Understanding Mortgages

So you're thinking of buying a house, and you see a lovely little home for sale in Markham; should you take the plunge? Buying or building a new home is a very big step for anyone. By investing, you are making a long term investment towards solidifying your future, so it should not be taken lightly. Understanding the ins and outs of mortgage loans can be difficult for anyone, so make sure to consider all your options and speak to a professional before signing on the dotted line.

The first thing to consider in setting up your mortgage is the "mortgage term", or length of time in which a mortgage is extended to you. Ranging from 6 months to 10 years, the mortgage length allows the borrower to have a fixed repayment amount and interest rate for this period of time. Next, you should consider the "amortization period", or the length of time in which you have to repay your mortgage. There are advantages and disadvantages to both long and short term periods: a long term amortization allows you smaller payments but costs you more in the long run through interest, whereas a short term amortization may mean larger payments up front but less in interest, saving you money. This is where understanding your personal situation is very important. If you're buying into Governors Bridge real estate and you have a steady, six figure position in downtown Toronto, a shorter amortization might be feasible. On the other hand, if you're searching for a Mississauga real estate listing on a five figure fixed income, a longer term amortization might better suit your needs. The most important thing is to understand your needs and structure your mortgage to suit them.

It's best to consider additional features as well when structuring your mortgage, such as assumability (allows you to pass on the mortgage to a new owner if you sell your home before repayment), portability (moving your existing mortgage to a new home is you sell your old one), and prepayment. This last feature can be a good idea in order to pay off your mortgage faster, and many mortgages have prepayment features attached; closed mortgages do not allow prepayment without penalty, partially open or closed mortgages allow payments at specific times, and open mortgages allow prepayment at any time. Take time to consider your prepayment options, because one never knows when fortune will smile upon you!

Lastly, take the time to consider where to apply for your mortgage; Toronto Canada alone has over ten major banks and dozens of credit unions, each with different interest rates, so take the time to do some research before deciding. You can also find additional savings with realtors, such as the Sutton Member Program which offers clients of Sutton Realtors low interest rates on their mortgage repayments.

A mortgage can be a scary, stressful investment to make if you don't understand what it costs and how much of a commitment you are making. It's important to take your time, review all your options, plan for your future, and do what's in your best interest. If you do your homework, you can come out ahead.