The Truth About Mortgages!
If you are in the market for a home mortgage, you will realize that getting a mortgage is not as simple as just finding the cheapest rates. It takes a lot more, and you might be overwhelmed by the vast number of real estate market trends, mortgage rates, fees, and terms. However, do not worry too much. Spending a little time learning about mortgages can pay off when you start the home buying process. You must get the facts, tips, and expert mortgage advice from a mortgage professional before starting the mortgage process.
As a leading mortgage agent at Mortgage Architects, I want to arm you with the most accurate information available to help you understand the process. To do this, I have put together a list of facts that will help you understand the truth about mortgages.
The facts!
1. Your credit score matters
First up is your credit score. You probably know that lenders will check your creditworthiness before deciding what interest rates to offer you. However, you might not fully appreciate just how much a low credit score can keep you from being offered great interest rates. Whether your credit score is six hundred or seven hundred can lead to a big difference in your monthly payments and over the life of the mortgage. The takeaway here is that it can be well worth spending a little time increasing your score before shopping for a home.
Some ways to improve your credit score include paying bills on time and paying off a lot of debt to lower your debt-to-available-credit ratio. An easy way to boost your credit score is to keep your monthly balances on credit cards and lines of credit below 35% of the credit limit. This suggests that you have your debt under control. This can accelerate your credit score compared to someone who carries balances greater than 35% of their credit limit.
2. Enjoy massive savings by paying a little extra
Most lenders allow mortgage prepayment privileges that allow you to increase your mortgage payment within each mortgage anniversary year. For example, many lenders allow you to increase your mortgage payment by up to 20% per anniversary year. You can do this by paying an extra $100 or $200 with each payment to reduce your principal. Even just paying $100 more each month -- only $25 per week -- can lop five full years off your mortgage’s life and save you more than $30,000! Alternatively, you can make lump-sum payments throughout the anniversary year to pay down your mortgage faster.
3. Lowest rate isn’t always the best
Many people have this misconception that when it comes to a mortgage, all they have to do is find the lowest rate. This is not true at all. There is no doubt that the mortgage interest rate plays an important role in terms of calculating your mortgage payment and the overall cost of borrowing associated with paying off your mortgage. However, there is a lot more involved in determining the best mortgage solution for a client than just interest rate. Having the right mortgage is a critical factor in determining long-term savings.
Most Canadians choose a five-year fixed term mortgage as it is the most competitively priced mortgage term in the industry; however, statistically speaking, approximately six out of every ten Canadians that hold a mortgage break their mortgage. Life is full of unexpected events! For example, you could be three years into a five-year mortgage term and suddenly get the job offer of your dreams in another city or country. To make a move, you may need to sell your home and end your mortgage early.
Now imagine you:
a) Need to consolidate debt into your mortgage.
b) Want to break and renegotiate to a lower rate.
c) Have to break the loan early for some other reason, maybe because of a loss of income, divorce, inability to get a fair rate from your bank on a “port and increase” (that is where you move your mortgage to a new property and increase the loan size), or inability to qualify for a port.
In these scenarios, one popular bank would charge you an interest rate differential (IRD) penalty in the thousands of dollars to exit your existing mortgage.
The takeaway
The real estate market can prove to be quite difficult, especially if you have little knowledge of what the market is like and how the trends continue to shift. It is also natural to have questions about mortgages. Make sure you have all of them answered before making the biggest financial decision of your life. Understanding the terms of your mortgage can save you thousands of dollars. When you are ready to buy or sell a home, it is best to work with a mortgage agent and a real estate agent you can trust.
The value of working with a mortgage professional is immense. They are not limited to mortgage product offerings from one source, like a bank. They can objectively search the mortgage market for the solution that is right for you, taking into consideration the interest rate, payment privileges, payment penalties, long-term savings, and most importantly, your personal and financial goals.
If you are looking for a mortgage agent in London and Windsor, Ontario, then get in touch with me - Gary Corriveau. For most homeowners, their mortgage is the single largest source of personal debt and I want to ensure that you have peace of mind throughout the mortgage process. Getting the right mortgage does not have to be complicated. I am here to help you make it easy and comfortable as I am dedicated to looking after all aspects pertaining to your mortgage.
My services include first-time homebuyer mortgages, refinancing, second home or investment properties, self-employed mortgages, and new to Canada Mortgages. I serve clients across Windsor, LaSalle, Amherstburg, Kingsville, Leamington, Tecumseh, Essex, Lakeshore, Chatham-Kent, London, St.Thomas, Strathroy, Sarnia, Woodstock, Brantford, Stratford, Kitchener, Waterloo, Cambridge, and all over Ontario. To learn more about how I can help you, please click here or contact me by clicking here.