Beginners Guide to Owning a Mortgage

Beginners Guide to Owning a Mortgage

A Beginners Guide to Owning a Mortgage

Beginners Guide to Owning a MortgagePreviously we talked about the Beginners Guide to Getting a Mortgage. Now that you got your mortgage here is a beginner’s guide to owning a mortgage.

Well, technically you don’t “own” your mortgage. In fact as soon as you get the mortgage you “owe” money to the lender who gave it to you. In this article A Beginners Guide to Owning a Mortgage we will raise awareness about and the importance of managing one of the largest debt’s that you will ever have; a mortgage loan

Mortgage Payment Frequency Options

At the most basic and elementary level, you need to pay back your mortgage on an on-time and regular basis as per the payment frequency you agreed upon with the lender. The Canadian Chartered Banks, Credit Unions, Trust companies, monoline lenders, and others will normally give you the borrower several payment frequency options to choose from; monthly, bi-monthly, bi-weekly, accelerated bi-weekly, weekly, and accelerated weekly.

The shorter between the payment frequency’s the more you are paying the lender back and therefore helping reducing the overall life of your mortgage, called the amortization. As well, the more payments you make, the less interest you pay and more of your payments go towards the principal owing, which in turn, the less you owe in principal the less interest is calculated on the lower principal amount.

We recommend to our clients to consider something in the middle ground. This way they won’t feel the pressure of making weekly payments, and at the same time will be taking advantage of making a little more payments than just 12 a year; the bi-weekly accelerated payment frequency option . The accelerated part means that the lender will increase your bi-weekly payment amount a little more by a certain percentage. For example if your bi-weekly payments are $1,000, then your accelerated bi-weekly could be $1,095. This extra $95 every two weeks can go a long way towards helping you save on interest payments.

Mortgage Prepayment Options

In a beginners guide to owning a mortgage we don’t want to forget telling you about the mortgage prepayment options the lenders give you throughout the year. Depending on which lender your mortgage is with, you are allowed to increase your regular mortgage payments by up to 10%, 15%, 20%, or 25% of the original payment amount.

As well, you are given the option to make a lump sum deposit towards paying down your outstanding mortgage balance. Again, depending on which lender your mortgage is with, you can make a lump sum payment of up to 10%, 15%, 20%, or 25% of the original mortgage amount towards your outstanding mortgage balance. And most lenders permit multiple lump sum payments throughout the year, as long as you don’t exceed the maximum percentages each year.

Although people don’t want to worry about any extra money being paid to the bank during their term with the lender, it is a good idea and a wise one to be mindful of setting aside a set amount each month for making lump-sum payments in the year or at the end of each year. By sacrificing a small amount earlier on in the life of the mortgage you are helping to pay less interest to the lender in the total life of the mortgage. For many borrowers who normally buy their homes at the prime of their life and having job security with a steady flow of income, making extra payments towards reducing their mortgage amount is definitely part of ‘owning’ your mortgage.

Be Wise and Prudent

Beginners Guide to Owning a Mortgage

A beginners guide to owning a mortgage wouldn’t be complete without a mention about being a wise and prudent borrower. Never borrow in excess and beyond your means. You wouldn’t want to put yourself in a situation where in the middle of your mortgage term you are unable to make mortgage payments or the high payment amounts create undue stress on your personal finances. The lenders are flexible and accommodating to a certain extent when it comes to late payments, or missed payments, however, they don’t like to see it happen too often, and certainly not regularly. Otherwise, you could find yourself in a legal mess and at the worst case scenario losing your home.

There are many resources out there, and since this article is a beginners guide to owning a mortgage here is one for your reading. Visit the Financial and Consumer Services Commission of New Brunswick and check out their Saving Money tip, which can help you towards controlling your debts and saving more money towards paying down your mortgage balance.

We always like to hear from our readers relevant feedback and information. What has been your experience with having a mortgage? Would you add anything else in a beginners guide to owning a mortgage?

Beginners Guide to Getting a Mortgage

Beginners Guide to Getting a Mortgage

A beginner’s guide to getting a mortgage

In this beginner’s guide to getting a mortgage we will take you through the main steps of applying for a mortgage application. This beginners guide to getting a mortgage will cover the main points that will help you better understand what is involved when getting a mortgage in Canada.

Beginners Guide to Getting a Mortgage

A beginner’s guide to getting a mortgage STEP 1 – find a mortgage professional

We strongly recommend you working with a Mortgage Broker or Agent. They are licensed with their respective Provincial Governments and have met all the required educational standards to become a licensed mortgage broker or agent.

There are many advantages to acquiring the services of a mortgage broker or agent. To name a few;

  1. They work for their client’s best interest,
  2. Mortgages are what they do day-in, day-out,
  3. Because a mortgage broker or agent is not working for any of the lenders there is no conflict of interest for them towards pushing you to one lender or the other,
  4. They constantly stay up to date with the real estate financing world by participating in continuing educational courses and workshops.

A beginner’s guide to getting a mortgage STEP 2 – ‘checks and balances’

Buying real estate is, for most people, the largest single investment they will ever make, and because of this, getting a mortgage should not be taken lightly. Every person thinking about buying their own home whether now or in the future should start planning for the inevitable. What is the inevitable you ask? It is being able to show the lender that you are able to pay them back on a timely manner as agreed upon based on your credit strength and income. And how do you show this in practicality? Lenders such as Chartered Banks, Trust Companies, and Credit Unions follow Government underwriting guidelines, and as well their own internal policy’s, all designed to test how strong or week someone’s personal financial strength is in comparison to their debt level’s to be able to pay back the mortgage loan. To do this the lenders have certain requirements and they ask for information from the borrower when considering whether to approve them for a mortgage loan or not. They want to make sure at minimum the borrower has:

  • Enough income to pay back the monthly principle and interest of the loan
  • At least 5% down payment or more; you can even use gifted money from immediate family
  • A satisfactory credit history and a healthy credit score
  • We also recommend checking your credit report and score regularly, perhaps every year or two at Equifax and Transunion. This is great preparation for when you are ready to apply for a mortgage by making sure there are no discrepancies or fraud activity in your accounts.

Beginners Guide to Getting a Mortgage

That means from now you can start putting aside money each month in your bank account for your down payment and making sure that you have a steady job or income coming in to show the lender that you can afford to pay back the loan. As well, you want to make sure that you are paying back your debt on time, and on a monthly basis, and not be late making those payments.

A beginner’s guide to getting a mortgage STEP 3 – Consult with your Mortgage Broker or Mortgage Agent

Beginners Guide to Getting a Mortgage

Now that you have done your checks and balances, you can contact your Mortgage Broker or Mortgage Agent and consult with her or him about your current financial strength and debt obligations. They will ask you to fill out their mortgage application so that they can better assess your financial health and credit worthiness/readiness to apply for a mortgage. Your mortgage professional will, after reviewing your financial and debt history, ask further questions and give you advice on what steps to take next; whether to continue with your mortgage application or to wait until other matters are taken care of to strengthen and improve your chances of getting approved for a mortgage.

 

This post and its content, we hope, has provided you with the basic information you need when considering applying for a mortgage. Don’t hesitate to Contact Us with your questions, and if you would like to start the mortgage application process. As well, we invite you to share any thoughts you may have about the mortgage application and approval process below in the comments section.

Home Buying Defining Financial Terms

Home Buying Defining Financial Terms

In the video Home Buying Defining Financial Terms, the Canadian Real Estate Association of Canada explains what the amortization period is. #FinancialLiteracyMonth


Home Buying Defining the Financial Terms

 

 

 

 

 

November is Financial Literacy Month and Trusterra Mortgage is here to spread the word about it.  When home buying defining financial terms is on your mind it is always important to seek all avenues of information and resources that are available across the world wide web and more importantly from industry professionals, such as #MortgageBrokers, MortgageAgents, #Realtors, and others.

At the federal level you can find more information about this initiative from the Financial Consumer Agency of Canada. You can also search for hashtag #FLM2014.

Resources for Home Buyers and Sellers

Resources for Home Buyers and Sellers

The Canadian Real Estate Association of Canada (CREA), one of Canada’s largest single-industry trade Associations has recently updated and relaunched a web site full of resources for home buyers and sellers.

The CREA resources for home buyers and sellers site is catered for families, individuals, and investors who are looking to buy or sell real estate in Canada. The resources for home buyers and sellers site is full of helpful, educational, informative, and fun tools for everyone of all real estate investment backgrounds.

Resources for Home Buyers and Sellers

To wet your appetite here are some of things you will find on the the CREA resources for home buyers and sellers site:

1.) Assess Financial Readiness

Assess your present household budget and your annual income to determine if you are eligible for a mortgage and how much you can comfortably afford.

2.) Consider Mortgage Options

A mortgage is a loan, generally used to buy a property. How much you pay depends on how much you borrow (the principal), the loan’s interest rate, and how long you take to pay it back (the amortization period).

3.) Mortgage Default Insurance

When you buy a home with less than a 20% down payment, the mortgage needs to be insured against default. This type of insurance protects the mortgage lender in case you are not able to make your mortgage payments. It does not protect you.

4.) Research Government Programs

The federal government has assistance programs to help homebuyers. Research government program requirements to see if you are eligible.

5.) Finding a Home

Finding your perfect home can be a long process. Your REALTOR® will help identify the right type of home for you and continually research new listings in neighbourhoods that meet your needs.

6.) Making an Offer

After seeing many different homes, you have finally found one worthy of an offer! What are the next steps?

7.) Closing and Related Costs

Closing costs are the legal, administrative and disbursement fees associated with buying a home. Understanding these fees will help you budget more accurately. Remember these are additional costs over and above the price of the home.

Home Buying Tip

A Home Buying Tip that can help you buy the right home

Here is a home buying tip for those of you looking to buy your next home. When doing a home inspection make sure to be there during the actual inspection of the house by the home inspector.

In a future article and in follow up with our home buying tip we will share more information about the importance of hiring a home inspector.

Another home buying tip is don’t hire the first home inspector you see in the news paper advertisement, but rather, call around and ask friends and family whether they know of any trusted and experienced home inspectors they can refer you to.

In this post we are also highlighting the Government of Ontario’s agency responsible for the protection of the consumer when it comes to these types of matters, the Consumer Protection Ontario. On their web site you will find helpful information and home buying tips.

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Walking through the home inspection with the Home Inspector can also be a learning experience for you as the inspection is a thorough one where all sections and technical operations of the home are looked at to make sure there are no dangerous or critical problems with the home.

home buying tipYou can visit the web site of The International Association of Certified Home Inspectors where you can find helpful information about home inspectors, including home buying tips.

Buy a condo or house

Buy a Condo or House

Both are good options; to buy a condo or house or semi-detached house or a townhouse. Each home buyer will have their own unique needs and requirements. Ultimately a first time home buyer should do her or his homework allowing them to make an educated and well informed decision on whether to buy a condo or a house.

buy condo or housebuy condo or house

 

 

Here are just a few of many factors that a first time home buyer should consider when weighing their options on whether to buy a condo or house.


1) Are you set on where you want to live? i.e. urban or suburban, down town or up town, close to your work or don’t mind driving long distance … you get the picture.

2) If you are set on where you want to live, what are the options available at your disposal based on your income, credit strength and down payment? i.e. maybe there is a nice house in the urban area you like to live, but can you get approved for a mortgage and would the monthly mortgage payments be comfortable for you to pay without putting too much stress on the rest of your monthly expenses.

3) If you know what is the maximum amount of a mortgage you can get approved for, what is within your practical reach; a condo or a house? i.e. sometimes first time home buyers first home will be a condo, and then, for example, when their mortgage is up for renewal five years later, they are ready to move into a house.

4) If none of the above is an issue, and financing is not a problem, then a suggestion would be to consider buying a detached home. You will have the most flexibility and freedom. No condo fee’s to pay, and you will have such benefits as having your own front and back yard, private parking, potentially less noise since there are no neighbours directly attached to your property and more.

5) Should you be someone who likes to travel a lot then a condo might be a better option as it is much easier, and most of the time safer, to just lock the doors and go away on holidays or even longer without worrying about whose looking after your home.

6) Living in a house has some work cut out for you as you have to cut the grass, shovel the snow, water the plants, maintain the outside of the property as it gets older, and other related matters. And if you decide to hire someone to do this work for you, it can become a large one time or monthly expense. Living in a condo you have to pay a condo maintenance fee, but you don’t worry about cutting the grass, shoveling the snow, and maintaining the wear and tear of the outside structure of the building. Plus, the majority of the condominiums will have around the clock security personal look after the premises.

Mortgage Free

Mortgage Free at a young age

Have you ever dreamed about the day when you will be mortgage free? Do you think it is possible to be mortgage free at a very young age? Well, “Sean Cooper, a 29-year-old pension analyst, is $130,000 away from paying off his $425,000 home in Toronto, without money from parents or the lotto.” Financial Post

In fact it could be more possible than not to be mortgage free at a younger age if you were to be very prudent in your spending and not purchasing a property way over your means. Also critical would be to take full advantage of the lenders lump sum payment privileges. Increasing your regular mortgage payments by the allowed percentage set by the lenders could help too. You may want to consider lowering your amortization down from 25 years, to the point where you are comfortable with making a larger monthly, or bi-weekly, or even weekly payments.

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mortgage free
Picture courtesy of the Financial Post

 

TREB Market Outlook June 2014

TREB Market Outlook June 2014

Watch the TREB Market Outlook June 2014 video produced by the Toronto Real Estate Board.
Providing market analysis and report on home ownership and sales, including mortgage rates and affordability of home ownership.

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Video Highlights

Sales activity for GTA South Simcoe and Orangeville

Home ownership affordability

Mortgage rates and the average household income

Toronto MLS new listings overview

Home price growth evaluation

2014 average price outlook

 

To learn more about the Toronto Real Estate Board and to take advantage of their diverse resources and tools visit their web site by clicking ‘TREB‘.

TREB Market Outlook June 2014

Why rent when you can own

Why rent when you can own?

First Time Home Buyers why rent when you can own your home! Switch from paying rent, to making monthly mortgage payments that’s going towards your property instead of someone else’s.

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What is cohabitation agreement

Have you ever asked yourself what is cohabitation agreement?

Are you planning to buy a property with your girlfriend or boyfriend?

Before moving in together, couples should consider property rights.

Sarah Millar, from the Toronto Star has a great article that explains in detail about cohabitation agreements.

It is worth your while to read further down and check out the informative article about what is cohabitation agreement.

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couples moving in together what is cohabitation agreement