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Home Buying and Mortgages

Your guide to buying a home in Alberta

ATB Home Buying Guide

Are you first home buyer?

Download this step-by-step guide to buying a home in Alberta for everything you need to know.

Are you looking at buying your first home (or maybe third or fifth home)? Buying a home is a huge milestone—and the home buying process can sometimes be just as confusing and overwhelming as it is exciting. That’s where we come in. We’ve collected information about buying a home from industry experts so that you can feel confident in the process. Here we’ll take you through a step-by-step guide on what you need to know (and do!) when buying a home in Alberta.

Am I ready to buy a house?


So, you’ve started to ask yourself ‘am I ready to buy a house?’ This is a very important question because thinking you’re ready to be a first-time home buyer and knowing you are ready to be a first-time home buyer are very different things. Purchasing a home is one of the biggest financial decisions you will make in your lifetime, so to help guide you, we’ve compiled the top signs that you are ready to sign mortgage papers.

 

7 signs that you’re ready to buy a home

Luckily, we have a few signs we recommend you look for in yourself to see if you’re ready to make the leap into home ownership.

  1. You have a specific area that you can see yourself staying for the long term.

  2. You have at least a loose idea of what your future will look like (the things you can control) and how your current lifestyle will likely shift in the next 10-15 years.

  3. Your current home can’t meet your long term vision and needs.

  4. You’re in a comfortable financial position, with a manageable amount of debt and you’re satisfied with your retirement savings up until now.

  5. You’ve accepted and prepared for the extra costs of being a homeowner.

  6. If you experienced a career shakeup, you could still cover your mortgage and other house expenses without dramatically increasing your debt.

  7. You feel like it makes sense to pay towards a mortgage instead of rent every month.

Three things you’ll need to decide before you buy a home

 

“Should I rent or own?”

It’s a common question, and a good one! Sometimes it just might not be the best time to take the leap into home ownership. But you don’t have to guess if you’re ready or not—try out our rent vs. own calculator. Take into account the mortgage rate, market value of the home, and potential rate of return you’d get from investing your extra cash instead of putting it towards a mortgage to help you move farther along in your decision.

What do you think? If you’re feeling pretty confident, we think that you should continue to learn more about buying a home and find answers to more of your questions. We’ve actually created a home buying guide, created specifically for first time home buyers to navigate how to buy a home in Alberta. Download it for free and keep it on hand as you continue your research.

 

Pros and cons of buying a house vs. a condo

Which is better to buy, a house or a condo? Well, neither is necessarily “right” or “wrong,” but one of them could be the best fit for you. Check out the comparison between the perks and pain points of living in a house versus a condo.

Mortgage insurance vs. term life insurance 

Pros Cons
Detached houses (and the land they sit on) tend to appreciate in value over time. Maintaining a yard may mean spending time, energy and money on lawn mowing, tree trimming, landscaping, etc. And you’ll have to shovel the snow off the sidewalks and driveway during the winter.

Pros and cons of buying a condo

Mortgage creditor insurance Coverage through term life insurance
Mortgage creditor insurance doesn’t typically require a medical exam. If you have no health issues you can be auto approved immediately. Life insurance through a term policy is based on you and your medical health only.

Want to know more things you should pay attention to when buying a resale? Check out our home buying guide—we’ve built an interactive home buying checklist and scoring system to help you prepare.

 

Determining the right neighbourhood

Another important decision you’ll need to make when purchasing a home is where you want to live. Is being close to the river valley in Edmonton important to you or do you want a short work commute to downtown Calgary?

Some of your neighbourhood wants could include:

  • Schools
  • Shopping
  • Proximity to work, family or friends (or all three!)
  • Parks or nature trails

Once you’ve confirmed your list, take a look at a couple neighbourhoods you’re considering and see what boxes they check. If you find they’re not checking the boxes, you might want to expand your search.

Variable vs. fixed-rate mortgage

Mortgage creditor insurance Coverage through term life insurance
Mortgage creditor insurance doesn’t typically require a medical exam. If you have no health issues you can be auto approved immediately. Life insurance through a term policy is based on you and your medical health only.

Variable vs. fixed-rate mortgage

Mortgage creditor insurance Coverage through term life insurance
Mortgage creditor insurance doesn’t typically require a medical exam. If you have no health issues you can be auto approved immediately. Life insurance through a term policy is based on you and your medical health only.

Want to know more things you should pay attention to when buying a resale? Check out our home buying guide—we’ve built an interactive home buying checklist and scoring system to help you prepare.

 

Determining the right neighbourhood

Another important decision you’ll need to make when purchasing a home is where you want to live. Is being close to the river valley in Edmonton important to you or do you want a short work commute to downtown Calgary?

Some of your neighbourhood wants could include:

  • Schools
  • Shopping
  • Proximity to work, family or friends (or all three!)
  • Parks or nature trails

Once you’ve confirmed your list, take a look at a couple neighbourhoods you’re considering and see what boxes they check. If you find they’re not checking the boxes, you might want to expand your search.

Saving for a mortgage down payment

Deciding when to start saving for a home is no brainer, the big decision is when to stop saving for a downpayment. The terms or your mortgage and interest rate is in part determined by the size of your down payment, and it’s a safe bet that a large down payment is going to save you money in the long run. Speaking to a mortgage specialist will help you determine how much you should save for a down payment while still maintaining your desired lifestyle. On top of programs, like the Home Buyer’s Plan, creative savings strategies can help you get closer to that down payment savings goal without sacrificing your quality of life.

5 tips to save up for a down payment

  1. Prioritize your spending: figuring out what are “wants” and what are “needs” can do wonders for your spending—and saving! If you prioritize saving for a house over that golf trip or designer bag, you’ll be well on your way.
  2. Pare down your material goods: when you learn to live with less, the need to always buy more decreases. Hear us out—we’re not saying that you have to eliminate everything you enjoy. We’re saying that you’ll be able to focus more on what you care about most when it doesn’t get lost in a sea of clutter. Plus, you’ll set yourself up with a mindset that doesn’t default to impulse buys and hoarding.
  3. Earn extra income: this is the time to get a side hustle, and put all of the extra earnings towards your down payment. Offer lawn care in your local area on weekends, sell your artistic creations, babysit for the neighbours. You’ll be thanking yourself for putting in the extra work when you get the keys to your new place.
  4. Pay off your credit card debts first: you don’t want to save up for a down payment with money that you don’t actually have. Once you’ve paid off your credit card debt, then you’ll see what you have to work with.
  5. Use the Government of Canada’s Home Buyers’ Plan (HBP): if you’re a first time home buyer, you can withdraw up to $35,000 from your RRSP, tax-free to put towards your down payment.

Mortgage terms explained

Open mortgages, closed mortgages, variable mortgages, oh my! All of the mortgage terms out there are enough to make someone’s head spin. That’s why we wanted to give you an overview of some mortgage terminology, to help you make sense of this sometimes confusing language. Here are some mortgage terms you need to know:

  • Insured mortgage: if you’re making a down payment of less than 20% of the price of the home, then you'll have to buy mortgage default insurance. This protects the mortgage provider who’s providing a loan without the security of a substantial down payment.
  • Conventional (Uninsured) mortgage: if you’re making a down payment of more than 20% of the price of the home, then your mortgage doesn’t require mortgage default insurance.
  • Variable mortgage: the interest fluctuates with the Bank of Canada’s prime lending rate.
  • Fixed rate mortgage: fixed-rate mortgages guarantee a fixed interest rate for the length of your term.
  • Closed mortgage: a closed mortgage can’t be repaid without prepayment penalties during its term, except if there are exceptions in the mortgage agreement.
  • Open mortgage: an open mortgage allows repayment of your mortgage at any time, without penalty, but typically has higher rates.
  • Amortization period: the length of time over which you expect you pay off your mortgage. It typically ranges from 15-25 years.
  • Mortgage term: your term is the amount of time that you’re committed to your mortgage provider, interest rate and payment options. At the end of your term, you can choose to either renew your mortgage under the same conditions but at a new interest rate based on the current market, renegotiate your mortgage with the same provider or move your mortgage to a different provider.

For more mortgage related terms, read ‘6 mortgage terms you need to know’.

Mortgage Finder Calculator: what mortgage should you get

Want a little help applying all of those mortgage definitions to find the right mortgage for you? Use our mortgage finder calculator to figure out your best mortgage option based on your mortgage needs, risk tolerance and payment preferences.

Just keep in mind that this calculator is a helpful tool, but to really understand what works best in your life, we recommend going over your options and long-term financial goals with a mortgage specialist.

Mortgage pre-approval process explained

“Will I get approved for a mortgage once I’m pre-approved?” “How do I get pre-approved for a mortgage?” These are normal questions that surround the seemingly intricate process of pre-approval. Here are some things you should know about mortgage pre-qualification and pre-approval:

First thing’s first: mortgage pre-qualification and mortgage pre-approval are not the same thing.

They do sound similar, so we understand it can be confusing. Now that we’ve got that out of the way, let’s define the two.

Pre-qualification is the first step to pre-approval. It helps you and your mortgage provider determine approximately how much you’ll be able to borrow and how much you’ll need for a down payment and closing costs.

The mortgage provider won’t review your credit report or verify your financial information when going through the pre-qualification process. Rather, they’ll estimate how much you might eventually be approved for based on an overview of your finances, including your income, assets and debts.

Mortgage pre-approval isn’t an all-out guarantee that a mortgage provider will actually fund your loan, but it’s as close to an all-out guarantee as you’ll get. It’s a smart move to get pre-approved before you start seriously shopping to buy a home.

Really, all pre-approval means is that a mortgage provider does some of the initial background checking in advance and commits to giving you a particular interest rate if you’re fully approved for a mortgage within 90 days.

To learn more about the mortgage approval process, read ‘6 things you need to know about mortgage pre-qualification and pre-approval’.

Mortgage affordability: what size mortgage do I qualify for?

In general, your credit score and the size of your down payment affects the interest rate a mortgage provider will offer you. If you have a low credit score (under 700 on a scale between 300 and 900), the down payment required by the lender to qualify for a mortgage may be more than if you had a higher credit score.

The mortgage you qualify for is based on:

  • Your ability to afford monthly mortgage payments.
  • How much confidence a mortgage provider has in your credit based on your credit score, which in turn affects the interest rate that provider is willing to offer you.
  • The size of your down payment, which is directly related to the size of the loan you’ll be taking out on the remaining portion of the property’s sale price.

You should be able to make all of your necessary monthly payments, including mortgage payments, with up to 50 percent of your total monthly income (this calculation follows the 50:30:20 rule that divides your budget into needs, wants and goals).

Making a budget: key to figuring out the size of mortgage payments you can afford

While it almost seems too simple, making a budget is actually one of the first steps you can take to see how much you can afford to spend on monthly mortgage payments, once you factor in your other monthly expenses.

Download the home buying guide to find an outline of a basic monthly budgeting tool, as well as a fillable worksheet that will make your calculations for you.

Mortgage rates

How are mortgage rates calculated?

Mortgage interest rates are determined by the prime rate in Canada. The prime rate is a target lending rate that’s used by banks to set interest rates for variable loans, lines of credit and mortgages. The rate is individually set by each financial institution, but when the prime rate is moved by one financial institution, others tend to follow and use the same rate within a day or two.

Who sets the prime rate?

The prime rate tends to be set based on what the Bank of Canada (BoC) sets their overnight target rate at. The BoC overnight target rate is the variable rate at which banks borrow money from the BoC.

How does the prime rate affect the rate I get on my mortgage?

The final rate that you’d see can be influenced by quite a few things, like how a bank’s loan and mortgage growth is doing, whether it’s secured, and your credit history. In a competitive environment when loan growth may be slowing, you’re likely to see prime plus a smaller percentage, giving a better rate to the borrower. In some cases, you might see prime minus a percentage if the loan is secured.

Want to dive in deeper to how the mortgage interest rate is calculated? Read this article.

Mortgage calculator

If you’re wondering what size of mortgage you can afford, how big your monthly mortgage payment would be, or maybe which mortgage type is right for you, we’ve got you covered with all kinds of mortgage calculator options.

  • Mortgage payment calculator: figure out how much your mortgage payment will be on all kinds of different payment schedules.
  • Maximum mortgage calculator: ​calculate the monthly mortgage payment you can afford using basic info like income, monthly payments, and down payment.
  • Mortgage comparison calculator: torn between a few mortgage options? Use this tool to compare different mortgages side by side and find the best fit for you.
  • Mortgage prepayment calculator: calculate the prepayment penalty you should consider before making additional payments beyond your mortgage contract. For example, lump sum payments or paying in full before the end of your term.

Feeling a little confused by the whole mortgage prepayment thing? We’ve got you covered. Here’s an article that explains prepayment penalties.

Should you get a variable or fixed mortgage rate?

Variable and fixed-rate mortgages are the two primary types of mortgages in Canada. Each has its advantages, but deciding which will work best for you can be tricky. Here are some key differences to keep in mind.

Variable vs. fixed-rate mortgage

Mortgage creditor insurance Coverage through term life insurance
Mortgage creditor insurance doesn’t typically require a medical exam. If you have no health issues you can be auto approved immediately. Life insurance through a term policy is based on you and your medical health only.

*If you have a variable-rate mortgage and the market is making you nervous, some variable-rate mortgages allow you to lock back in to a fixed rate with no penalty.

Do I need mortgage insurance: the benefits of mortgage insurance and term life insurance

Torn between mortgage insurance and life insurance? Totally understandable! Here’s a breakdown of some of the key differences to help you figure out what’s the best fit for you.

Mortgage insurance vs. term life insurance 

Mortgage creditor insurance Coverage through term life insurance
Mortgage creditor insurance doesn’t typically require a medical exam. If you have no health issues you can be auto approved immediately. Life insurance through a term policy is based on you and your medical health only.

What you need to know about the Home Buyer’s Plan

What is the Home Buyer’s Plan?

The Government of Canada’s Home Buyers’ Plan (HBP) allows first-time home buyers (and those considered first-time home buyers) to withdraw up to $35,000 from your RRSP, tax-free.

Do I have to repay the Home Buyer’s Plan?

Short answer: yes! You have to repay the funds that you withdraw back into your RRSP (or have the required repayment added to your taxable income).

How do I repay the Home Buyer’s Plan?

You’ll pay back your HBP when you do your taxes every year—you’ll allocate the money you repay into your RRSP either towards the HBP or your RRSP. The repayment period starts the second year after you withdraw your funds from your RRSP. So, if you took the money out in 2020, you’ll start your repayment in 2022. You have 15 years to repay to your RRSP.

For more information, check out what the Government of Canada has to say.

Can I withdraw from an RRSP for home renovation using the Home Buyer's Plan?

No, you’ll need to put 100% of your withdrawn RRSP funds towards buying or building a home that will be your primary residence.

When should I withdraw my Home Buyer’s Plan?

You’ll have to buy or build your new home before October 1 of the year following your withdrawal year, so keep that in mind when planning when to take your RRSP funds out.

Still have more questions about the Home Buyer’s Plan? Find more answers in this article on using your RRSP to buy your first home.

The basics of making an offer on a house

Did you know that there are two different types of offers you can make when purchasing a house? Here’s a simple breakdown of the types of offers to give you a solid knowledge base.

Conditional offer

  • Most offers are conditional offers pending home inspection and final approval of the buyer’s mortgage. Other conditions may also be applied.
  • With a conditional offer, if any of the stated conditions can’t be met, the buyer gets their full deposit back.
  • Some real estate contracts will also have a 48-hour clause to remove all conditions if another offer is received. This is seen mainly when the offer is subject to the sale of the buyer’s existing house.

Unconditional offer

Unconditional offers are both rare and risky. With an unconditional offer, if anything happens to compromise the deal before it closes, the buyer loses their deposit.

What happens after you make an offer on a home? Read through the rest of the process (and everything else you’d want to know about the home buying process) in our home buying guide.

Why home buyers need a lawyer

Do I need a lawyer to buy a house?

Yes. Unlike in some other provinces, where a notary is sufficient legal authority to oversee property transfers, in Alberta it’s mandatory to work with a lawyer when buying a home.

What role does the lawyer play in the home buying process?

In the most basic terms, a lawyer ensures the transfer of land from buyer to seller is legally enforceable and binding. It’s the lawyer who takes on some of the risk you might otherwise assume.

It’s a lawyer’s job to protect both the buyer and the seller from the time the offer is made until the time the deal is done. After the home inspection is passed, the lawyer initiates the two-week process for registering the transfer of land from the seller to buyer.

One of the documents the lawyer will send you is called a Statement of Adjustments. This document summarizes (among other things) the total property tax owed for the year, the percentage of the property tax that the seller is responsible for and the percentage of the property tax you, the buyer, are responsible for in the year of the sale. Generally, the percentage of the property tax the buyer is responsible for is added to the sale price of the house and paid to the seller.

The lawyer also facilitates the transfer of your down payment to the seller.

Can I meet with a lawyer before choosing to work with them?

Most real estate lawyers are happy to sit down with a potential client and discuss any questions before they actually launch into the legal process.

How much does a lawyer typically cost when buying a home?

You can expect to pay both your lawyer’s fee and your lawyer’s disbursements (costs a lawyer can’t avoid) such as courier fees, office administration fees, title insurance, and land title and mortgage registration. A lawyer’s fee might range from $600 and $1200, plus GST, while the disbursement costs might come to $400 or $500. All in all, you should be budgeting between $1500-$1700 for a lawyer’s services.

Everything you need to know to close the deal and take possession of your new home

Here’s a checklist of what needs to happen in the time between you making an (accepted) offer and moving into your new home:

  • Make a conditional or unconditional offer
  • Get a lawyer
  • Get final mortgage approval (conventional or insured)
  • Transfer the deposit to show that you’re serious about the place
  • Get a property appraisal
  • Transfer the rest of the down payment to the seller and take possession (YAY!)
  • Receive final approval and send documents to the lawyer
  • Get a home inspection
  • Buy title insurance through the lawyer

Want a little more information about each step? We have more detail included in our Home Buyer Guide—did we mention that it’s free download? You’ve only skimmed the surface of all that we have to share with you about first-time home buying—the Home Buyer Guide is full of handy tips for before, during and after you purchase your home, interactive tools and budgeting tips to make your house a home.

Need help?

Our Client Care team will be happy to assist.