Arranging your Mortgage

Arranging your mortgage can be an easy process

Buying a home today can be an extremely attractive proposition. For some, it’s a simple decision that they are ready to own a home, for others it is a stressful time of doubt, and second guessing and a lot of people will fall somewhere in the middle.  Also, Interest rates are at their lowest in decades, every time we think they can’t get any lower, we see another small tick lower.  London Ontario is an amazingly affordable major city, with the average Canadian home price being over $400,000, and London has an average home price of $265,000.

Not only are their options when it comes to the type of house you can buy, there seems to be an endless amount of mortgage choices as well.  Variable rate, fixed rate, length of term, prepayment options, banks, credit unions and mortgage brokers.  There is no one choice for everyone, and depending who you speak with, you’ll get differing opinions on which is best.

Nonetheless, you’ll want to at least familiarize yourself with the mortgage process, how to arrange one and the different financing strategies involved.  Your REALTOR® will be able to help you cut through some of the details, and if you need the help, be able to refer a few mortgage specialists or mortgage brokers.

You have choice when it comes to who will lend you money.  Keep your options open, and go with the one you are most comfortable with.  After all, you are essentially hiring them, to shop you as a client to the differing lenders available.

There are a couple types of mortgages that we see regularly.  The high-ratio mortgage is most common, where we see a down payment amount less than 20%.  Most commonly we see 5% for first time buyers.  A conventional mortgage is a mortgage with 20% or more for a down payment.  One of the benefits of this, is you won’t have to pay the mortgage insurance premium to have a high ratio mortgage.  All this means, is unless you have 20%, your mortgage needs to be insured, so you will pay a small percentage of your mortgage to an insurance company.  Your lender will set this up for you.

‘Variable-rate’ mortgages are usually offered for both conventional and high-ratio mortgages. Typically, your monthly payments remain fixed for the term, while the interest rate fluctuates with economic conditions. This means that if interest rates climb, you’ll be paying more per month in interest. If rates drop, you’ll then be paying more off your principal. Conversely, ‘fixed rate’ mortgages maintain the same rate of interest over the entire negotiated term.

When you hear about amortization, it is the total amount of time it would take you to pay off the amount borrowed, if all conditions stay the same.  There are ways to speed up your amortization rate (25 years is the most common we see for first time buyers) including prepayment privileges and payment frequency (monthly, bi-monthly, weekly).

All these things, and more, can be discussed with your REALTOR® and mortgage broker or mortgage specialist.  If you would like to contact a great mortgage person, we highly recommend Carina DeMedeiros at BMO, Joe Battaglia with Mortgage Intelligence and Jeff Krieger at OMAC.  To speak with someone at The Price Real Estate team, call 519.633.9411.