Navigating the Rocky Shores of Mortgages
Few events cause such a variety of contradictory feelings as purchasing a new home. While the pride you take in home ownership can make you want to dance and sing, getting the financing you need for that mortgage —and the dreaded signature on that dotted line — can make you want to hide under the bed.
We are here to help you deal with this most difficult part of home ownership – the mortgage approval process. Feel free to get in touch with us at any time with questions and concerns.
Initially, you will almost always need to put down some money up front. There are options available with zero down payments, options, and we are glad to talk about these with potential customers. However, you should probably expect, as a baseline, the need to put at least 5% of the total purchase price down up-front.
If you can afford putting down 20% of the price, it may be worth it, as you will not have to have the mortgage insured via the Canadian Mortgage and Housing Corporation (CMHC). Insuring the mortgage through the CMHC costs you an additional 2.5% (give or take) of the purchase. It is possible to include this additional fee in the mortgage itself, but there’s no reason to pay this enormous sum if you don’t have to.
There are other options, as well, that most people never recognize when entering into a mortgage. How quickly most people will sign the contract, too frequently without even reading it, never ceases to surprise us! Given the amount of money you are spending, and how much you are committing to, we recommend that you explore as many options as possible.
Depending on what you are comfortable with, you can also access a number of different terms for your mortgage. Do you want a variable interest rate, or would a fixed rate, with its increased security, be better for your family? This is an important factor with long-lasting repercussions; fortunately, we can use our expertise and experience to help you make the correct decision for yourself and your family.
The First Rule of Starting a Mortgage…
One basic rule of thumb that we can offer is to should always put down as much as you can. While it may mean short-term sacrifice, it always benefits you in the long-term by ensuring that you save money and pay off your mortgage as quickly as possible.
The second simple piece of advice we can give you when looking for a mortgage is to consider the timing. Shopping around at different places is a good idea. Brokers and banks can both find you good rates, and most will give you a time period where the rate is guaranteed. If you’re time-conscious, this lets shop around with knowledge of how much you can afford to spend.
Depreciation of the value of a property’s is another important factor. While its value will not depreciate anywhere near as much as a car’s, a home’s value will depreciate nonetheless. This is doubly true when purchasing a new house. Most people combat this depreciation by performing various home improvement projects over the period of their occupancy – not only does this increase the home’s value, it also improves your quality of life!
When looking to get a new mortgage, make sure to keep these tips in mind. As your REALTOR®, we are here to help you navigate the rocks and shoals that are modern mortgages.