Mortgages

Understanding and negotiating a mortgage for your first home can be an intimidating experience. It can also be expensive and can affect your lifestyle for years to come if you don't understand the terms and conditions associated with the wide variety of mortgage programs and sources. The following is a brief explanation of some of the things you need to know. For more complete information and free professional assistance, This email address is being protected from spambots. You need JavaScript enabled to view it. and I will put you in touch with some of the best mortgage professionals.

All mortgages are of two basic types Conventional and Insured or High Ratio.

Conventional:

In which the purchaser can borrow up to 80% of the purchase price or value of the property, whichever is less. You must provide at least 20% of the financing as a down payment.

Insured or High Ratio:

In which the purchaser can borrow up to 95% of the purchase price or value of the property, whichever is less.

Costs

For a conventional loan, the purchaser may be required to pay for a property appraisal. For a high-ratio mortgage, Canada Mortgage & Housing Corporation (C.M.H.C.) carries out its own assessment of risk, which may or may not include a property appraisal at a cost of approximately $235.

Under Canadian law, an insured lender can not provide first mortgage financing in excess of 80% of the purchase price unless the mortgage is insured. Lenders are also more confident in making loans of up to 95% of the value of the property when borrowers obtain mortgage loan insurance.

The cost of mortgage loan insurance ranges from 1/2 % to 3 3/4% of the mortgage amount, depending on the ratio of the loan to the value of the property. Like auto insurance, the higher the risk (a low down payment), the higher the premium. The insurance cost can be added to your total mortgage loan or can be paid in a lump sum at the time of purchase.

What is a pre-approved mortgage?

Pre-qualification means having your mortgage lender calculate the amount of a mortgage that you can comfortably afford given your income and other debts. Pre-approval requires you to complete an application. Then your credit rating will be reviewed by the lender.

Why do I need a pre-approved mortgage?

A pre-approved mortgage gives you peace of mind when you are shopping for a home.

First, it provides a guideline for the price range of home that you should be considering. A lot of time and opportunity can be wasted if you're looking at homes that are higher or lower priced than you can comfortably afford.

Pre-approval also guarantees your interest rate for a specified period of time. This can protect you from fluctuations in the rates during your pre-approval period. A higher interest rate means higher payments or a decrease in the price of home for which you can qualify.

Finally, when you're ready to place an offer on a home a pre-approved mortgage provides you with greater strength in negotiating.

Kathy Amess

Peak Professionals Realty