TD recently surveyed 1,000 home owners for its Repeat Home Buyers Report. Below are nine mortgage-related findings from that report with our perspective tossed in…
- 1 in 5 repeat home buyers have owned more than five homes.
Mortgage Considerations: People move a lot over their lifetime, sometimes unexpectedly. Having the ability to port a mortgage without a penalty can therefore be a money-saver. Fortunately, most prime mortgages are portable nowadays. Just make sure you understand your lender’s porting restrictions.
- 49% plan to upgrade when they buy their next home.
Mortgage Considerations: If you’re thinking of buying a more expensive property sometime during your mortgage term, be sure your lender has a policy of offering fully discounted rates on ports & increases. People who port and increase sometimes get stuck with subpar discounts (like 1.25% off posted 5-year fixed rates) because the lender knows the client can’t break without a penalty.
- 21% plan to take the maximum mortgage they’ll qualify for.
Mortgage Considerations:
This increases to 28% for buyers under 40. There are few things more stressful than worrying about making your mortgage payment. So keep your blood pressure low…and your gross debt service ratio under 32%. - 72% plan to stick with their current lender when they buy a new home.
Mortgage Considerations: The top reasons for switching lenders were: better rates (60% cited this reason), better customer service (33%), and better mortgage terms (28%). If you love your lender’s rates and service, that’s groovy. But don’t make the mistake of not shopping around. If you’re buying a new house, you’ll need to apply all over again anyway. See if there’s a mortgage elsewhere that’ll save you a few tenths of a percent and offer more flexibility.
- 60% aren’t familiar with their portability or assumability options.
Mortgage Considerations: “Porting” lets you avoid a mortgage penalty if you move. “Assumability” lets you: a) offer a low mortgage rate as an incentive to buyers of your home; and/or, b) avoid a penalty if you’re selling and need to break your mortgage. Here’s a related story from the Post.
- Just 1 in 3 port their mortgage when buying a new home.
Mortgage Considerations:
If you have a mortgage and buy a new home, always ask your mortgage advisor if porting will save you money. - Only 8% of home sellers offer an assumption as a selling feature of their home.
Mortgage Considerations:
This may be due to:
1) sellers not realizing they can offer an assumption
2) down-trending rates that have made assumptions less attractive; or,
3) sellers porting their mortgage to their new property (most people with great terms keep their mortgage when they buy a new property). - 84% plan to sell their current property before purchasing another one.
Mortgage Considerations: If you want to buy a new property before you sell your old one, get prequalified to ensure you can debt service both homes if needed. - Two-thirds will choose accelerated payments for their next mortgage.
Mortgage Considerations: If you can afford the equivalent of one extra payment a year, accelerated bi-weekly payments can shave up to four years off a 25-year mortgage.
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About the TD Canada Trust Home Buyers Report:
Results for the TD Canada Trust Home Buyers Report were collected through a custom online survey conducted by Environics Research Group. A total of 1,000 completed surveys were collected from August 12 to 27, 2010. All participants either purchased a home that was not their first home within the past 24 months, or intend to purchase a home that is not their first home within the next 24 months. (Source: TD)
Last modified: April 26, 2014
Is the gross debt service ratio calculated using your gross pay or your net pay after income tax and EI, etc?
Gross pay is your pay with no deductions. The GDS and TDS use your gross.
Both GDS and TDS use the gross income. To calculate the GDS you take your mortgage payments plus heating bill, plus taxes and condo fees and you divide it by you gross income.
For the TDS you would use the same expenses plus 3% of credit card and loan balances plus car payment divided by your gross income. You don’t want to exceed 35 for the GDS and 42% for TDS (44% max depending on the lender).