• Choosing your mortgage term
• How much down payment do you need?
• What are the monthly costs of owning a home?
• Can you use your RRSP for a down payment?
• Are there extra costs to purchasing a home?
• How much do you qualify for?
• How do you pay your mortgage off sooner?
• Questions to ask potential builders
• What information do you need to provide to the bank?
• Who do you need to contact before moving into your new home?
• Protect the things that mean the most to you
• 8 Common Mistakes
• RBC Homeline Plan

• CHOOSING YOUR MORTGAGE TERM

Check out our "Fixed rate, variable rate or both" brochure.

• HOW MUCH DOWN PAYMENT DO I NEED?

As a borrower it is important to understand the difference between a Conventional and NHA (National Housing Act)/ High Ratio Mortgage.

The determining factor is the LTV (Loan-to-Value) Ratio. The LTV is calculated by dividing the amount borrowed by the lesser of the selling price or appraised value.

Conventional mortgages are limited to not more than 80% Loan-to-Value. If you require more than 80% (your down payment is less than 20%) you will require an NHA Mortgage/ High Ratio Mortgage.

NHA Mortgages allow borrowers to purchase a home with as little as 0% down. A premium is charged and can be added to the mortgaged amount. So while there are additional costs associated with NHA/ High Ratio Mortgages, the alternative is waiting until you save up a full 20% down payment.

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• WHAT ARE THE MONTHLY COSTS OF OWNING A HOME?

After you've looked in some detail at the initial costs associated with buying a hew home, you should also review the financial obligations that home owners must be prepared to assume on a monthly basis.

The Mortgage Payment: For most home buyers, mortgage payments constitute their largest monthly outlay of cash. The actual amount of the mortgage payment can vary widely since it is based on a number of factors and variables.

Property Taxes: Most municipalities (including the City of Grande Prairie) will set up a Pre-authorized Tax Payment Plan. What is it? It is a plan whereby a taxpayer can enter into an agreement with the municipality, to make equal monthly payments automatically through their bank or financial institution chequing account.

School Taxes: In most municipalities, school taxes are integrated into the property taxes; in other municipalities, they are collected separately and are payable in a single lump sum.

Utilities: As a home owner you'll be responsible for all utility bills (including heating, gas, electricity, water, telephone and cable), some of which may previously have been included in the cost of your rent.

Condominium Fees: If you have chosen to purchase a condominium unit or a townhouse, you will likely be required to contribute to exterior maintenance and upkeep of the common grounds and public areas on a monthly basis. Your property manager or condominium association ca provide full details of the services and monthly fees.

Maintenance and Upkeep: As a homeowner, you will also have to cover the costs of maintenance (including interior and exterior painting, roof repairs, electrical and plumbing, walks and driveway), lawn care and snow removal, and if you so choose, periodic renovations. A well-maintained property helps to preserve your home's value, enhances the neighborhood and, depending on the kind of renovations you make, could add to the worth of your property.

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• CAN YOU USE YOUR RRSP FOR A DOWN PAYMENT?

The HOME BUYER'S PLAN (HBP) is a program that allows you to withdraw up to $20,000.00 from your registered retirement savings plan (RRSP) to buy or build a qualifying home. Withdrawals under this program do not have to be included in your income and no tax is withheld. This Federal Government plan may help you purchase a new home sooner than you thought.

There are a number of conditions in order to participate:

1. You have to be considered a first time home buyer.
2. You have to buy or build a qualifying home.
3. You have to intend to occupy the home as your principal residence.

These 3 minimum conditions (with some exceptions) must be met in order to participate and it is your responsibility to ensure you qualify.

To be considered a first time home buyer in 2008, you or your spouse cannot have owned and occupied as your principal residence a home since January 1, 2004. Withdrawals made under the HBP have to be repaid within a period of no more that 15 years. Basically, you're expected to repay at least 1/15 each year until you have repaid the entire amount withdrawn. If you do no repay the amount due for a year, it will be included in you income for that year.

It is important to note that funds must be in your RRSP for 90 days to be eligible for withdrawal. In other words, any contributions made within the last 89 days prior to withdrawal would have to remain in the plan.

Exceptions to first time home buyer conditions include:

1. You are a disabled person acquiring a home more accessible or better suited for your needs.
2. You are buying or helping buy a home for a disabled person related to you.

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• ARE THERE EXTRA COSTS TO PURCHASING A HOME?

Most people considering their first home purchase know they must have capital set aside for down payments. Potential homeowners often overlook, however, the other initial costs associated with the actual purchase. These costs can add up, so it's important to have a good understanding of the types of expenses you are likely to incur. For a resale home, these extras can easily add up to 1.5% to 2% of the purchase price.

Legal Fees: You will be required to retain a lawyer to act for you in the purchase and mortgaging of the property, and you will be responsible for payment of the legal fees and disbursements. Fees for these services may vary significantly, so shop around and ask for referrals before you make your decision.

Closing or Adjustment Costs: These costs are payable, usually through the lawyer, when the sale is closed. Standard adjustment costs include property and school taxes, utility bills and condominium common expenses if applicable. These adjustment costs are prorated based on your occupancy date.

Inspection Fee: It is recommended that you have an inspection performed by a professional building inspector before you finalize your offer to purchase. The inspection may bring to light areas where repairs or maintenance are required and will assure you that the house is structurally sound. Often the inspector will provide you with a written report.

Appraisal Fee: A property appraisal may be required to ensure that the property you are buying meets the banks criteria for a mortgage. You may be responsible for the cost of the appraisal.

Real Property Report/Survey or Title Insurance: Check with your lawyer to find out which of these is required and at who's cost.

Property Insurance: All homes must have adequate insurance coverage against fire and other risks of loss, and liability. You are required to provide your lawyer with proof that your insurance is in place by the closing date.

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• HOW MUCH DO YOU QUALIFY FOR?

Have you ever wondered how banks determine how much they will lend you for a mortgage?

Essentially, most begin by calculating two simple debt ratios.

1. Your Gross Debt Service (GDS), compares your total monthly housing costs with your gross monthly income. As a rule this ratio should not exceed 32%.
2. Your Total Debt Service (TDS) which compares your total monthly debt (includes loan and credit card payments) to your gross monthly income. This should not exceed 40%.

Let's look at a typical family gross income of $80,000 ($6,667 per month), with loan and credit card payments totaling $550 per month. They wish to purchase a home for $280,000 with 5% down and annual property taxes of $2,160. The following ratio calculations would determine if they qualify for that amount:

*Based on 25 year amortization and 6.25% interest rate.

Based on these figures, this family would qualify for this mortgage.

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• HOW DO YOU PAY YOUR MORTGAGE OFF SOONER?

Save $$$$$ in interest costs.

Amortization periods (the total period of time over which your mortgage must be repaid) vary widely - up to 40 years. Since most people want to keep their regular mortgage payments as low as possible many choose to amortize their mortgage over 25 years. While this may be advantageous in the early years of home ownership, particularly for first-time buyers, the impact of this decision over the long term will be more costly. The total amount interest that you will pay over the life of your mortgage varies according to the length of the amortization period. The shorter the amortization period, the more you will pay on a monthly basis, but the less you will pay in interest costs over time. Alternatively, the longer the amortization period, the less you will pay on a monthly basis, but the more you will ultimately pay in interest costs.

Payment frequency also affects how much your mortgage will cost over its lifetime. By making weekly or biweekly payments, you can save thousands of dollars in interest and take years off your amortization.

Accelerated payments. Borrowers don't benefit just because a mortgage is paid faster than monthly; the key is how the amount payable is calculated with an 'accelerated' payment schedule, a little more is added to each payment resulting in the equivalent of an extra month's payment each year. This 'accelerated' weekly/biweekly payment reduces the normal 25 year amortization by 5 years or more. Some mortgages, though, take the total amount payable each year, and break it into 52 or 26 pieces; less is paid each week/every two weeks, but it does little to cut the amortization. How can you be sure you'll get "the real thing" - an accelerated weekly or biweekly mortgage payment? Ignore the idea at the outset; shop for a mortgage with monthly payments amortized over 25 years. But before booking it, divide that payment by 4 or 2, depending if payments are weekly or biweekly. This accelerated payment will save you tens of thousand of dollars in mortgage interest. The following example is based on an $280,000 mortgage at a constant rate of 6.25% through the amortization period.

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• QUESTIONS TO ASK POTENTIAL BUILDERS

Once you have made the decision to go with a "New Home". The next step is choosing your Contractor/Home Builder.

Some things to ask your potential builder:

1. Are you a member of a New Home Warranty Program? There are different warranty programs and your protection varies under each. So it is important to verify the coverage and understand what protection it provides to you.
2. Are you on the Royal Banks Approved Builder List? This list is updated regularly and insures we know who the builder is.
3. Are you a member of the Grande Prairie Home Builders Assoc.? or the Grande Prairie Construction Assoc.? It may be important to you to know the builder is a member of the community and is monitored by an industry association.
4. Will you require a Draw or Completion Mortgage? This determines your cost during construction and forms part of your contract with the Builder.

Completion Mortgages are advanced once the Home is 100% complete. In this case the contractor carries costs through construction.

Draw Mortgages are advanced in stages, usually 3 or 4. At each stage an inspection is done determining how much money will be advanced at that time. During construction you are required to make interest only payments on the amount of funds advanced.

It is also important to understand how GST is calculated on new home construction. Make sure your Builder explains this thoroughly or have your Lawyer or Mortgage Specialist clarify if there is any confusion.

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• WHAT INFORMATION DO YOU NEED TO PROVIDE TO THE BANK?

1. Confirmation of down payment and closing costs.
2. Confirmation of employment/income - Letter from employer/T4. (If you are self employed we require the last 3 years tax returns and the latest Notice of Assessment. You may also wish to provide the latest financial statements for the business).
3. Copy of offer to purchase.
4. Copy of real estate listing information sheet (description of home).

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• WHO DO YOU NEED TO CONTACT BEFORE MOVING INTO YOUR NEW HOME?

1. Atco Gas 310-5678
2. Atco Electric 1-800-668-2248
3. Aquatera Utilities 538-0340
4. City of Grande Prairie (Taxes) 538-0315
5. County of Grande Prairie (Taxes) 532-9722
6. Telus 310-2255
7. Northern Cablevision 539-1011 (1-800-661-1904)
8. Canada Post 1-800-267-1177

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