Buying a home is a big decision and a wise decision as well. In these days of economic insecurity having a roof over the head is important and better to buy a home when one is working actively... Read More
For a first time buyer it is not so easy, the key is to start early and it is better to use the services of a mortgage consultant... Read More
Buying a home is a big decision and a wise decision as well. In these days of economic insecurity having a roof over the head is important and better to buy a home when one is working actively. Not everyone can afford to buy a home on down payment, only people with huge amount of cash does that for rest there is mortgaging.
For a first time buyer it is not so easy, the key is to start early and it is better to use the services of a mortgage consultant. Only by consulting them one can know up to what amount one can get mortgage based on the credit score and repayment capacity. It is good to check with them before even starting to look a for a house, this is for two reasons; one is that there is no point in selecting a house which is beyond our repayment capacity and second is that they will already have a list of houses that would fit in to our budget. Thus it helps in many ways to both start early and use professional guidance.
The mortgage that is given by lenders does not follow a fixed formula, there are a few variants in the kind of mortgage one gets and one has to decide which one suits and fits their repayment plan.
There are a couple of main factors that vary, they are
- Rate: The rate of interest could be fixed or changing. In a fixed interest mortgage, the rate remains the same despite any market and financial fluctuations for the entire duration of the mortgage. Whereas in a floating interest rate, the rate may vary based on industry and market situation. However the rate of a fixed interest mortgage is higher to start with, which can be found at http://www.whichmortgage.ca/calculators/.
- Duration: The duration of the loan also varies; it depends on the principal amount of the mortgage. It is decided by the lender based on the agreement with you. You can decide on the duration based on your repayment plan.
- Type: There are two types of mortgages; this can be decided by you based on how you would like to repay the monthly amount.
Interest Only: In this type of repayment you only pay the interest month on month. Repayment of principle is up to you to pay back whenever you have enough money. The advantage of this method is that the monthly amount you pay is less compared to other type.
Principle and interest: In this type of repayment the amount you pay is divided in to two parts, one part goes in to paying back the principle amount and rest is for the interest. Usually lenders calculate the interest amount based on number of instalments that are pending. They try to initially have the interest component larger so they get more money back.
Apart from choosing the type of loan based on the other factors one has to keep in mind the below points when buying a house for the first time
- Do not compromise: Do not settle for whatever is on offer. Yes you have to consider your credit score and your repayment capacity. However do not go for interest only mortgage if you are not comfortable with it. You have to repay the loan for so many years so you decide.
- Don’t fully agree with agent or seller: They agent or seller may have hidden agenda. Usually most agents are good and give proper guidance but some agents may have percentage fees based on the amount they sell, these types of agents may push you to buy a costlier home than you want. The sellers may also try to bargain more.
- Do your own research: No matter what the agent says, you also do your research about the house you are planning to buy its locality etc. regarding the type of loan as well do your research before you sign the papers.
- Listen to your conscious: Finally it is going to be your home where you are going to live for years together and you are fully responsible to repay the loan. Hence always listen to your inner voice and pick what you are comfortable with and don’t go just by what others say.
Keep the above points, choose wisely and live happily.