Buying a home is much easier the ‘second time around’ because you know the basics and understand the process, but there are some unique steps in buying your next home you don’t want to forget. Let Vertuity Mortgage help you purchase your next home.
Why a new home?
There are many reasons for your next home: a need for more space, a new addition to the family, moving to a new area, and others.
Down payment
You will have paid some of the principal on your existing mortgage and, if you are lucky, the property will have appreciated, putting you in the enviable position of selling it for a profit. When this is the case, you’ll be able to put a generous down payment on your next home, making your mortgage easier to manage. If, however, things haven’t worked out as planned, you can still apply for a high-ratio mortgage (down payment of 20% or less) even if you had a high-ratio mortgage on your first house.
Talk to your financial advisor if you are concerned about your down payment. There are a number of ways to gather the funds you need.
Pre-approval
Just as important as the ‘first time around’, pre-approval lets you know what you can afford, what your payments will be and shows the potential vendor that you are serious. Calculators, like the mortgage qualifier calculator on this site can be a great tool to start the conversation with your financial advisor.
Potential penalties
Pre-payment penalties may apply when breaking your mortgage contract. Often, if you are taking out a new mortgage, your lender will reduce or eliminate the penalties, but if you are changing lenders, add a penalty into your closing cost calculations.
Other ways you may be able to avoid pre-payment penalties include portable and assumable mortgages:
- If your mortgage is portable, you can take the rate, terms & conditions and balance to your new home. This is a great option when your existing rate is lower than current rates. If your new mortgage is larger, your lender may offer ‘top up’ options.
Your existing mortgage can be a selling feature for your house. If you have a rate lower than current rates, your buyer may be interested in assuming your mortgage. - Type of mortgage
If you felt confined by your previous mortgage, now is the time to change!
When rates are declining or you feel more adventurous, you may want to try a variable rate mortgage.
Or, perhaps you have a specific strategy in mind and want the security of a fixed rate.
Because you are more experienced, you will be able to discus the features and benefits of different mortgages with your financial advisor to select the right one.
Bridge financing
You’ve found that ‘perfect’ house, but your house hasn’t sold yet. You will need to decide if you can carry both mortgages for a time or if you are in need of bridge financing — a temporary loan to cover the costs of your new home when the sale of your existing home has not yet completed. Talk to your realtor and your financial advisor if you are in this situation.
The paperwork
The offer process does not differ when it comes to your next home except for the fact that you will likely have a better understanding of what everything means. You will also be more aware of what your needs are in terms of closing and possession dates.
Accepted offer in hand and pre-approved mortgage in place, the application process will move along easily.
Closing details may be different this time around in that you may be conducting both the sale of one home and the purchase of another in one visit to your legal representative. All other transactional details and costs will be similar.