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YOUR MORTGAGE:
In general, when comparing mortgages in between banks, trust companies, credit unions, life insurance and mortgage brokers and private lenders that offer this service, interest rates are basically the same throughout the financial services industry but that does not mean that some are not better than others for you!
1. Why Should You Buy Versus Rent?
No matter how much you put down, if the value of your home increases or appreciates this amount, no matter how big or small, gives you leverage to move on to bigger and better investments and increase your standing with your bank.
2. What Is The Most I Should Spend?
Most lenders follow a lending ratio close to 28/36, meaning that you can only spend 28%-30% of your gross income on payments or shelter costs and have no more than 36% total debt.
3. Flexibility an issue?
You want a mortgage that is flexible and reflective of your financial capabilities and cycles. Flexibility on your mortgage envelopes concepts such as prepayment privileges, open versus closed mortgages, reducing the amortization on your mortgage, renewals, having the ability to have a convertible mortgage, and having the opportunity to increase your payment or multiply payment plan to weekly or bi-weekly payments. You should definitely consider Short-Term versus Long-Term Mortgages, your financing options such as Home Equity Loans or Lines of Credit and as such where you stand financially when your mortgage come due every pay period. It is important to not only evaluate your financial situation but also your lifestyle, future goals and expectations.
4. What about costs or fees?
You must ensure that all hidden costs and liabilities are out on the table as many do not take in this consideration and struggle after the fact, sometime unable to make their principal payments as a result.
5. Are they all the same?
Check out what all banks and mortgage firms can offer and find the best interest rate possible to ensure that you save money as much as possible, especially within the first year. With interest rates rising and falling continually, ensure that you take advantage of falling interest rates whenever you can - considering of course any fees that may accrue as a result (your number of rate reductions may be limited and their may be cost attached and final rates may be set – take this into consideration).
6. Which interest calculation saves me money?
Semi-annual interest is cheaper than interest calculated on a monthly basis – ask your lender how they calculate theirs!
7. Is there a better payment strategy that will save me money?
Make sure payments are paid and end of term and not beginning.
8. Is amortization an issue?
A reduction in amortization saves you money! Never increase over 25 years!
9. Does it matter if mortgage payments remain the same or not?
Increase your mortgage payment amount whenever possible and ensure this option is available prior to signing. Increase payments from monthly to weekly or bi-weekly to save interest!
10. Is the mortgage down payment significant?
Try to put down or pre-pay as much as the mortgage as you can before your payments begin. Not putting anything down may not affect your monthly payments, but it will definitely give you higher interest rates as you are much more of a risk to any lender. The majority of money contributed to your mortgage for the first while will then go strictly towards interest payments and not reduce your principal balance much – taking you much longer to pay off your debt.
11. Are there other borrowing options to consider?
Home equity loans or lines of credit are possibilities to consider. Equity loans allow you to receive full amount of mortgage in a lump sum, using your home as collateral, with the funds you can pay down your mortgage as well as ‘put your money to work’ – rates on these equity loans are variable. Bottom line is you do not have to use it, but it is there.
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