Mortgage Down Payment Options – RBC Royal Bank #mortgage #affordability #calculator


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Mortgage Down Payment Options

From a low down payment mortgage to using your Registered Retirement Savings Plan (RRSP) as a source of funds, buying a home has never been easier.

The down payment is that portion of the purchase price you furnish yourself. The balance is obtained from a financial institution in the form of a mortgage. The amount of the down payment (which represents your financial stake, or the equity in your new home) should be determined well before you start house hunting.

Conventional Mortgage

A conventional mortgage requires a down payment of at least 20% and is offered on either a fixed or variable interest rate basis. Conventional mortgages have the lowest carrying costs because they do not have to be insured against default.

Low Down Payment Insured Mortgage

Most lenders now offer insured mortgages for both new and resale homes with lower down payment requirements than conventional mortgages-as low as 5%. Low down payment mortgages must be insured to cover potential default of payment; as a result, their carrying costs are higher than a conventional mortgage because they include the insurance premium.

Mortgage default insurance is a one time premium paid when your purchase closes. You can pay the premium or add it to the principal amount of your mortgage. Talk to your mortgage specialist to find out which option is best for you;

Using Your RRSP as a Down Payment

Under the federal government’s Home Buyer’s Plan, first-time home buyers are eligible to use up to $25,000 in RRSP savings per person ($50,000 for couples) for a down payment on a home. The withdrawal is not taxable as long as you repay it within a 15-year period. To qualify, the RRSP funds you plan to use must have been in your RRSP for at least 90 days.

Even if you already have enough money for your down payment, it may make sense to access your RRSP savings through the Home Buyers’ Plan.

For example, if you have already saved $25,000 for a down payment-and assuming you still had enough “contribution room” in your RRSP for a contribution of that amount, you could move your savings into an RRSP at least 90 days before your closing date. Then, simply withdraw the money through the Home Buyers’ Plan.

The advantage? Your $25,000 RRSP contribution will count as a tax deduction this year. Use any tax refund you receive to repay the RRSP or other expenses related to buying your home.

However, the money you borrow from your RRSP won’t earn the tax-sheltered returns it would if left in your account. Ask your financial planner if this strategy makes sense for you.

Saving Money with a Larger Down Payment

It’s to your advantage to put down as much money as you can because interest costs for a smaller mortgage are lower-adding up to significant savings over the long run.

The table below shows how an average homeowner can save more than $25,000 in interest costs on a $100,000 home by making a down payment of 25% versus the minimum down payment of 5%.

Down Payment Amount


Mortgage Amortization – RBC Royal Bank #saxon #mortgage


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Mortgage Amortization

Choosing the length of your amortization period, which means the number of years you will need to pay off your mortgage, is an important decision that can affect how much interest you pay over the life of your mortgage.

Historically, the standard amortization period has been 25 years. However, shorter and in some cases longer time frames may be available depending on the amount of down payment you have available.

A shorter amortization saves you money as you will pay less in interest costs over the life of your mortgage. Your regular mortgage payment amount would be higher than if you had selected a longer amortization, as more of your payment goes towards paying down your principal balance. However, the benefits are that you build the equity in your home faster and are mortgage free sooner.

A longer amortization provides you lower monthly payments and because of this it is appealing to many people. However, it does mean that more interest will be paid over the life of the mortgage and you will build the equity in your home at a slower pace.

Note: If you choose an amortization over 25 years, you must have a down payment of at least 20%.

Example: Extended Amortization 5 Year Fixed Rate Closed Mortgage

The chart below shows the impact of two different amortization periods on the monthly mortgage payment and total interest costs (over the full amortization). It is important to be aware that the total interest costs increase significantly if the amortization period exceeds 25 years.

Example: Extended Amortization 5 Year Fixed Rate Closed Mortgage


Refinance Your Mortgage – RBC Royal Bank #refinance


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Refinance Your Mortgage

You are on: Using Your Home Equity

Refinancing to Use the Equity in Your Home

If you need access to additional funds, using the equity in your home can be a lower cost way to borrow the money than taking out a traditional loan. For example, you can use your home equity to:

  • Renovate your home
  • Buy an additional property
  • Invest in stocks
  • Buy a car or boat

Another common reason for refinancing a mortgage is to consolidate debt such as higher interest credit card balances and loans. By consolidating these debts into your mortgage at a lower interest rate, you can save money and have all your debt in one place. Plus, our pre-payment options give you the flexibility to pay off your loan more quickly.

Advice and Solutions to Meet Your Goals

Whatever your reasons for wanting to refinance your mortgage, an RBC mortgage specialist will take a look at your current home equity and your goals for the future to recommend the best solution. Depending on your situation, here are a few of the refinancing solutions that may be available to you:

  • Mortgage Add On
    With our Mortgage Add-On option you can borrow up to 80% of the appraised value of your home, minus the remaining mortgage balance 34 .
  • RBC Homeline Plan
    If you have 20% or more equity in your home 2 the RBC Homeline Plan is a smart and easy way to manage all your borrowing needs under one simple, flexible plan.
  • Secured Line of Credit
    You can fully secure a Royal Credit Line with a registered collateral mortgage on your principal residence. With a secured credit line, we can offer you a lower interest rate than we could with a regular, unsecured line of credit 3 .

You are on: Mortgage prepayment Charges

Mortgage prepayment Charges

Thinking about refinancing, prepaying a large amount or renegotiating your current mortgage to take advantage of lower interest rates? Before you do, there are several things to keep in mind—the most important one being whether or not you will have to pay the mortgage pre-payment charge.

What is a Mortgage Pre payment Charge?

The purpose of a prepayment charge is to compensate the lender for the economic costs it incurs when a prepayment amount exceeds the prepayment privileges permitted under the mortgage.

What’s Right for You?

The best way to know whether you can still save money in the long run after paying the mortgage pre-payment charge is to visit your RBC branch and talk with us.

Our “Mortgage Prepayment Charge Calculator” can also help you determine how much it could cost to break your mortgage. If you have a fixed rate closed mortgage, our calculator can help you determine what interest rate you would need to get in order to “break even.”

To learn more about breaking your mortgage and mortgage pre-payment charges, see:

We’re Here to Help

Call us today about managing your mortgage. We can help explain your options and offer advice on mortgage solutions to help you achieve your goals.


Closing Costs – RBC Royal Bank #home #rates


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Closing Costs

Expense-wise, there’s more to owning a home than your monthly mortgage payment. Below are some of the one-time closing costs you may need to pay:

  • Default (or High Ratio) Mortgage Insurance Premium and PST (where applicable). Your lender requires this coverage if your down payment is less than 20% of the purchase price. This premium, minus the Provincial Sales Tax (PST), can be added to your mortgage balance. The PST must be paid at closing.
  • Appraisal Fee (if applicable). Your bank will have hired an independent appraiser to determine the value of the property and whether it meets its lending criteria. This may or may not be required depending on the type of property being purchased.
  • Down Payment. The portion of the purchase price that you furnish yourself.
  • Bridge Financing (if applicable). If your home purchase closes before the sale of your current home, you’ll need to finance the cost of the home purchase for a short period of time. Bridge financing is expensive and not recommended as a matter of course-talk to your lender if this situation applies to you.
  • Estoppel Certificate (for condominium/strata units). Documentation of the condominium corporation’s financial well-being and legal state.
  • Interest Adjustment Costs. Most lenders expect the first mortgage payment one month after closing the purchase. If you close mid-month, however, some lenders expect the first payment, or at least the interest accrued during that time period, at the beginning of the next month, two weeks before you would normally expect. When arranging your mortgage, ask how interest is collected to the interest adjustment date.
  • Legal/Notarial Fees and Disbursements. You will be required to retain a lawyer or notary to act for you in the purchase and mortgaging of the property, and you will be responsible for payment of all related fees and disbursements. Fees for these services may vary significantly, so you may wish to shop around before making your decision.
  • Title Insurance. Title insurance is an insurance policy that protects you, the home owner, against challenges to the ownership of your home or from problems related to the title to your home. Talk to your lawyer or notary to see if a title insurance policy is right for you.
  • Land Transfer Tax (Land Registry Tax). Most provinces levy a one-time tax (sometimes called the “Welcome Tax”) based on a percentage of the purchase price of the property.
  • Township/Municipality Levies (applicable to new homes within subdivisions). For such items as tree planting, school taxes and other items until they are assumed by the town/municipality.
  • Property Tax/Utility Bill Adjustments. The purchase price of a resale home is always payable “subject to the usual adjustments” at closing. This means that any amount that the seller has already prepaid will be adjusted so that you pay the excess amount back to the seller, and vice versa. The most common adjustments occur on property taxes and utility bills that have been paid ahead of time.
  • Certificate of Location (Property Survey). Required by the financial institution for mortgage approval, and by your lawyer or notary for transfer of ownership. Ensure that this certificate reflects improvements such as decks, patios or pools. If outdated, the offer to purchase should indicate whether the seller or you will incur the necessary expense to obtain the appropriate certificate.
  • Upgrades (applicable in new home construction). Such items as hardwood flooring, granite kitchen countertops, additional ceiling height and so forth usually will increase the purchase price of your home, and can be paid for in cash or (in most cases) or added to the mortgage proceeds.

Keep other costs in mind as well

Will your new home need furniture? Carpets? Lighting? Window coverings? Appliances? Do you have the tools you need to maintain the lawn and gardens? Are you hiring movers or renting a truck? Will you need boxes, bubble wrap and tape for the move?

While these and other out-of-pocket costs aren’t part of the real estate transaction, you still need to budget for them. Plan your expenses as much as possible. If necessary, decide what you can put off buying until later, after you move in and get settled.

Start Your Online Mortgage Pre-Approval

Lock your rate and know exactly how much home you can afford. Start your pre-approval online and an RBC mortgage specialist will be in touch within 24 hours to help you complete your pre-approval application.


Investment Property Mortgage – RBC Royal Bank #how #to #calculate #a #mortgage #payment


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Investment Property Mortgage

You are on: Features and Benefits

The RBC Investment Property Mortgage can provide financing for up to 80% of the appraised value of your rental property.

A Mortgage Solution to Meet Your Needs

Offering competitive rates and a range of terms, the RBC Investment Property Mortgage may be the ideal solution if you’re considering:

  • Acquiring a rental portfolio of one or more properties to build income and equity
  • Converting your current home to a rental property
  • Purchasing a property for your child to live in

How to Qualify for an Investment Property Mortgage

To qualify for an RBC Investment Property Mortgage, you must have a good credit history, demonstrate sufficient rental income (either through existing tenancy documentation or an opinion of market rent), and have enough non-rental income to meet the obligations of the mortgage.

Not sure where to start? Talk to an RBC Mortgage Specialist. who can help you decide whether an investment property is right for you.

You are on: Payment Options

Select Your Payment Schedule

When you first set up your mortgage, you can choose from several payment options, including monthly, semi-monthly, bi-weekly, weekly, accelerated bi-weekly and accelerated weekly payments.

Choose Your Amortization Period

At RBC Royal Bank, you can select an amortization period between 5 and 30 years. This is the length of time it will take to pay off your mortgage if the interest rate does not change.

Pay Down Your Mortgage Faster

You can also reduce the number of years it takes to pay off your mortgage and enjoy substantial savings by:

Enjoy Other Flexible Payment Options

If you ever need to free up cash for another purpose, you can also skip a mortgage payment once every 12 months:

You are on: Rates and Terms

Special Offers

The RBC Investment Property Mortgage is available with a variety of rates and terms. Below are several of our current special offers:

Fixed Rate Closed Term Mortgage Rates (1) :

Required Documentation

The following documentation is required to complete your mortgage application:

  • Your most recent Notice of Assessment
  • Your most recent T776
  • Current lease agreements and/or opinion of market rent

Additional documentation may be required based on the structure of the application. Please contact us at 1-800-769-2511 for a complete list of other documents that may be required.

Down Payment

Investment properties with one to four units are not eligible for high ratio default insurance a down payment of at least 20% is required.

Learn More

1. Interest rate is an annual rate and is compounded half-yearly, not in advance. Interest rates are subject to change without notice at any time. Applicable to residential mortgages only and subject to Royal Bank of Canada lending criteria for residential properties.

2. Special Offers are discounted rates and are not the posted rates of Royal Bank of Canada. Specials Offers may be changed, withdrawn or extended at any time, without notice. For mortgages approved on or before September 30, 2015 funds must be advanced within 120 days of date of application in order to qualify for the Special Offer rate.

3. The annual percentage rate (APR) is based on a $250,000 mortgage for the applicable term assuming a processing fee of $250 (which includes fees associated with determining the value of the property). If there are no cost of borrowing charges, the APR and the interest rate will be the same.

Start Your Online Mortgage Pre-Approval

Lock your rate and know exactly how much home you can afford. Start your pre-approval online and an RBC mortgage specialist will be in touch within 24 hours to help you complete your pre-approval application.


Mortgage Down Payment Options – RBC Royal Bank #mortgage #calculator.com


#0 down mortgage

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Mortgage Down Payment Options

From a low down payment mortgage to using your Registered Retirement Savings Plan (RRSP) as a source of funds, buying a home has never been easier.

The down payment is that portion of the purchase price you furnish yourself. The balance is obtained from a financial institution in the form of a mortgage. The amount of the down payment (which represents your financial stake, or the equity in your new home) should be determined well before you start house hunting.

Conventional Mortgage

A conventional mortgage requires a down payment of at least 20% and is offered on either a fixed or variable interest rate basis. Conventional mortgages have the lowest carrying costs because they do not have to be insured against default.

Low Down Payment Insured Mortgage

Most lenders now offer insured mortgages for both new and resale homes with lower down payment requirements than conventional mortgages-as low as 5%. Low down payment mortgages must be insured to cover potential default of payment; as a result, their carrying costs are higher than a conventional mortgage because they include the insurance premium.

Mortgage default insurance is a one time premium paid when your purchase closes. You can pay the premium or add it to the principal amount of your mortgage. Talk to your mortgage specialist to find out which option is best for you;

Using Your RRSP as a Down Payment

Under the federal government’s Home Buyer’s Plan, first-time home buyers are eligible to use up to $25,000 in RRSP savings per person ($50,000 for couples) for a down payment on a home. The withdrawal is not taxable as long as you repay it within a 15-year period. To qualify, the RRSP funds you plan to use must have been in your RRSP for at least 90 days.

Even if you already have enough money for your down payment, it may make sense to access your RRSP savings through the Home Buyers’ Plan.

For example, if you have already saved $25,000 for a down payment-and assuming you still had enough “contribution room” in your RRSP for a contribution of that amount, you could move your savings into an RRSP at least 90 days before your closing date. Then, simply withdraw the money through the Home Buyers’ Plan.

The advantage? Your $25,000 RRSP contribution will count as a tax deduction this year. Use any tax refund you receive to repay the RRSP or other expenses related to buying your home.

However, the money you borrow from your RRSP won’t earn the tax-sheltered returns it would if left in your account. Ask your financial planner if this strategy makes sense for you.

Saving Money with a Larger Down Payment

It’s to your advantage to put down as much money as you can because interest costs for a smaller mortgage are lower-adding up to significant savings over the long run.

The table below shows how an average homeowner can save more than $25,000 in interest costs on a $100,000 home by making a down payment of 25% versus the minimum down payment of 5%.

Down Payment Amount


RBC Self Employed Mortgage – RBC Royal Bank #mortgage #application


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RBC Self Employed Mortgage

Required Documentation

Your most recent Notice of Assessment and documentation to confirm of your self-employed status may be sufficient to support your application; however, additional documentation may be required, based on the structure of the application. Contact us for a complete list of other documents that can be used.

Learn More

1. Interest rate is an annual rate and is compounded half-yearly, not in advance. Interest rates are subject to change without notice at any time. Applicable to residential mortgages only and subject to Royal Bank of Canada lending criteria for residential properties.

2. Special Offers are discounted rates and are not the posted rates of Royal Bank of Canada. Specials Offers may be changed, withdrawn or extended at any time, without notice. For mortgages approved on or before October 31, 2016 funds must be advanced within 120 days of date of application in order to qualify for the Special Offer rate.

3. The annual percentage rate (APR) is based on a $ 250,000 mortgage for the applicable term assuming a processing fee of $250 (which includes fees associated with determining the value of the property). If there are no cost of borrowing charges, the APR and the interest rate will be the same.

Start Your Online Mortgage Pre-Approval

Lock your rate and know exactly how much home you can afford. Start your pre-approval online and an RBC mortgage specialist will be in touch within 24 hours to help you complete your pre-approval application.


Mortgages – Home Equity and Mortgage Loans – RBC Royal Bank #calculator #for #mortgage


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Mortgages

Renewing your RBC Mortgage?

Whether you are renewing now or in the future, give us a call at 1-800-769-2511. 24 hours a day, 7 days a week. We can help you tailor a mortgage solution based on your financial needs, and offer advice on the options available to you at renewal time, such as:

Calculate your Mortgage Payments

Are you on the right mortgage term and payment schedule to meet your goals? Compare different mortgage payment solutions and scenarios.

Move your Mortgage to RBC Royal Bank

We offer more than just great rates. We offer the advice you need to choose a mortgage that fits with your financial goals.

Applicable to residential mortgages only and subject to Royal Bank of Canada lending criteria for residential properties. Some conditions apply.

Renewal Rate Guarantee

Sign and return your renewal forms and if the interest rate changes before your actual mortgage renewal date, you’ll automatically receive the lower rate for the term you chose.

Renew your mortgage today

You are on: Make my mortgage payments affordable?

By choosing a longer amortization for your mortgage, it will help you lower your monthly payment.

However, longer amortizations increase the total amount of interest you pay over the life of your mortgage. Total interest costs are significantly increased beyond 25 years.

You are on: Take my mortgage with me when I move?

Our mortgage portability option lets you transfer the terms and conditions of your current RBC Royal Bank mortgage to your new home, subject to a credit review and property appraisal when you make the new home purchase.

You may also qualify to Add-On to the mortgage if you require a larger mortgage amount.

You are on: Find the right financing option for my home improvement project?

If you own a home, using the equity you have built up may be one of the most cost-effective ways to finance a home improvement project. And in many cases, home equity products can offer you a lower interest rate as compared to other types of loans.

Find out more about home equity loans and secured lines of credit in our guide to Renovating Your Home .

You are on: Manage my mortgage in Online Banking?

With RBC Online Banking, you can:

  • Watch your mortgage decrease every time you make a payment (Payments are processed overnight)
  • Arrange a Skip-A-Payment or Double-Up mortgage payments
  • Pay property taxes and utility bills
  • Schedule regular payments to occur automatically
  • View your HomeProtector life, critical illness and disability insurance coverage

Learn More


Disability Insurance – RBC Insurance #disability #insurance, #disability #income #protection #insurance, #rbc #insurance, #royal #bank


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Disability Insurance

You may apply for disability insurance if you:

  • Meet the age requirements of the policy:
    • Age 18-60 for The Professional Series . The Foundation Series™ and Bridge Series policies
    • Age 18-64 for The Fundamental™ Series policy (illness coverage) and age 18-69 (injury coverage)
    • Age 18-55 for RBC Simplified ® Disability Insurance
    • Age 18-55 for the Retirement Protector policy
  • Are a Canadian citizen or permanent resident/landed immigrant

Typically, yes. When purchasing disability insurance, medical questions and exams are usually required, the extent of which depends on your age and the amount of insurance you request when you apply.

If you apply for RBC Simplified ® Disability Insurance, there are just a few basic pre-qualifying questions and no medical exam.

We encourage you to apply for coverage even if you aren’t sure you can qualify. If you are not eligible for a traditional disability plan, you may be eligible to apply for RBC Simplified ® Disability Insurance, which only requires answers to a few basic pre-qualifying questions.

Yes, he or she may apply for coverage under his or her own policy, provided your partner meets the eligibility requirements of the policy.

Coverage Details

While the Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) do include disability coverage, there are considerable limitations to the benefits provided by these plans. For example, for the Canada Pension Plan:

  • For 2013, the maximum amount you can receive from the disability benefit each month is $1,212.90 (5). This amount is considerably less than what you could receive through one of our disability insurance plans. For example, through The Professional Series ® policy, some individuals can qualify for as much as $25,000 per month, depending on their occupation, pre-disability income and other factors.
  • To qualify for the CPP disability benefit, you must sustain a severe and prolonged mental or physical disability and be unable to work at any occupation (5). With a disability insurance plan from RBC Insurance, you may be able to receive benefits under a less stringent definition of disability.

For more information:

This answer depends on your employer-sponsored disability plan, so examine it carefully and know what it covers. Typically, an employer-sponsored plan will end when your employment ends. One of the advantages of a disability insurance policy from RBC Insurance is that you can take it with you if you leave your job.

Here are some things to look at for your employer-sponsored plan:

  • How much of your income will your employer-sponsored disability plan replace? Will you be caught short?
  • Are you covered for illness as well as injury?
  • Are you only covered for accidents on the job, or are you protected 24/7?
  • Does your plan provide valuable return to work services?
  • How does your plan define a disability?

Once you know the answers to these questions, you may find that you need additional coverage.

The probability of incurring a 90-day or longer total disability prior to age 65 (1) may surprise you:

What’s more, when a disability lasts longer than 90 days, the length of that disability averages between 2.1 and 3.2 years for those age 55 and younger (2) .

No one can predict an injury or illness, yet after one arises you may have difficulty obtaining disability insurance. The best time to purchase disability insurance is while you are healthy.

Your disability benefits should allow you and your family to continue to live comfortably, as though you were still able to work full-time. First, total up your monthly “fixed living expenses” such as food, housing, transportation, utilities and other miscellaneous expenses. Subtract from that amount any income you’ll receive from other sources during a disability—for example, from investments you may have, property you rent out and other disability insurance coverage. The amount by which your expenses exceed income during disability is the amount you need. Bear in mind, though, that any disability insurance plan will only replace a portion of your income.

Disability insurance isn’t a “one size fits all” purchase. Different people have unique circumstances, needs and budgets. That’s why we offer such a wide range of policies with a variety of options. Compare our plans side-by-side:

You must meet the plan requirements for eligibility, including having the policy in force and satisfying the elimination period.

Definitions of disability can vary from plan to plan; your policy will contain complete information about eligibility, limitations and exclusions.

The elimination period is the number of days between the onset of a disability and the day you begin receiving benefits. Most of our plans offer you a choice of elimination periods ranging from 30 days to 730 days. RBC Simplified ® Disability Insurance has a 90-day elimination period.

Yes. Typically, benefits are not paid for disabilities due to* (the following is a summary of exclusions only):

  • An act or accident of war
  • Normal pregnancy or childbirth (complications of pregnancy or childbirth are covered)

In addition, the policies won’t pay a benefit for any period during which you are incarcerated.

*The information above is intended as a summary only. Other limitations may apply depending on the policy. Your policy will contain complete details on terms and conditions, including benefits and exclusions.

Premiums

You will pay premiums through the term of your policy.

This answer depends on the policy. Some plans offer a choice of guaranteed level premiums for the life of the contract and step rate premiums (for age 35 and under), which allow you to pay less while you’re getting your business or career off the ground. With other policies, RBC Insurance does reserve the right to increase premiums. However, we cannot change your premiums unless we do so for an entire group of policyholders sharing similar characteristics.

A Waiver of Premium benefit is included in every one of our disability insurance plans at no extra cost. In most policies, this provision takes effect after 90 days of disability and any premiums you paid during the 90 days are refunded back to you.

Claims

Our goal is to make the claims process as easy as possible. Just call 1-877-519-9501. An RBC Insurance representative will send you a claim form and guide you through the claims process.

Take the Next Step – Contact Us Today

Your most valuable asset is your ability to earn an income. Disability insurance can help protect the lifestyle your income affords—and provide valuable services to help you return to work. Call today to apply or to discuss your needs with a licensed RBC Insurance advisor.

1) 1985 Commissioners Individual Disability Table A

2) 1985 Commissioners Individual Disability Table A: If the disability lasts longer than 90 days, the average length will be: 2.1 years for age 25, 2.5 years for age 30, 2.8 years for age 35, 3.1 years for age 40, 3.2 years for age 45, 3.1 years for age 50, 2.6 years for age 55, 1.6 years for age 60.

3) Certain conditions must be met for benefits to be payable. Your policy will provide complete details.

4) Provided you satisfy the pre-qualifying questions.

6) If you are self-employed, income means your share (proportionate to your ownership interest) of the income or loss of the business net of all business expenses except income taxes. If you are an incorporated business owner, you may also include any wages, salary, fees or commissions which the incorporated business paid to you as an employee of the business.

Get a Quote

Need basic disability insurance? Want to top-up your group coverage? Get a quick quote for RBC Simplified ® Disability Insurance!


Mortgage Down Payment Options – RBC Royal Bank #free #mortgage #payment #calculator


#0 down mortgage

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Mortgage Down Payment Options

From a low down payment mortgage to using your Registered Retirement Savings Plan (RRSP) as a source of funds, buying a home has never been easier.

The down payment is that portion of the purchase price you furnish yourself. The balance is obtained from a financial institution in the form of a mortgage. The amount of the down payment (which represents your financial stake, or the equity in your new home) should be determined well before you start house hunting.

Conventional Mortgage

A conventional mortgage requires a down payment of at least 20% and is offered on either a fixed or variable interest rate basis. Conventional mortgages have the lowest carrying costs because they do not have to be insured against default.

Low Down Payment Insured Mortgage

Most lenders now offer insured mortgages for both new and resale homes with lower down payment requirements than conventional mortgages-as low as 5%. Low down payment mortgages must be insured to cover potential default of payment; as a result, their carrying costs are higher than a conventional mortgage because they include the insurance premium.

Mortgage default insurance is a one time premium paid when your purchase closes. You can pay the premium or add it to the principal amount of your mortgage. Talk to your mortgage specialist to find out which option is best for you;

Using Your RRSP as a Down Payment

Under the federal government’s Home Buyer’s Plan, first-time home buyers are eligible to use up to $25,000 in RRSP savings per person ($50,000 for couples) for a down payment on a home. The withdrawal is not taxable as long as you repay it within a 15-year period. To qualify, the RRSP funds you plan to use must have been in your RRSP for at least 90 days.

Even if you already have enough money for your down payment, it may make sense to access your RRSP savings through the Home Buyers’ Plan.

For example, if you have already saved $25,000 for a down payment-and assuming you still had enough “contribution room” in your RRSP for a contribution of that amount, you could move your savings into an RRSP at least 90 days before your closing date. Then, simply withdraw the money through the Home Buyers’ Plan.

The advantage? Your $25,000 RRSP contribution will count as a tax deduction this year. Use any tax refund you receive to repay the RRSP or other expenses related to buying your home.

However, the money you borrow from your RRSP won’t earn the tax-sheltered returns it would if left in your account. Ask your financial planner if this strategy makes sense for you.

Saving Money with a Larger Down Payment

It’s to your advantage to put down as much money as you can because interest costs for a smaller mortgage are lower-adding up to significant savings over the long run.

The table below shows how an average homeowner can save more than $25,000 in interest costs on a $100,000 home by making a down payment of 25% versus the minimum down payment of 5%.

Down Payment Amount