes down the line and you cannot complete the purchase. What is a downpayment? Your downpayment refers to the initial payment you make when buying a property through mortgage financing. In Canada, the minimum downpayment amount is 5%, as lenders can only lend up to 95% of the property’s value. Securing mortgage financing with anything less than 20% down is only made possible through mortgage default insurance. You can source your downpayment from your resources, the sale of a property, an RRSP, a gift from a family member, or borrowed funds. Example scenario Let’s say that you are looking to purchase a property worth $400k. You’re planning on making a downpayment of 10% or $40k. When you make the initial offer to buy the property, you put forward $10k as a deposit your real estate brokerage holds in their trust account. If everything checks out with the home inspection and you’re satisfied with financing, you can remove all conditions. Your $10k deposit is transferred to the lawyer’s trust account, where will add the remaining $30k for the downpayment. With your $40k downpayment made, once you sign the mortgage documents and cover the legal and closing costs, the lender will forward the remaining 90% in the form of a mortgage registered to your title, and you have officially purchased the property! If you have any questions about the difference between the deposit and the downpayment or any other mortgage terms, please connect anytime. It would be a pleasure to work with you.
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