5 Things Every First-Time Home Buyer Must Know About Getting a Mortgage

1. 5 Things Every First-Time Home Buyer Must Know About Getting a Mortgage If you’re a first-time home buyer, the concept of a mortgage can be pretty intimidating. As you set off on your undertaking toward home ownership, you’re likely to be confronted with words and phrases you’ve never heard before. It can get pretty complicated if you’re not privy to this language of rates and terms. Before you dedicate massive portions of your time and money to this endeavor, there are five basic concepts in home ownership that you need to understand. According to a mortgage broker in Toronto You should become acquainted with these terms, rates and other conditions before you do anything else. 1.What is a Mortgage? A mortgage is a legal agreement between the prospective home buyer and a bank or lender. Under the arrangement of a mortgage, the home buyer will have to repay not only the mortgage amount to the lender, but also pay off interest. The bank or lender, in return, will take the title of the person’s property until the mortgage is paid in full. 2.Mortgage Durations The length of your mortgage is typically referred to as the “mortgage term.” During the time outlined as a part of the agreement between the prospective home buyer and the bank or lender, the debtor agrees to terms laid out by the mortgage provider. A typical mortgage term in Canada is anywhere between six months and ten years. A mortgage’s term can come to an end, even before the mortgage is paid in full. This typically leaves you with a handful of options to continue your journey toward homeownership: Renew the mortgage for another term Pay the remainder of the mortgage off in full Refinance the mortgage 3.Types of Interest Rates There are two types of interest rates that impact how much you end up paying for your mortgage: Fixed rate and variable rate. A fixed rate mortgage never sees its interest rate fluctuate. The amount remains consistent for the duration of the mortgage and, by definition, will not change. A variable rate mortgage, on the other hand, causes one’s interest rates to change, thus effecting their monthly mortgage payments. When the interest rate goes down, more money in each subsequent payment goes toward the money that the homeowner had initially borrowed. When it rises, more of the payment goes toward the interest rate. 4.Getting Approved for a Mortgage Obtaining a mortgage isn’t as simple as asking for one. Certain matters will be investigated by the bank or lender before they agree to work with you. Your credit rating Your income, pre-taxes Your expenses (like utilities and other bills)

2. The amount you intend to borrow The time it will take to pay off the mortgage Your existing debts 5.Closing on your Mortgage So you’ve found the house, the mortgage has been approved and all that’s left to do is to close. Usually the new homeowner will be granted a walkthrough of the home at least 24 hours prior to closing, to ensure that the home has been left in the condition specified by the mortgage agreement. At this stage, right before closing, the new homeowner can also make any final changes to the transaction. At this stage you will also be signing all of the binding paperwork for the mortgage and paying any final closing fees.