Welcome to the October issue of Your Monthly Home & Mortgage News offering tips to keep you in the know! Please feel free to contact me with questions or feedback regarding this issue.
Thanks again for your continued support and referrals.
What is your mortgage type?
CONTRIBUTOR | Milka Lukacevic | Mortgage Professional
Purchasing a new home can be a stressful experience. On top of that, there are enough mortgage options in the marketplace to make your head spin. When it comes time, how will you know which one is right for you? Here are the most common mortgage options that you will come across, and why they may (or may not) be right for you.
Conventional Mortgage As long as you have a 20 percent down payment, you will be able to apply for a conventional mortgage. These have a low loan-to-value ratio, meaning that the amount of the loan is low, relative to the value of the property.
High-Ratio Mortgages This is a mortgage option where the borrower is contributing a down payment of less than 20 percent. These mortgages must have Mortgage Default Insurance through the Canada Mortgage and Housing Corporation (CMHC).
Open Mortgage An open mortgage allows you the flexibility to make a lump sum prepayment or accelerated payments at any time before the end of the amortization period, without penalty. Although this option has greater flexibility, it tends to have a slightly higher interest rate.
Variable Rate Mortgage These mortgages are initially set up like a standard loan, based on the current interest rate. The mortgage is reviewed at set intervals and if the prime rate has changed, either changing the size of the payment or the length of the amortization period, the lender will then alter the repayment plan.
Capped Rate Mortgage This mortgage option offers a variable rate that is capped by the lending institution. Rates may fluctuate in the market, but the lender will offer a guarantee that you will never pay an interest rate above their cap.
Fixed Rate Mortgage A fixed rate mortgage features an interest rate that is fixed for a set period of time. It's easier to manage a budget as your payments won’t change during the term. Not only does this bring peace of mind, but you will also benefit from a lower rate than that of a variable rate mortgage.
Convertible Mortgage With this option, you can move from a variable to a fixed rate, or a shorter to a longer term, at any time without a penalty. This is a good option to consider if you want to stick with a variable rate for the moment, but expect rates to rise in the near future.
Reverse Mortgage A reverse mortgage provides you with the opportunity to transfer the equity in your home into cash value, if you have a need to do so. You will not have to worry about selling or vacating your home in the process. It has been touted as a good option for home owners who are nearing retirement and who have considerable equity in their home.
So, as you can see, there are many mortgage options available to you. If you’re feeling overwhelmed by all of this information, set up an appointment to discuss all of these options and more with your mortgage professional.
Infographic by Alexis Kornblum
Are you financially ready to own a home?
Source | CMHC | Home Buying Guide
Are you financially ready to own a home? Look into these five calculations and questions before you meet with your broker.
Compare how much you currently spend on expenses and debt payments with the amount you have saved or invested.
How much can you afford to spend on housing each month without risking your financial health?
How much do you need to save to pay for the upfront costs of buying a home? Upfront costs include:
the down payment
home inspection and appraisal fees
land registration fees
prepaid property taxes or utility bills (the buyer reimburses the seller or builder)
legal or notary fees
potential repairs or renovations
GST/HST/QST on a newly built house or mortgage loan insurance
How much would you be spending each month with home ownership expenses added to your current financial situation?
What is your credit score? Can you demonstrate your ability to consistently pay bills and debts?
When qualifying for a mortgage there are two affordability rules that determine how much you can spend on housing without risking your financial situation.As a new homeowner:
your monthly housing costs should be at or under 32% of your gross monthly income
your monthly debt load (including your mortgage) should be at or under 40% of your gross monthly income
If you don't qualify for a mortgage here are a few steps to help you towards home ownership.
meet with a credit counselor to improve your financial situation
pay off some loans or other debts
save for a larger down payment
lower your home price range
adjust your budget to spend less or save more
Contact your mortgage professional to find out more about home ownership.
Please don't hesitate to contact me at any time...I'm always available to take your call! Whether your looking to purchase or refinance, I can help you find the right solution. One application, One credit check and access to over 30 of Canada's top banks and credit unions!