Let’s Start With The Basics
Gross annual household income is the total income, before deductions, for all people who live at the same address and are co-borrowers on a mortgage. Enter an income between $1,000 and $1,500,000.
A down payment is the amount of money, including deposit, you put towards the purchase price of a property.
Minimum down payment amounts:
- For homes that cost up to $500,000, the minimum down payment is 5%
- For homes that cost between $500,000 and $1,000,000, the minimum down payment is 5% of the first $500,000 plus 10% of the remaining balance
- For homes that cost over $1,000,000, the minimum down payment is 20% or more depending on property location
For down payments of less than 20%, home buyers are required to purchase mortgage default insurance.
A down payment is the amount of money, including deposit, you put towards the purchase price of a property.
Minimum down payment amounts:
- For homes that cost up to $500,000, the minimum down payment is 5%
- For homes that cost between $500,000 and $1,000,000, the minimum down payment is 5% of the first $500,000 plus 10% of the remaining balance
- For homes that cost over $1,000,000, the minimum down payment is 20% or more depending on property location
For down payments of less than 20%, home buyers are required to purchase mortgage default insurance.
Selecting your province or territory helps us personalize your mortgage results.
Enter your total monthly payments towards any car loans, student loans or personal loans.
Selling With A Mortgage: It Happens All The Time
Mortgages are pretty awesome financial tools that allow people without hundreds of thousands of dollars in cash reserves to achieve their dream of homeownership. Some homeowners will stay in their homes long enough that the entire mortgage is paid off by the time they sell. Thats a great feeling! However, its not required that you stay in your home until that happens.
Typically, sellers use their proceeds to pay off their remaining mortgage balance and closing costs, then pocket the remaining funds. This option is possible because real estate generally gains value over time, so a house is usually going to be worth more when you sell it than when you purchased it. A report from CoreLogic shows that U.S. homeowners with mortgages saw their equity increase 19.6% year over year on average in Q2 2021.
Thats the beauty of owning a home!
*The fee is dependent on your market, the lender you use, and the number of days we own your home.
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How To Account For A Home Equity Line Of Credit
If you are considering a home equity loan or line of credit, another important calculation is your combined loan-to-value ratio . Your CLTV ratio compares the value of your home to the combined total of the loans secured by it, including the loan or line of credit youre seeking.
Most lenders require your CLTV ratio to be below 85 percent to qualify for a home equity line of credit. However, your homes value can fluctuate over time so if the value drops, you may not be eligible for a home equity loan or line of credit, or you may end up owing more than your home is worth.
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Is It Ever A Bad Idea To Sell Your Home Before Its Paid Off
The timing of when to sell a home is really a personal decision and dependent on your circumstances and financial goals. However, keep in mind that if the value of your home wont cover your outstanding mortgage balance and selling expenses, youll need to bring separate funds to the sale to cover the difference.
Another thing to keep in mind: if you sell the home before owning it for a minimum of two years, youll likely have to pay capital gains tax if you make money from the sale.
- If youre selling less than a year after buying, youll have to pay a short-term capital gains tax on your gain from the sale, which is taxed as ordinary income according to your tax bracket.
- If youre selling more than a year after buying, but less than two years, your gain will be taxed at the lower long-term rate either 0%, 15%, or 20%, based on your capital gains tax bracket.
If youve owned and lived in the home for two of the past five years and havent excluded gain from the sale of a different main residence in the past two years the IRS allows you to exclude up to $250,000 of gain if single or married and filing separately, or up to $500,000 if married and filing jointly. We always recommend reaching out to a tax advisor to go over the details of your individual transaction.
The Percentage We Recommend
At Rocket Mortgage®, the percentage of income-to-mortgage ratio we recommend is 28% of your pretax income. This percentage strikes a good balance between buying the home you want and keeping money in your budget for emergencies and other expenses. However, its important to remember that you dont need to spend up to your monthly limit. Think of 28% as the maximum amount you should spend monthly on your total mortgage payment. Remember to include your principal, interest, taxes, insurance and homeowners association dues in your total before you sign on a loan.
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Can I Reduce My Mortgage Repayments
You may be able to extend your mortgage term in order to lower your monthly mortgage repayments.
For example, if your mortgage is currently on a 25-year term and you move it to a 30-year term, your monthly repayments will fall as you are taking longer in order to clear the capital youve borrowed.
While this will reduce your monthly outgoings, it will increase the overall amount you repay. Because you are taking longer to clear the capital youve borrowed, youll also be charged interest for longer, meaning a larger total repayment.
Let’s look at an example. If you borrowed £200,000 over 25 years at an interest rate of 3%, you’d repay £948 and repay £284,478 in total.
Extending your term to 30 years will reduce your monthly repayments to £843, but you’ll repay 303,495 – an extra £19,000.
You may also be able to switch part or all of your mortgage debt onto an interest-only mortgage. Lenders may offer this as an option if you are experiencing some financial difficulties to help you avoid falling into arrears.
Remember, while this will mean lower monthly payments, you will still need to find a way to repay the capital you borrowed at the end of your mortgage term.
Calculation Of The Ird
To calculate the IRD, your lender typically uses 2 interest rates. They calculate the entire interest fees left to pay on your current term for both rates. The difference between these amounts is the IRD.
To do so, they can first use one of the following interest rates:
- the posted rate at the time you signed your mortgage contract
- your current rate or discounted rate as described in your contract
Your lender can calculate a second interest rate based on the following:
- the current posted rate for a term with a similar length
- the current posted rate for a term with a similar length minus the discount you were originally offered
Also Check: What Does It Mean Refinance Mortgage
Deferring Your Mortgage Because Of Coronavirus Could Cost You
What you need to know about calculating additional interest costs and protecting your credit score
By Bryan BorzykowskiMarch 31, 2020
A sold sign is shown in a housing development in Beckwith, Ont., on Wednesday, Jan. 11, 2018. Canada Mortgage and Housing Corp. is expanding its insured mortgage purchase program to $150 billion.
On March 17, Canadas six largest banks announced that they would work with customers to provide flexible solutions to help people manage through the Covid-19 crisis. While they said they would look at everyones situation on a case-by-case basis, the highlight of their announcement was that some people could potentially be granted a six-month deferral on their mortgage payments. Naturally, this was welcome news for people who might have lost their job or those who may have contracted the coronavirus and cant work.
It didnt take long for a lot of confusing reports to surface. Some people claimed that their deferral request was denied, while experts said that delaying payments would cost homeowners thousands in additional interest and potentially ruined credit scores. So whats really going on?
READ: What to do if youre laid off because of the coronavirus
Today’s Best Mortgage Rates
Our rate table lists the best current local mortgage rates available from our lender network. Set your search criteria by entering your loan data and selecting the relevant products from the dropdown, click search and we’ll help you compare the market by showing you the most relevant offers for homeowners.
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Can You Provide An Example Of Cash
Letâs use the following example to walk through calculations for cash-out refinance :
A homeowner owes $100,000 on a first-lien mortgage loan and $45,000 on a second-lien home equity loan.
The current home value is $400,000.
The combined loan amount is $100,000 + $45,000 = $145,000.
The current CLTV is $145,000 / $400,000 = 36%.
With Discover you can borrow up to 90% CLTV 0.90 x $400,000 = $360,000 could be taken out against the current value of the home.
Since you owe $145,000 on your existing loans, the maximum cash-out value you can get is $360,000 – $145,000 = $215,000. While the homeowner does not have to take out the full amount available, finding these values for your home can help you understand the limits of your loan application before you apply.
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Accept An Offer And Open Escrow
Once you accept an offer from your buyer, youll complete any additional steps to close such as the inspection and appraisal. At this point, you may wonder if you need to get in touch and update your mortgage lender about your plans to sell and pay off your remaining mortgage balance. However, you can rest assured that your third-party escrow company will facilitate those communications.
Technically, you dont have to say anything to the bank when youve accepted an offer on your home, confirms Helali. You just continue making your payments and as you get closer to the closing date, the escrow or title company thats going to be handling your transaction will reach out to your lender and get an official payoff statement based on an actual closing date. There isnt much maintenance that you have to do.
How To Use Our Home Loan Calculators
Our home loan calculators are simple to use. You need to have an idea of your loan amount, the interest rate, repayment type, loan term, repayment frequency, and other information as required.
If youre not sure what your loan amount is because youre a first time buyer or have only just started thinking about taking out a home loan, thats okay. Have a think about what your budget is and enter rough numbers into the calculator that matches your budget.
Other calculators, like the stamp duty calculator, may require you to enter your location, while our income tax calculator will require you to include your income and current expenses.
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How Much House Can I Afford
This DTI is in the affordable range. Youll have a comfortable cushion to cover things like food, entertainment and vacations.
*DTI is the main way lenders decide how much you can spend on a mortgage.
This DTI is in the affordable range. Youll have a comfortable cushion to cover things like food, entertainment and vacations.
*DTI is the main way lenders decide how much you can spend on a mortgage.
For Other Loans And Installment Debt:
- Enter information for mortgages, home equity loans, personal loans and other installment payments here
- Again, enter your current balance for each loan
- Enter the amount you must pay or wish to pay each month
- The calculator will figure how many payments it will take to pay off each loan at that rate.
After entering all your information, your total debt will be displayed at the top of the page. The graph below the calculator will show the time it will take to pay off all your debts.
For a more detailed breakdown of your debts and repayment schedule, including month-by-month payments over time, click “View report.”
Would refinancing to a lower mortgage rate help you get out of debt faster? Or maybe you’d like to pay off high-interest rate debt with a low-rate home equity loan? Click “Get Free Quote” to obtain a personalized rate quote tailored to your financial profile.
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Ask A Real Estate Agent
Get the needed information from a real estate agent and other professionals in the field. Check out how informed these people know about the house you are planning to buyone way of getting information about the history and background of the house from property experts. Although you may have secured such information online, an agent can give you updated information about the property.
There are cases when the information you have gathered through an online search may not be up-to-date. The loan balance may not be current, meaning the monthly dues paid currently may not yet reflect the property records you have acquired online.
So if you want updated data about a property, aside from searching online, talk to these real property professionals. Realtors can gain easy access to such information.
How Big A Home Equity Loan Can You Get
Very few lenders will let you borrow against the full amount of your home equity. They generally allow you to borrow a maximum of 80% to 90% of available equity, depending on your lender, credit, and income. So, if you have $100,000 in home equity, as in the example above, you could get a home equity line of credit of $80,000 to $90,000. Race, national origin, and other non-financial considerations should never play a role in determining how much home equity you can borrow.
Mortgage lending discrimination is illegal. If you think you’ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report to the Consumer Financial Protection Bureau or the U.S. Department of Housing and Urban Development .
Here’s a second example that takes into account a few more factors. Suppose you are five years into a 30-year mortgage on your home. Furthermore, a recent appraisal or assessment placed the market value of your house at $250,000. You also still have $195,000 left on the original $200,000 loan. Remember, almost all of your early home mortgage payments go toward paying down interest.
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What Do You Mean
OK, for example, you might be making good money at your current job. But what if you dont like it and youre thinking of quitting? And what if your future job doesnt pay as well and you therefore have less monthly income? Are you going to feel comfortable continuing to pay the same amount each month?
Moreover, how is the health of your parents or your spouses parents? Are there medical bills down the road youre going to have to contend with? Are you thinking of starting or adding to your family?
Basically, you need to be honest with yourself about your personal expenses. How do you like to spend your money? Relatively small things add up and can put a dent in your monthly budget.
You also have to consider how youre going to decorate the house. Can you afford to furnish every room once you own them? And what do you expect your utility bills to be? What if the stove breaks in six months? Will you have the savings to get it repaired quickly? And speaking of savings, hows that situation going, or going to change in the months and years ahead? Are you currently trying to stow away lots of money for the future? If so, thats another issue you need to consider.
Consider An Offset Account
An offset account is a savings or transaction account linked to your mortgage. Your offset account balance reduces the amount you owe on your mortgage. This reduces the amount of interest you pay and helps you pay off your mortgage faster.
For example, for a $500,000 mortgage, $20,000 in an offset account means you’re only charged interest on $480,000.
If your offset balance is always low , it may not be worth paying for this feature.
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