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When applying for a mortgage, one of the most pressing decisions a borrower must make is with respect to the interest rate. Should you lock into a fixed rate? Should you take a chance on a variable rate? These are important questions that need answers so that the homeowner doesn’t find themselves saddled with a mortgage they can’t afford because the rate increased.

Knowing what can cause the interest rate to change can help you make the right decision. This knowledge can help you predict how the interest rate might fluctuate over the duration of your mortgage, and ultimately, prepare for any changes.

The Health of the Market

It’s normal for interest rates to increase when a market cools down. This gives buyers less money to purchase a home with and can lead to housing prices dropping as sellers look to unload their properties.

The housing market is directly tied to interest rates so be sure to understand the state of the market. Whether it is prosperous or struggling should inform your mortgage terms.

The Bank of Canada 

The Bank of Canada influences interest rates as part of their overall economic and monetary strategies. This institution can dictate rates, including the overnight rate for banks, and can impact the Canadian exchange rate.

Owned by the Federal Government, The Bank of Canada is tasked with ensuring the financial welfare of the Canadian economy. What’s important for homebuyers to know is that The Bank of Canada takes the approach of steady growth and to avoid jarring interest rate fluctuations.

Provincial and National Economy

As mentioned, interest rates play off the supply and demand of the housing market. When demand is high, lenders want to charge more to borrowers to capitalize. When demand is low, lenders want to charge less to spark business.

Economic conditions fluctuate interest rates making the Provincial and Federal Government the biggest factor in determining the interest rate. The Government will act in accordance with the state of the economy and pursue stimulating it or cooling it through raising or lowering the interest rate, which will trickle down to borrowers.

The more borrowers understand the nature of interest rates, the more likely they are to make the right decision with respect to choosing the mortgage terms that work for them.

Closing costs are the fees associated with buying a property and are required to close the transaction. Closing costs can include appraisal fees, title insurance, legal fees, taxes, commissions, pre-paid property tax, mortgage insurance, and can even extend to moving expenses and certain upgrades or repairs to the new property.

Buyers need to prepare for these one-time expenses and make sure their budgets reflect more than just the upfront costs.

Let’s take a closer look at the closing costs to help you estimate what you should put aside so that you can mitigate any surprises.

Planning for Closing Costs

You’re always better overestimating what you will need to pay in closing costs. The best advice is to budget around 4% of the purchase price of the property to pay for all the associated closing costs. This number could increase or decrease depending on the size of the home, location, level of legal requirements, among other variables.

Closing Cost Breakdown

Appraisal fee: This fee covers the services provided by the appraiser to assess the market value of the proposed property.

Title Insurance: This type of insurance is mandatory and protects against any fraud or issues with the title of the property.

Lawyer Fees: You will need to contact a lawyer. The fees charged will consist of a title search, prepare the mortgage, drafting the deed. There could be other fees that are specific to your purchase. Typically, lawyer fees for the average home is a minimum of $500 plus taxes.

Utility Adjustments: Prior to closing, the buyer is responsible to reimburse the seller for any prepaid utility charges, or to cover any adjustments. Your lawyer will advise you of these costs.

Mortgage Insurance: This is sometimes not associated with closing costs but it is too often left off budgets. Based on the amount you’re borrowing and your down payment, you might have to insure your mortgage. This can cover the lender in the event of job loss, disability or death.

When calculating your budget for purchasing your next home, make sure to include all closing fees. Even overestimate certain expense like lawyer fees just in case costs come in higher due to unforeseen circumstances.

Owning a home is quite certainly on most people’s minds. But given the current situation of the growing real estate prices in the GTA, this may seem like a pipe dream to many. Purchasing a house for the first time, finding a bigger property, or even simply moving to a more desirable location could be out of reach financially.

Budgeting a large amount for something as significant as a home can be daunting, but here are some tips to help you save up.

Determine how much money you need

Take into account what you can afford to spend on mortgage payments, including potential maintenance fees and various other expenses. If you currently own a property that you will sell before moving, there will be equity from which to take. However, you also need to figure out where to live and the size of the home you need. Where you choose to lay your hat will be a major factor in the cost of your new house and what you need to budget.

Set aside some monthly funds

Tuck away a portion of every pay cheque you receive into a savings account from which you purposefully do not withdraw. Your income (as well as your spouse’s or significant other’s income if the home will be a co-purchase) also plays a significant role in the size of the mortgage you will be able to obtain.

Adjust your lifestyle

Cut back on unnecessary purchases and make some frugal adjustments to your lifestyle, if needed, such as packing lunches and dining at home, and skipping outside entertainment activities for now. This will help you sustain more of the money you earn each month to put towards a new home.

Mortgages are obviously in place because only the illusive one percent can possibly afford buying a home outright. That means the rest of people need to save up for at least the down payment, with enough left over and a steady stream of income to manage monthly payments and other regular bills, such as hydro and utilities. Simply set realistic goals and give yourself some time to make it happen.

A real estate lawyer works to protect his or her clients when they purchase or sell a home, helping to ensure that the transaction is completed well—regardless of which side of the deal they are on. There are many facets of a purchase or sale that real estate lawyers deal with on your behalf so you can rest assured it will go smoothly.

Agreement of Purchase / Agreement of Sale

A real estate lawyer reviews a wide range of legal documents on their clients’ behalves, including the Agreement of Purchase or Agreement of Sale. These items detail the negotiations involved and range from an irrevocability deadline and completion date to matters of Harmonized Sales Tax and a title search.

Title insurance

He or she might also arrange for the client to obtain title insurance. Although this is not required, a real estate lawyer may recommend it to better protect you, the property owner. Coverage includes title issues that affect you from having clear ownership of the home, title fraud, liens that a previous owner may have had, public record or survey errors, a structure that requires removal by interfering with a neighbouring home, and related issues that impact your ability to sell or lease down the road.

Other issues that may arise

Real estate lawyers are also responsible for ensuring that no claims are listed against the home you purchase, as well as checking that property taxes are up-to-date and that you (their client) have a valid title upon closing. Some of their other roles include calculating the land transfer tax due, drawing up the applicable mortgage documents, exchanging legal documents and keys with the seller’s real estate lawyer, plus closing the transaction while ensuring all financial and legal conditions are met.

As a seller, your real estate lawyer also handles potential title issues that occur, prepares the deed to your home, and helps you negotiate the terms and conditions with your buyer. But no matter whether you buy or sell a home, having a professional in your corner is crucial to avoid as many complications as possible.