Mortgages 101: Where do I even start?
Taking the leap from renting to buying can be intimidating. Questions can pile up and figuring out where to start can be daunting.
We want to make the process as easy as possible, so we’ve laid out answers to some important questions to get you started.
What is a mortgage?
A mortgage refers to when a bank or creditor lends you money at interest in exchange for ownership of a property. There are different types of mortgages:
Open mortgage: You can repay an open mortgage as quickly as you see fit. Open mortgages have no prepayment restrictions and tend to be available for short terms (typically five years or less). So, if you’re planning on moving in the near future, this might be a good option for you.
Closed mortgage: More structured than open mortgages. A closed mortgage cannot be paid in full without incurring a penalty. However, most lenders will allow you to make significant prepayments each year during your term and allow you to refinance in most cases. If your lender is offering a closed mortgage without these options, just ensure you are planning on staying in the same place for your entire closed term.
Variable Mortgage: Your regular payments remain constant; however, your interest rate may change based on market conditions. If you feel comfortable with a little more uncertainty towards what your mortgage payments may be, for the chance to pay less when the economy fluctuates in your favour, you may find a variable-rate mortgage appealing.
Fixed Mortgage: Your interest rate remains unchanged for the duration of the term. Fixed-rate mortgages cannot be refinanced or re-negotiated without incurring penalty. If you prefer financial consistency, you may find yourself more comfortable with a fixed-rate mortgage.
How do I apply for a mortgage?
You will need to submit a mortgage application and meet with an expert.
One of the first steps in the home-buying process is meeting with a mortgage broker/agent. During a consultation, your broker/agent will need to find out as much as possible about your circumstances and goals. They will be able to answer all your questions about home loans, home-buying, different types of mortgages, investment properties, pre-approval and more. They’ll compare rates from lenders to find a mortgage that’s right for you.
What do I need to apply for a mortgage?
Check out our guide to an easier mortgage approval here.
You can expect personal questions and should have answers on your debt, loans, and financials, employment and income, and family and children. It is crucial to be transparent and have proof of your statements.
It is also important to get pre-approved for your mortgage, which confirms the amount you qualify to borrow and protects you from rate increases for up to 120 days. Not only will you know your borrowing capacity, you’ll be able to plan your monthly payments, and get more credibility as a buyer. You’ll save time by only looking at houses that are in your budget.
How do I pay off my mortgage?
Every month you will make payments to your lender as you work to pay off the loan and own the entirety of your home.
The Government of Canada has outlined a few ways to pay off your mortgage quicker, check it out here: www.canada.ca/en/financial-consumer-agency/services/mortgages/pay-mortgage-faster.html
Still have questions, or want to learn more?
Let’s chat! Call us at 613-563-3447 or use our quick and easy contact form.
