What You Need To Know About Mortgages Before Buying Your Home

July 27, 2015

Your Realtor

First of all find yourself a Realtor. Your Realtor will be working to find you the kind of home you are looking for, in the area you want, at a price within your budget. The Realtor will be able to give you an idea of the amenities that a particular neighbourhood has to offer such as schools, recreation, and other benefits. Using their MLS database your realtor will be able to compare the property you are looking at to other properties that have sold in the same area, giving you a better idea of that neighbourhoods housing market. Another huge benefit that your Realtor can assist you with is finding out if you could be eligible for any government home owner incentive programs. A Realtor with a stong knowledge of mortgages can help you find a lender and work with you to see if a particular mortgage is a good fit. When buying a home the paper work can be complicated, your realtor will be familiar with the various contracts and will be able to negotiate various contract terms such as the possesion date, what is included with the home and if any repairs need to be done. You will certainly require the expertise of other professionals such as lawyers, notary of the public, home appraisers and inspectors; Your Real Estate Agent will be able to help you find these qualified industry professionals and plan for closing costs and various expenses.

Your Mortgage

 

Before you begin your search for a home preparing to get a mortgage will be a significant step.

It is recommended that you get a copy of your credit report before you apply for a mortgage, just to make sure that there are no surprises or errors. Having a good credit rating will be key to securing a mortgage. The lender will want to be certain that you haven’t had any issues paying off debts in the past. For more information on how to get a copy of your credit report and how to improve your credit rating visit the Financial Consumer Agency of Canada (FCAC) website at: It Pays To Know

The mortgage lender will use a couple of calculations to assess your financial eligibility for a mortgage. Two of these calculations are your Gross Debt Service (GDS) ratio and the other your Total Debt Service (TDS) ratio. To calculate your GDS add up monthly mortgage payment, taxes, heat, and if you are purchasing a condo half of the maintenance cost. Your GDS ratio should be roughly no more than a third of your gross monthly income. The TDS ratio is the cost to cover your monthly home costs, plus all other debt you may have. This number should be less than 40% of your gross monthly income.

Ideally you will want to get pre-approved for you mortgage. This will give you a clear idea of how much you can afford to spend on a property, allowing you to focus your real estate search.

You have several options when it comes to types of mortgages.

Fixed rate mortgages:

 

With a fixed rate mortgage the interest rate is locked in for a certain amount of time. The benefit to this is that if interest rates go up, your payments will remain the same.

Variable rate mortgages:

 

With a variable rate mortgage your payments will change as interest rate either go up or down.

Closed mortgages:

 

With a closed mortgage you cannot pay it off early, unless you pay a penalty.

Open mortgages:

 

Open mortgages can be paid off at anytime with no penalty. Often the interest rate is higher for an open mortgage than an identical closed mortgage.

Penticton Mortgage Broker & Realtor

Find and compare Penticton mortgage rates today…

If you have any questions about these different types of mortgages give Scott Bowland a call at 1-888-778-7772.  He will be more than happy to explain the options in detail with you.

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