# Mortgage / House Purchase Advice



## cr73 (Jan 8, 2015)

Hello! First time poster

I currently own a condo, which I purchased in 2010. In the next year I would like to purchase a larger detached home, which would be a significant increase in mortgage payments, and sell my current condo. Now married, and looking to purchase a larger home before starting a family. Current value 275k, mortgage of 175. Future budget of 550k 

1) current mortgage is up for renewal - should we renew to an open mortgage, or short term fixed

2) we would like to purchase a house first, and then put the condo on the Market. (vs. Sell condo first and then buy a new house) -opinions welcome from those who have done either option

3) How does the downpayment for the new property work if my current residence isn't sold when i apply for the mortgage. I have cash for closing costs, and a deposit for when i submit an offer to the seller, however I am unsure if have to have the downpayment in cash, or can I use the equity in my condo. Would i have to apply for a Heloc if i am not keeping both properties

Thanks!
Carol


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## Just a Guy (Mar 27, 2012)

First off, talk to the bank. Lending has really tightened up over the last year and you may not get the loan you are looking for. 

Next, talk to the bank about bridge financing. 

Third, don't assume you'll get what you expect from the sale of your condo. The place is only worth what someone is willing to pay. If there is a recession because of oil, local Layoffs, whatever you may not get what you expect.


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## birdman (Feb 12, 2013)

Good advice from Just a Guy. Perhaps also think about purchasing a home "subject to the sale of your condo". Ask you F/I about "porting" your existing mortgage to you new home and enquire about other options. Its probably a toss up whether or not to buy first; however, if it were myself I would lean towards selling first or purchasing subject to the sale of your home. Perhaps selling 1st but try to get a long closing date of maybe 120 or 18 days?? Just some things to think about.


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## Spudd (Oct 11, 2011)

I would renew to an open mortgage so you don't get hit with penalties from selling at a time that doesn't exactly line up with the mortgage. If it will be for a short time, the higher interest rate shouldn't matter that much. Or you could go for a short term one if you know you plan to stay for at least 6 months to a year (and get either 6mo or 1 year term), then go to open after that. 

We bought our new house before our old one had sold, and it was stressful. In the future I would sell the old one first, you can always rent for a while if you need to close on the old place before you find a new one. Unless carrying both mortgages is easy with your income, in that case I guess it wouldn't matter. I can't exactly remember but I think that the bank set us up for bridge financing using a HELOC for the downpayment. Talk to the bank, they see this all the time and should be able to provide you with more details.


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## dougboswell (Oct 25, 2010)

Bridge financing only is offered is you have sold your own home and the closing dates of your new home and present home are not on the same day ie the new place closes before your present home. The lender wants proof of a completed offer of purchase and sale.
Some lenders still allow you to borrow from lines of credit for a downpayment. However that monthly payback becomes part of your debt ratio along with your present mortgage. If this puts your TDS and GDA ratios over the allowable amount you would not be given a mortgage on the new place.


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## realist (Apr 8, 2011)

frase said:


> Good advice from Just a Guy. Perhaps also think about purchasing a home "subject to the sale of your condo".


Depends on the market. In Toronto this would mean you're either never going to buy a home, or have to pay more for it because it's such a competitive market. Sellers would rather sell for a bit less to the offer with no conditions. Conversely, in Mississauga, this is exactly what my parents did when they downsized from their house to a condo.


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## banjopete (Feb 4, 2014)

realist said:


> Depends on the market. In Toronto this would mean you're either never going to buy a home, or have to pay more for it because it's such a competitive market. Sellers would rather sell for a bit less to the offer with no conditions. Conversely, in Mississauga, this is exactly what my parents did when they downsized from their house to a condo.


I don't really understand what you mean about never going to buy a home but I think it's that in a bidding war conditions aren't generally encouraged by the real estate agent who'll instruct you to come with your best (high) offer? 

Another idea is what if they avoided silly bidding war situations? Conditional offers protect buyers, and competitive bids where conditions weren't accepted seems to favour one part of the transaction in my opinion. I think bidding wars are isolated incidents which are over reported which futher legitimizes the false truth. One needs to only look at the volume of real estate advertising in newspapers to get an understanding of conflict of interest in housing "journalism".

To the OP I'd say take advantage of the free services and information available and talk to lots of lenders to understand what your options are before you sign and remember you'll almost surely save money by leaving your current lender if it's a big bank despite what they tell you. In my experience they're happy to match better offers but theirs will never be close to a best offer if you do your homework.


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## realist (Apr 8, 2011)

banjopete said:


> I don't really understand what you mean about never going to buy a home but I think it's that in a bidding war conditions aren't generally encouraged by the real estate agent who'll instruct you to come with your best (high) offer?
> 
> Another idea is what if they avoided silly bidding war situations? Conditional offers protect buyers, and competitive bids where conditions weren't accepted seems to favour one part of the transaction in my opinion. I think bidding wars are isolated incidents which are over reported which further legitimizes the false truth.


It depends on the market and what you are buying. I have 5-10 friends who bought houses in the last two years in Toronto and all were encouraged to get home inspections completed prior to making an offer, and otherwise take steps to reduce the number of conditions on their offer. I'm exaggerating somewhat when I say "never" but from a sellers perspective a a $550k offer with conditions is often less attractive than a $545k offer without conditions. Conversely, we were the only offer and had a financing condition on our offer for our condo and got it for less than the asking price.


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## Just a Guy (Mar 27, 2012)

Every real estate transaction is different because each one deals with different people with different needs. I buy a lot of properties, and there is no general rule as to what works best. I've won huge discounts with unconditional offers and I've lost out by $500 to a conditional offer. Each deal is different. 

In my opinion, it's best to find the house you want first, then sell your old place. 

Selling first means you may wind up "homeless" for a time. Getting a short term rental is tough, plus you need to move twice. This will put pressure on you to find something that's not what you want, or make you pay more than you would have...causing you to have regrets later...never a good thing. 

Of course, I could always afford to carry multiple properties, (the last one was for more than two years) and that can put pressure on you to sell cheaper if you can't. 

The next thing you should look at is do you need to move. My first house was a 900 sq ft bungalow with an unfinished basement. It had 3 bedrooms and a huge yard but when my wife got pregnant the first time, she decided it was "too small", so we had to move. In reality, the original owners had raised 3 kids in the place, and they turned out just fine. 

Society seems to have skewed our "needs" a little more into the "wants" category. Often following our "wants" is not a good thing financially.


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## sags (May 15, 2010)

We bought and sold 6 homes over the years, with the last sale 10 years ago..........and the offers for us to buy and from those who bought from us always had at least 2 conditions.

They were "subject to financing" and "subject to a home sale by a given date".

Home inspections are a relatively new concept as well.

We had sales that involved 6 sellers in a chain that stretched from London to Ottawa............and every offer had conditions of sale in them.

If one of those people didn't sell their home...........all 6 sales would fall through.

Buying a home, without selling their home first, was considered a very bad idea.

We also used to make offers on a home with a $100 deposit.

It sounds like times have really changed in the real estate market.


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## Spudd (Oct 11, 2011)

It probably depends on your local market, too. 

Here in Toronto, we sold our house about a year ago. There was a bidding war with 3 bidders, and at first they had conditions in their offers but by the end, they had increased the price and dropped all conditions in order to win. Toronto is crazy at the moment. 

We're looking to eventually buy in a smaller town outside Toronto, and in the main town we have our eye on, the houses are just not moving at all. They're on the market for months and months. So there, I am sure you could have 10 conditions and the offer would still be accepted.


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## Mortgage u/w (Feb 6, 2014)

cr73 said:


> Hello! First time poster
> 
> I currently own a condo, which I purchased in 2010. In the next year I would like to purchase a larger detached home, which would be a significant increase in mortgage payments, and sell my current condo. Now married, and looking to purchase a larger home before starting a family. Current value 275k, mortgage of 175. Future budget of 550k
> 
> ...


You have so many variables in your senario - your best solution is to speak to a mortgage specialist.

To answer some questions, the down-payment on your new home can be as little as 5%. Question is; do you want to pay an insurance premium? Also, will you quality with both mortgages? If your intention is to eventually sell the condo, I suggest you get it on the market asap...will make your qualification process a lot simpler. As for your current mortgage, if you know you will be making changes within the next 6 mths, then I definitely recommend renewing to an open term. If you intend to purchase later on, then I would recommend a variable rate mortgage.....when you eventually break it, you will only pay 3mth interest. Alternatively, if you stick with the same lender and your condo is sold, you can simply port and increase the current mortgage to the new property in order to save the penalty regardless the term you took.


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## Jon_Baker (Oct 1, 2014)

Agree to what Just a Guy has told. Before making conclusions yourself talk to the bank about your loan proposal. Make sure that they will give the loan at the desired rate. If not, then you will have to look at other banks or personal loan providers who offer better rates. And have you enquired about the price your condo may get when put for sale. It would be good if you contacted some real estate agents and enquired about the price.


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