A mortgage is a loan generally used to buy property. How much you pay depends on how much you borrow which is called the principle. The loan's interest rate and how long you take to pay it back is called the amortization period.
What type of mortgage is best for you?
Fixed Mortgage: means you are locked into an interest rate for a fixed amount of time, you will pay a specific amount during this term even if the interest rates increase during this term your payments will stay the same.
Variable Mortgage: means your interest rates changes with the economy. So if the interest rates go up you will have a higher payment, if the interest rates go down you will have a lower payment.
Conventional Mortgage: means you must have a minimum 20% down payment for the property you wish to purchase. You will not be required to pay default insurance if you have a conventional mortgage.
Closed Mortgages: means the mortgage can not be paid off earlier without paying a prepayment penalty fee.
Open Mortgages: means a mortgage that can be paid off anytime during the term, without having a prepayment penalty charge. However the interest rate for an open mortgage may be higher then a closed mortgage.
What Mortgage Features Are Best For You?
Portable Mortgages: is if you sell your existing home you can transfer your mortgage to your new home and keep the same interest rate. You may be able to avoid prepayment penalties by porting your mortgage.
Prepayment Privileges: is when you can make lump sum prepayments or increase your monthly payments without having to pay a penalty charge. This can help you pay off your mortgage quicker and save on interest charges.
How Often Can You Make Your Payments?
You can make payments in a number of ways which include monthly, bi-weekly or weekly. If you choose the accelerated bi-weekly or weekly payment plans you will pay off your mortgage quicker with less interest fees.
What Type Of Mortgage Charges Might You Have To Pay?
You may have to pay charges if you prepay large portions of your mortgage early or if you break your mortgage due to unforeseen life changes like divorce, death, job relocation.
It is your right to understand how lenders calculate prepayment charges. Read your mortgage contract carefully to ensure you understand how the charges are calculated.
How Much Do You Need For A Down Payment?
A down payment is a portion of the property price that is not financed. You will need a minimum down payment of 5% of the purchase price of the home. For example if you are buying a $200,000 home your will need $10,000 down payment. If your down payment is less then 20% of the home's purchase price you will need default insurance.
What Is Mortgage Default Insurance?
If you are buying a home with less then 20% down payment you are required to get default insurance. This insurance protects the mortgage lender in case you are not able to make your mortgage payments. It does not protect you.
Mortgage default insurance generally adds 0.6%-3.85% to the cost of the mortgage depending on the amount being borrowed. Mortgage default insurance allows you to purchase a home with a minimum of 5% down (10% for multi-unit family dwellings) with interest rates comparable to those of a conventional mortgage.
Major providers of mortgage default insurance include CMHC (Canada Mortgage and Housing Corporation), Genworth Canada, and Canada Guarantee Mortgage Insurance Company.
(sourced from CREA)
Where Is The Best Place To Get A Mortgage?
There are many options when it comes to getting a mortgage to buy your home. They include banks, and mortgage brokers. Each option has different benefits for choosing them as your mortgage provider.
A mortgage broker that I send many of my clients to is Centum Mortgage located at 111 St. Peters Road. Kim Reddin and Kim Ogley are highly trained mortgage brokers who work hard to get you into the home of your dreams. If you are interested in contacting them you can call their office at 902-626-3066.
Stay tuned for my next installment of the Homebuyer's Guide-Government Programs
Comment below on your mortgage shopping experiences.
Century 21 Colonial Realty Inc.