Help a First Time Home Buyer~ Putting in an offer this evening.
Long time reader... First time poster. I have done a lot of research, and now the time has come. I am putting an offer in on a house this evening and could use some (financial/mortgage) advice. Here are the details:
Wife and I are long time renters, both 30 Years old. We have two children, a 4 y/o and a 1 y/o and are not planning for any more kids. We are putting in an offer on a $400,000, 2 story detached, 12 y/o house. We both work full time and plan to continue making $70-90K for the forseeable future. Our finances are as follows:
Absolutely ZERO DEBT
$155,000 Professionally managed mutual funds, Planning to liquidate for downpayment.
$150,000 Sunlife RRSP mutual funds, Planning to liquidate $20k (wife and I) for 40K additional downpayment by using first time home buyers plan, and pay back the $40k over 15 years.
$10,000 in savings
$15,000 RESP for the kids.
$26,000 line of credit, never been used.
2 Cars paid off
$15,000 expected from Grandparents estate in the next 6 months (plan to purchase furniture)
Our credit scores are 760.
We do not have a realtor and plan to use the listing agent for the transaction.
Home is listed at $400,000 and was recently assessed at $375,000, we plan to start at $355,000 based on a long list of deficiencies we have provided the agent with.
Selling will be contingent on a home inspection.
Seller has agreed to include a new roof for the $400,000 listing price, and produced a $9,600 quote. (Required as rood if sun-faded, no water damage seen)
I like the current ING website offer of 3.99% fixed 10 year ING mortgage.
I have been told to look into a Manulife one Mortgage.
1. How much down?
2. Mortgage suggetion?
3. Things to do
4. Things not to do.
I really appreciate any advice I'll receive wish to thank you guys in advance.
As you don't seem to have alot of RE experience and you haven't mentioned whether both of you work or have any other related RE/housing or structural engineering backgrounds, I would say things not to do. By without an agent representing you. The listing agent works for the seller, not the buyer.
Only use a home inspector that is insured.
Other than that....how much you put down is up to you. In your situation of being an inexperienced home buyer, I would suggest to put as much down on the home as possible.
I HAVE MUCH EXPERIENCE with buying real estate and my one rule is NEVER use the listing agent.I have used same agent for 14 years and I know she looks out for me 100%.Where in Ontario is this property?
Sometimes when you use the listing agent, he/she will try to sell your offer as she will make the full 6% commision, instead of just 3% and (your agent 3%) everyone just wants more money! also she could work out a deal with the seller going for say 5.5% commision instead of 6, knowing she's getting more in her pocket than just 3%
put as much down as you can, the more now, the less interest later, you obviously know how to save, and can earn cash back
10 year 3.99 sounds okay as we all know in 4 years the price is going to be up at least 1% anyways...
(that is a great rate)
some people like to accept only 1 year terms, fight for the best rate every year... you'll always be at the lowest rate.. but when it goes up, you gotta pay for it sooner than later
but, don't tap into your line of credit
30-155k (mutual funds)
+50k (home buyers)
although, if your mutual funds make more than the 3.99 rate you've decided on... maybe you can keep some?
you obiously need to get at least 20% (better rates, and no CMF insurance [savings of 5k])
so you should have at least 85k-90k (at least 5k-10 for extra fees)
i think i would put 135k mutual funds 50 home buyer 10 savings... 195k (nearly 50% :-)
you can also add abit extra on your 1 year anniversaries
i would highly recommend Home Buyers... do your works have pensions? it's not hard to put 1600 dollars back per year(each)... but you know you can't rush it, its seriously, the next 16 years you're paying that ammount(first year is grace), you can also decide not to pay it, and get taxed 500 dollars instead(each)!
if your work has pension, you're going to get taxed eventually taking out the RRSPs, why not do it slowly over 16 years :-) some people say RRSPs are aren't as good as that originally thought, when they go to retire...
things not to do, don't get emotionally attached, if there are multiple offers, its highly likely your agent will ask for more money, you can really pay for the house if you want it badly...
I wouldn't recommend using the listing agent; use someone independent of the seller. Surely you can get a referral from a friend.
I also wouldn't touch the Homebuyers RRSP's. These funds are supposed to be your nest egg, you'll need them one day and if you take it out now, it will set you back.
Shop around for a better rate, you may be able to get closer to a 3.5% 5 year fixed if you do.
Also, plan on the unexpected. Eg. the roof will cost more, the plumbing will quit 4 months in etc. Don't use all of your mutual funds for the down payment. Keep some aside inside of a TFSA for emergencies.
Great! Thanks for the quick replies and good advice.
@ marina628 Where in Ontario is this property? The property is located in Port Elgin, (280kms NW of Toronto).
@SheaButters Do your works have pensions? No real pension, but work does offer my wife and I a DPSP account at Sunlife where they give us a couple percent per cheque. Through work, we both voluntarily contribute $250 a week to our sunlife RRSP accounts.
@SheaButters If your mutual funds make more than the 3.99 rate you've decided on... I asked my adviser, he advised that I would require a 5.5% ROE to equal a 4% ,mortgage, then suggested I liquidate.
@ Cal We both work, no RE or structural background. Yes, I confirmed the home inspector is insured.
We are moving ahead and geez is this ever exciting.
We offered $355k with roof, he countered $375k and no roof (basically came down 15k)
We countered $364k and to include all the master bedroom furniture.
Mortgage broker found us 3.99% 10 years fixed at ING and First National... leaning towards FN.
@ Sheabutter do your works have pensions? No real pension, we have a DPSP contribution our employer contributes to a Sunlife account. (locked till retirement) The RRSP funds I have are due to taking $500 off each cheque for the past 6 years.
Also, about keeping some mutual funds... my financial planner claims the Mutual funds need to make 5.5% to equal a 4% mortgage, then again suggested liquidating.
@ marina628 The house is in Port Elgin, 280k NE of Toronto
Mortgage, broker suggested going with a "non-brick and mortar bank" (such as ING) 10 year fixed at 3.99%.
UPDATE: We offered $255k plus roof. Counter came back today as $275k and no roof. We countered at $265, no roof and the master bedroom furniture.
This is exciting stuff... I may be a home owner as soon as tomorrow!