Household debts and taxes keep rising, but don’t let that deter you from taking on an assumable mortgage if the dollars and cents add up.
Ontario’s home buying market changes almost daily. Waiting to jump in can take forever. An assumable mortgage could be the answer. Because if you haven’t considered an assumable mortgage before, it’s time you did.
Here’s what to know about having an assumable mortgage.
Switching It Up With An Assumable Mortgage
Assuming an existing mortgage over getting a new one — the thought is tempting. The seller gets a mortgage, you take it over. No fuss over finding a mortgage loan on time. The seller takes care of it all.
Why it seems so easy. In reality, how easy it is can depend on the mortgage terms and conditions and your ability to afford a new loan over taking on an assumable mortgage.
Qualifying for New Mortgages
Qualifying has seldom been easier or more complicated. How’s that for confusion?
Your lawyer’s role in mortgage transactions.
To start with, you’ll need a gross debt service ratio of 39% and total debt service ratio of 44% to qualify for most mortgages in 2021.
Your GDS ratio is…
- Projected monthly housing expenses divided by gross monthly income
- Mortgage payment, heating costs and property taxes
- Plus half of any condominium corporation fees.
Your TDS ratio is…
- Housing expenses, plus total monthly debts, divided by gross monthly income
- Debts include credit card payments, car or other loans
- Spousal or child support
- And other monthly expenses you regularly pay.
What You Need Down
Unless you have 20% or more down, a high ratio mortgage or private lender are your best options. Even with a 5% to 19.9% down payment, your credit score will need to be acceptable. Typically, that means a score of at least 600, although private lenders may go lower.
Can you borrow a downpayment?
How to Assume a Mortgage
If getting a new mortgage isn’t what you want, assumable mortgages could be a contender. As long as you can satisfy the seller’s lender that you are creditworthy, you could take over the whole mortgage or a part.
Fees You Could Pay
Be aware you’ll pay lenders’ fees for the paperwork involved and could have a monthly mortgage insurance premium tacked on. Since you are often taking over payments mid-stream (maybe year two of a five-year mortgage), the amortization period is shorter than the sellers’. Your mortgage payments could go higher because of that.
How It Works
Say, for example, a rowhouse you desire costs $650,000 and you have 10% down ($65,000). Provided the seller has a mortgage for at least $585,000, you could be in business. You assume the mortgage payments. The seller hands you the keys.
RRSP mortgage loan tips for Ontario home buyers.
Renewing or Refinancing
As long as you faithfully make the mortgage payments for the remaining term (six months to 10 years), you could improve your own credit rating. When it comes time to renew or refinance, mortgage lenders have reason to believe you are serious about buying a home.
What happens to the deposit when buying a house.
Where to Find Assumable Mortgages (Ontario)
Most realtors know homeowners who might be open to giving you an assumable mortgage, provided their lender agrees. For private sellers, check online or in local newspapers. Dropping into for sale by owner viewings can also open doors if you’re determined to find an assumable mortgage with terms you can manage. Ask a mortgage broker to do the math.
Private mortgage rules and how to qualify.
Why You Need a Real Estate Lawyer Ontario
Assuming a mortgage has its own peculiarities. Axess Law real estate lawyers (Toronto, Ottawa and Greater Toronto Area) review the fine print for terms and conditions mortgage lenders typically include. We explain your legal obligations and tell you if an assumable mortgage binds you in ways you may not expect.
Discharging a mortgage in Ontario — the mortgage discharge fee and more.
If your current mortgage needs discharging, your Axess Law real estate lawyer can liaise with your bank, credit union or private lender. We finalize assumable mortgage documents or help you make private lending mortgage arrangements.
Home inspections can be troublesome. Axess Law words the home inspection clause (Ontario properties) to protect your legal interests — and explains why waiving home inspections in Ontario is a bad deal. Our licensed real estate lawyers negotiate with sellers’ lawyers to fix minor repairs or manage what happens to the deposit if the deal falls through.
Tips for wording the home inspection clause (Ontario).
When you’re finally ready to close a real estate transaction, our professional legal team does a comprehensive title search and registers the property title transfer (Ontario land registry offices). Axess Law takes care of all the legal details, from purchase or sale to taking possession.
Affordable Legal Services for Assumable Mortgages
Access lawyers for less in Greater Toronto Area, Ottawa, or anywhere in Ontario when you buy, sell, or transfer property. Axess Law’s flat fee real estate lawyers are affordable, and our rates are all inclusive (excluding taxes, disbursements, and third-party charges). Axess Law offers you only the legal services you absolutely need. Your final invoice includes no surprises or hidden charges. Your itemized statement of adjustments is explained when we deliver it, and we answer any questions you have about it.
Book Now By Phone or Online
No worrying about whether you can find a local real estate closing lawyer on time. Axess Law’s virtual real estate lawyers video conference live from anywhere in Ontario. Your real estate closing is quick and confidential. E-signing with Axess Law is secure and legally valid.
Prefer to meet in person? Axess Law locations are open 7 days a week. We have a real estate lawyer (Toronto, Greater Toronto Area or Ottawa) when you need one, with onsite parking and easy transit access.