THUNDER BAY – Business – For most of us, buying a home is the biggest investment we will make in our lifetime.  This is why it is important that you know all of your loan and payment options, how much you can afford, and any fees that may be involved. Here are some tips and things you’ll want to know when you’re applying for your first mortgage, or are renewing your mortgage.

Mortgage – get pre-approved with a rate guarantee

Before you shop the market for an existing home or plan the construction of your new home, get pre-approved, and have your bank or mortgage lender guarantee your rate.  You can search online and find current mortgage and mortgage refinance rates at a site like Credible.com. Most financial institutions will tell you how much you can afford to buy, and will also guarantee your mortgage rate for at least 90 days.   This will help you shop the market with confidence and will allow you to feel comfortable when you’re making a bid for that home you like.

Select the right term and rate type for you

A mortgage is a large financial commitment, so make sure the term commitment and rate type are suited for you.  You can select up to a 10-year term with most institutions, although most opt for 5-year terms with the option of having your rate fixed or variable during that time.  It is important to let your financial advisor know your personal situation and your future plans to help guide you into the right mortgage product.

Use your RRSPs for a down payment

If you a first time home buyer, consider the Home Buyers’ Plan (HBP) that allows you to withdraw funds from your RRSP in order to put a down payment on your home.  The plan will allow you to withdraw up to $25,000 in one calendar year to put towards the home.  If you are one who has contributed to RRSPs over the years, talk with your financial advisor about a plan for you.

Plan for other costs associated with owning a home

When you’re buying a home, you’ll learn that there are costs associated with making the purchase.  Costs such as property tax, land transfer tax, house inspection fees, utilities, moving costs, and of course unexpected costs that come up when owning a home.  This makes it important to have your costs budgeted in case the unexpected does occur.

Pay off your mortgage quicker if possible

Many mortgages now allow you to put 5% down on your mortgage once every year.  If you have the extra money to do so, you can pay your mortgage down much quicker.  Also, by setting up your payments more frequently you will also pay it down much more quickly.  For example, by using weekly payments instead of monthly payments, you can pay your mortgage down 4 years faster on a 25-year amortization and it will amount to much greater savings over the course of that period.

Term insurance over mortgage insurance

If your mortgage lender can offer you term insurance instead of mortgage insurance, go for it.  Often times the premiums are the same but the coverage you receive is much greater.

The Bottom Line

When you’re making this large of purchase it is important to weigh all of your options, especially the ones that are important to you.  For questions about mortgages and term or mortgage insurance feel free to contact me at any time.