There’s a social pressure in western culture to become a homeowner. As kids, we live with this expectation that we’ll “grow up” and buy a home of our own one day.
While owning your own home can provide security, improve quality of life, and offer a solid financial investment, it’s certainly not your only choice. It may come as a surprise to hear this from your mortgage broker, but…
In some cases, it might make more financial sense to rent.
There are a multitude of variables that come into play when you’re making the decision to purchase. The real estate market is an obvious one, but your personal situation is equally imperative.
This is why we always consider the bigger picture when meeting with clients to discuss their mortgage options. It’s important to know your goals – both personally and financially – so you feel equipped to make the best decision moving forward.
Just as there are some compelling reasons to become a home-owner, there are also plenty of good reasons to continue renting:
If you are considering making the transition from renting to buying, here are some of the benefits home-ownership can bring:
How do you know if or when you’re ready to commit to a mortgage?
First, you want to consider the fees, taxes and monthly payments. How much can you really afford? Remember to consider closing fees (like land transfer tax) and additional ongoing bills when you’re calculating the total cost of home ownership.
If you’re not sure just how far your budget can stretch, connect with us and we’ll get you started.
Despite the abundance of information available online in regards to mortgages, there’s a lot of confusion around the different terms. We’re here to make it easier on you…
While fixed and variable mortgages refer to the way your interest rate is calculated and applied, open and closed mortgages refer to the flexibility you have in paying off your mortgage debt.
Our number one goal is to help you become mortgage free faster, and the choice between open and closed mortgages is an important factor for many to consider in this process. At the end of the day, we want to make sure you feel confident and comfortable in any financial decision you make.
So let’s break it down…
An open mortgage can typically be paid off in full, at any time, without any penalty. It can be an appropriate choice for those who prioritize flexibility in their mortgage. Perhaps you’re planning to sell your home relatively soon, or you’re expecting to come into a large sum of money, which can be used to pay off your entire mortgage. If this is the case, an open mortgage may be the right fit for you.
With a closed mortgage, you are allowed to make limited, penalty-free lump-sum payments, and there is a penalty if your mortgage is repaid in full before the end of its term. Many Canadians prefer the simplicity of a basic closed mortgage with fixed interest payments. They’re relatively easy to understand and you don’t have to worry about any surprises.
An open mortgage is tempting for borrowers who fear mortgage penalties, but this doesn’t mean it’s necessarily the best option. In fact, in many cases, a close variable-rate mortgage still ends up being a cheaper alternative. Not only are you getting a lower rate (with small payout penalties), you can still make lump-sum payments of at least 20% on your original mortgage balance every year with no penalty.
Here’s what it comes down to: using an open product (whether an open variable-rate mortgage or a line-of-credit loan) is most effective as very short-term financing, and if used for any other reason it can end up costing you a surprising amount of extra money.
The only way to know for sure what option is best for you is to take the next step and secure your mortgage application. By doing so, you’ll have access to our honest feedback, and you can count on us to cut through the jargon and provide expert advice.
We make the process really easy, too. Just follow the steps we’ve outlined at the link below and our team will get started right away on finding the best mortgage product for you.
Stretching your finances too thin can lead to unnecessary stress. Your mortgage is a tool that’s meant to support your financial goals, not hinder them. The key is to know your numbers and find a solution that works within your means.
Here are some factors to consider when determining how much you can afford to borrow for your mortgage:
The minimum down payment you can make in Canada is 5% of the first $500,000 and 10% of the amount above $500,000.
What if you are putting less than 20% down?
If you make a down payment of less than 20%, your mortgage is considered high-ratio. This means you’ll be required to:
How much does mortgage insurance cost?
The cost of your insurance payments will vary, depending on the size of your mortgage. You can choose between two insurers: Canada Mortgage and Housing Corporation (CMHC) or Genworth Canada.
What does mortgage insurance do?
Mortgage insurance is designed to protect the lender in cases where a borrow defaults. It can be paid in a lump sum upon closing, or in installments over the length of the mortgage.
What if you have a down payment of 20% or more?
A mortgage with a down payment of 20% or more is considered a conventional mortgage. This means you can:
Closing costs can add up to anywhere from 1.5 to 4% of the purchase price of a home. These are one-time transactions that commonly include: inspection fees, realtor fees, lawyer fees, and land transfer tax.
Of course, becoming a home-owner means incurring a range of ongoing costs that must be considered separately from the purchase price and closing costs involved. Common additional costs include: home insurance, payment protection insurance, strata fees (monthly fees paid on the purchase of a condo), utility fees (such as hydro and water), and property tax.
Once you’ve considered all of the factors involved, you can compare these numbers to your income to determine exactly how much you can afford to borrow. Here’s how:
No matter what situation you’re in, it’s a good idea to run through your numbers with one of our mortgage specialists. Together, we’ll help you determine your closing costs and prepare you for the financial transaction you are planning to make.
At Mortgage Savvy, we would never put you in a situation we wouldn’t want for our own family members. No matter your financial background, we’re here to offer sound advice and guide you through the decision-making process.
Selecting your rate is one of the first steps to achieving your dreams of financial freedom.
There are many factors involved when shopping for your mortgage. Of course, rates are top of mind for everyone involved, but the lowest rate isn’t always the most important factor.
Here’s what you should know about fixed and variable rates…
With a fixed rate mortgage, your mortgage rate and payments are fixed, meaning the amount you pay each month will stay constant for the term of your mortgage.
Pros
Cons
With a variable rate mortgage, the mortgage rate will change with the prime lending rate, as set by your lender.
Pros
Cons
These are just a few key points to keep in mind as you consider fixed versus variable rates, and what the differences could mean for your monthly mortgage payments.
At the end of the day, our main objective is to help you become mortgage free, faster.
You can trust us to read the fine print and cut through the jargon for you. We’re here to provide you with clarity and expert insight, so you feel equipped to make a sound financial decision.