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6 Common Mortgage Questions

6 Common Mortgage Questions

Before you start dreaming of marble countertops and feature walls, it’s important to know what you’re getting into with your mortgage. Here are just a few of the most common questions asked by people who are buying their first home.

Common Mortgage Questions Mortgage Calculator Image1. What’s a good down payment?

The average down payment used to be 20 percent. Nowadays, however, you can find brokers to work with a down payment as low as five percent. While a lower deposit might help you purchase a home more quickly, it’ll also leave you in debt longer, and you’ll have to deal with additional expenses in the form of mortgage insurance. Bear in mind that mortgage qualifying rules in Canada are changing as of January 1st, 2018. These factors are all worth considering when you’re calculating the ideal down payment for you.

2. Wait, what’s mortgage insurance?

You’re required to pay for mortgage insurance if your down payment is less than 20 percent. This is Canadian law, and unfortunately, there’s no way to avoid it. The good news is that you’ll have options if you decide to go down this route: You can choose from Genworth Canada, Canada Guaranty or the Canada Mortgage and Housing Corporation (CMHC) for your mortgage insurance.

3. What’s the difference between fixed rates and adjustable rates?

Fixed rate mortgages will always have the same rates. It doesn’t matter what the market is doing; it won’t affect your mortgage or your pocketbook. On the flip side, adjustable rate mortgages will change with the economy and the general strength of the real estate industry. Again, it’s up to you to decide which choice is the best suited to your personal needs and preferences. Do you want to play it safe with a fixed rate, or would you regret locking it down if you lost money on it in the long run?

Common Mortgage Questions Credit Image4. Can I still qualify for a mortgage if I have a poor credit rating?

Yes. Your latest shopping spree might not have been a good idea, but it didn’t permanently damage your chances of buying a home! Your options will be more limited than someone with good credit, but there are still avenues that you can explore to help you qualify for a mortgage. You can build trust with a lender if you’re willing to make a larger down payment and if you’re able to get a co-signer.

5. Will my tax credits interfere with my mortgage?

No. If you’re eligible for things like the Home Buyers’ Plan (HBP) or the First-Time Home Buyers’ (FTHB) tax credit, they’ll have no bearing on your mortgage. In fact, a good broker will help you incorporate these credits into your overall financial plan. The money that you save with something like FTHB can be applied towards paying your mortgage. That’s something that the broker will want to encourage.

6. How can I save money on my mortgage?

The easiest way to save on your mortgage is to find a lender that will allow you to increase your payment frequency or make lump sum payments. If you can repay your debt bi-weekly instead of just monthly, you’ll drastically cut your total payment time! You should also pay attention to things like penalties. No one expects to break their mortgage, but unexpected life events can happen to anyone, and you’ll want a lender with forgiving policies.

These are just a few of the most common questions that people ask about mortgages. They’re not nearly as daunting as they seem at first glance, especially if you take the time to do your research. Gaining a little knowledge today can really help you with your mortgage tomorrow!

 

Photo credits: couple dreaming, credit score, mortgage calculator

About The Author

Jeff S.

Proud father and husband. Loves music, Nine Inch Nails, UFC and inbound marketing.

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