Getting a Mortgage
Getting your mortgage pre-approved before you go house hunting will
help to ensure you don't fall in love with a house you simply can't
afford.
What is your Credit Score?
Before applying for a mortgage buyers need to first determine their credit score. Scores range from 300 to 900 and any borrower will need a minimum of 600 to qualify for a mortgage, if putting less than 20% down. Scores of 700 or more will get the best rates. You want to get your credit score 6-12 months in advance to make sure nothing is wrong and also try not to find yourself unemployed while going through the process, you want to your income to look good and solid to the bank.
Down payment time
A mortgage in Canada requires a minimum of 5% down, however if you pay 20% upfront it is a big cost cutting move! By doing so you avoid paying Canada Mortgage and Housing Corporation (CMHC) insurance premiums that would otherwise add thousands of dollars to your mortgage. Don't fret if you can't afford putting 20% down even 10-15% down can still reap financial savings.
Size does matter
Buying a house that is within your budget will get you into the market sooner but it will also help you from having to pay mortgage default insurance premiums.It means your closer to having 20% down.
What is my rate?
It pays to shop around, credit unions and non-direct lenders will offer a discount and even if it is just a fraction of a percentage point, it will save you money on interest payments compared to a larger lender.
What are my terms?
The terms of your contract are really just as important as a securing that low interest rate. Make sure before you sign on the dotted line that you have a clear understanding of what would happen if you sold your home or move lenders before your mortgage is up.
Fixed vs Variable
Fixed rate mortgages are appealing because you will know what your mortgage payment is for a determined length of time, and as well will know exactly when it will be paid in full. An open fixed rate mortgage allows you to prepay in full or in part at any time without a prepayment charge. A closed fixed rate mortgage is when your interest rate and payment are fixed for the rate you choose. This should appeal to budget conscious buyers as your rate will not rise during the term.
A variable rate mortgage is when the interest rate is adjusted periodically to reflect market conditions, in an open variable rate mortgage you can put down as much as you like or pay it off at any time. In a closed variable rate mortgage payments are generally fixed for the term as well they typically have limited prepayment options.
Amortization
Amortization is paying off the debt with a fixed repayment schedule in regular installments over a period of time. If you go with a longer amortization but set your payments higher with prepayment privleges then you could be paying off a 20 year mortgage in 10 years. Get the right payment schedule for you, payment schedules can make a big difference and payments can be made every month, twice a month, every two weeks or each week. Weekly or bi-weekly will accelerate your payments by an extra 2 weeks a year.
*NOT INTENDED TO SOLICIT BUYERS OR SELLERS CURRENTLY UNDER CONTRACT*
What is your Credit Score?
Before applying for a mortgage buyers need to first determine their credit score. Scores range from 300 to 900 and any borrower will need a minimum of 600 to qualify for a mortgage, if putting less than 20% down. Scores of 700 or more will get the best rates. You want to get your credit score 6-12 months in advance to make sure nothing is wrong and also try not to find yourself unemployed while going through the process, you want to your income to look good and solid to the bank.
Down payment time
A mortgage in Canada requires a minimum of 5% down, however if you pay 20% upfront it is a big cost cutting move! By doing so you avoid paying Canada Mortgage and Housing Corporation (CMHC) insurance premiums that would otherwise add thousands of dollars to your mortgage. Don't fret if you can't afford putting 20% down even 10-15% down can still reap financial savings.
Size does matter
Buying a house that is within your budget will get you into the market sooner but it will also help you from having to pay mortgage default insurance premiums.It means your closer to having 20% down.
What is my rate?
It pays to shop around, credit unions and non-direct lenders will offer a discount and even if it is just a fraction of a percentage point, it will save you money on interest payments compared to a larger lender.
What are my terms?
The terms of your contract are really just as important as a securing that low interest rate. Make sure before you sign on the dotted line that you have a clear understanding of what would happen if you sold your home or move lenders before your mortgage is up.
Fixed vs Variable
Fixed rate mortgages are appealing because you will know what your mortgage payment is for a determined length of time, and as well will know exactly when it will be paid in full. An open fixed rate mortgage allows you to prepay in full or in part at any time without a prepayment charge. A closed fixed rate mortgage is when your interest rate and payment are fixed for the rate you choose. This should appeal to budget conscious buyers as your rate will not rise during the term.
A variable rate mortgage is when the interest rate is adjusted periodically to reflect market conditions, in an open variable rate mortgage you can put down as much as you like or pay it off at any time. In a closed variable rate mortgage payments are generally fixed for the term as well they typically have limited prepayment options.
Amortization
Amortization is paying off the debt with a fixed repayment schedule in regular installments over a period of time. If you go with a longer amortization but set your payments higher with prepayment privleges then you could be paying off a 20 year mortgage in 10 years. Get the right payment schedule for you, payment schedules can make a big difference and payments can be made every month, twice a month, every two weeks or each week. Weekly or bi-weekly will accelerate your payments by an extra 2 weeks a year.
*NOT INTENDED TO SOLICIT BUYERS OR SELLERS CURRENTLY UNDER CONTRACT*
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