Mortgage Articles

Finding the Perfect Home and Mortgage

Many people consider buying a home one of the most important decisions they make in their life but actually, buying a home is relatively easy. There are several hundred good books on the library shelves on the topic of home buying, how to select a home, what to look for and so on.

Further, there are numerous professional Realtor® Salespeople, Associate Brokers and Brokers across Canada that belong to various local, Provincial and national real estate associations. The Canadian Real Estate Association (CREA) represents real estate board member Realtor®s from across Canada.

They are real estate ''experts'' who can be called upon for mountains of information on the topics of home prices, trends and statistics as they relate to the art of buying a home.

But looking at a home purchase as being important is only a small part of the real reason why buying a home is such a monumental decision. The fact is, buying a home is a big decision because we go so deeply in debt to finance the house of our dreams!

Canadians have now borrowed several times their annual Gross National Product (the value of all goods and services produced in the country in a given year) and many more times the Gross National Income (the total wages and salaries paid to Canadians in a given year) in the form of mortgages.

The consequences of non-payment of this debt can create a great deal of personal and financial problems.

Therefore, the debt incurred to purchase a home and our level of comfort with incurring that amount of debt that is the really important factor in buying a home. Debt deserves our understanding and respect.

Older versus newer homes

When considering the purchase of a home, one of the questions that may arise is whether to look at new homes or older (resale) homes. There are many considerations that go into this decision, including each person's preference and opinion of both. However, beyond this is the matter of the various mortgage financing options available today.

One advantage to purchasing a new home is the New Home Warranty Program, which provides some measure of security. Secondly, building a new home will often keep any unanticipated drastic expenses to a minimum, making the purchase of the house and repayment of the mortgage more predictable.

On the other hand, a resale home is more likely to be located in an already established neighborhood, and offer many extras, such as existing landscaping, fences, extensive decorating, and even appliances in many cases. And if well maintained, or extensively renovated, can provide the same level of security. Plus it will probably be more conveniently located and provide easier access to schools and other local amenities, such as parks, hospitals, public transit and entertainment venues, just to mention a few.

Mortgage Tips

If the payments are about the same, you will be further ahead financially by making payments on a mortgaged home rather than paying rent on a house or apartment.
Paying down your mortgage is like earning the interest that you are paying on it, tax free.
Making no attempt to repay a mortgage is the worst thing that a borrower can do.
The size of mortgage that you qualify for will be greatly affected by the level of your debt at the time of your mortgage application.
When renewing your loan or selling your house, look for options and features that afford you with the maximum amount of flexibility.
The faster you pay down your mortgage, the sooner you will have extra capital for investments.
Look for a mortgage that offers the best prepayment privileges.
Increasing the frequency of mortgage payments will reduce overall interest costs.
As a general rule, you should not spend more than 30 per cent of you gross combined family income on mortgage payments.
When purchasing a home, always remember that the price is negotiable and that you can make a counter offer.
Remember that flexibility allows a homeowner to exploit their cash flow and pay down the principal faster. The flexibility is negotiated before you sign on the dotted line, not after.
Shop around for the lowest possible interest rate when purchasing a mortgage or any other loan.
Beware of the mortgage pre-approval trap as it might have you paying too much for your dream home. Just because you can borrow a large sum of money doesn't mean that you should necessarily spend that much.
Remember that if you are changing mortgage lenders, the same qualifying factors may apply. You may be facing both legal and appraisal fees so investigate all associated costs before you act.
Shop around for the best deal on a mortgage before getting the pre-approval in writing. You can reduce the amount of interest paid over the life of your mortgage by opting for a shorter amortization period.
If you are guaranteed an appreciation rate that is a few points above inflation and the monthly costs of renting are the same as buying, it is a good time to purchase a home.
Typically, lenders are looking for you to invest 25 per cent of the appraised value as a down payment towards a home. They will normally advance the balance of 75 per cent.
If interest rates have fallen when the time comes to refinance your mortgage, continue the same monthly payment schedule to pay off the principal sooner than anticipated.
If your monthly mortgage payment is an odd amount, ask the lender to round it up. For example, paying an additional $21.92 per month on a $778.08 monthly mortgage increasing the payment to $800 may not seem like a lot but it amounts to several thousand dollars over the life of the loan.
Making weekly or bi-monthly payments on your mortgage is an effective way of paying off the debt quickly.
When the interest rates of most lenders are at the same level, the only way for them to compete is through the terms and conditions of the mortgage.
Visit the bookstore to find publications on home ownership and obtaining a mortgage.