Taking a mortgage loan for the first time is a huge responsibility, and it is extremely important to pick the most favourable one. That task might be a little easier if you prepare yourself with these handy tips.
You don’t have to be a financial genius to choose your first time mortgage wisely. What you need to do is make a plan and stick to it throughout the process while systematically examining the options at your disposal. Here are some rules of thumb to keep in mind while you are weighing many different options:
1. Find out what affects the loan approval
What good is applying for a mortgage if your application is going to be rejected? It is perfectly logical to chase only those financial products that you can realistically obtain. In order to estimate your chances, you need to find out which factors are taken into account when the approval decision is made. Search for this info on lender’s website, or ask directly if you can’t find the conditions online.
2. Decide between fixed rate and variable rate products
Some mortgages are designed to be paid back with a fixed rate, while others have a variable interest rate that follows an index determined by the Bank of Canada. Those two classes of products are fundamentally different and carry different types of risks. Be aware that fixed rate mortgages can also change over time and ask your lender about all possible scenarios before signing any documents.
3. Examine various amortization periods
If you are looking to buy a home in Guelph, you should know that standard payback period in Canada is 25 years, although shorter periods may be approved by some lenders at client’s request. Such a long amortization period will certainly lower monthly payments, but some buyers would prefer to be debt free sooner. Choosing the most optimal length is one of the most important decisions you need to make during the entire process.
4. Check whether the mortgage loan is portable
Maybe you like your new home now, but in a couple of years you might be looking to upgrade. That’s why it is very convenient to have the ability to execute a mortgage renewal and obtain additional funds needed for your second house. This may sound like planning too far in advance, but you will be glad you were so farsighted once you start thinking about moving on from your first purchase.
5. Compare conditions between multiple providers
You would be surprised how much variety you can find in the Canadian mortgage loan market. Even when two providers are offering the same interest rates, there might be quite a few details that don’t match, such as pre-payment privileges or rate differentials. Since you’ll be married to the same lender for a long string of years, you want to make sure that the deal you are taking is both fair and suitable for your financial situation.