Applying for a Loan
Getting ready to make an offer on your dream home? Make sure you’ve secured a mortgage first. Doing so will show you what kind of home you can afford, so you can focus your search and avoid disappointment. It also means you can put an offer in on a property right away, which gives you a competitive edge.
There’s a lot to consider when it comes to getting a mortgage: how much you qualify for, interest rates, amortization period (15 years, 20 years, 25 years), payment plans (weekly, bi-weekly, monthly), variable or fixed mortgage…even who you get your mortgage from.
The following tips will help guide you in the right direction:
Determine the best mortgage for your lifestyle: There are a lot of loan programs out there for first-time home buyers to consider. You need to find one best suited to your financial and lifestyle needs. That includes deciding whether or not you want to go with a variable or fixed mortgage. Another important factor to consider is the amortization period. And perhaps most importantly, where do you get your mortgage?
Decide on variable or fixed: Getting a low interest rate is important, but so too is affordability. With a fixed mortgage, you have peace of mind knowing what the regular interest charges are. In this low-interest-rate environment, you might be attracted to a variable mortgage; keep in mind that your interest charges will fluctuate depending on current market conditions. In 2013, 82% of Canadian home buyers went with a fixed rate mortgage.
Short or Long? Choose: Most people want to pay off their mortgage as quickly as possible. But for some, a longer amortization period might be a better option. A short amortization period might mean higher monthly payments; it also means you build up home equity quickly. A longer amortization period means smaller payments, which can free up extra money for daily use.
Shop Around: Where do you go to get your mortgage? While many homeowners turn to Canada’s big banks when it comes to looking for a mortgage, there are other options. Approximately half (48%) of first-time home buyers turn to independent brokers to help them find the best mortgage. If you’re seeking a residential mortgage, be sure to look around; doing so could save you a lot of money over the lifetime of the mortgage.
CMHC, “2014 First Time Home Buyers Survey,” November 3, 2014; www.cmhc-schl.gc.ca/en/hoficlincl/moloin/sure/fihosu/upload/FTB-InfoBrochure_WEB_EN_Oct15.pdf.