How to Choose a Mortgage

Choosing a mortgage often involves a similar decision making process to choosing your own home. When it comes to talking about fixed rate, variable rates, payment options, and time frame, you're best to listen to a professional, and talk it over with your Chatham-Kent realtor, but these tips will definitely ease your stress when choosing a mortgage.

What Can You Afford?

Deciding how much you can afford for each mortgage payment is more difficult than subtracting a number from your income. Sure, most lenders will insist your payments do not exceed one third of your budget, but you need to consider the other aspects of your life. Do you want to take a vacation? Will your car or house need repairs? Also, think about other fixed and variable expenses such utilities, taxes, transportation, and more. All of this needs to be budgeted into your calculations before you decide what you can afford for a mortgage, and for your mortgage payments.

Have You Found Your Dream Home?

If you're purchasing a move in ready home, then simply find a mortgage that fits the purchase price and go. If however, you plan to renovate your home and you'll need additional financing for this, then this is something you need to consider and discuss with your mortgage broker, lender, or bank staff.

What will your payment schedule be?

Payment schedules for your mortgage are important. In the long run, you can save money by paying bi-weekly or even weekly. Paying more frequently can also make the term of your mortgage shorter. These options however, might cause undue financial stress. For this, you'll need to know when you get paid, and balance it with your mortgage schedule, rates, and payment amounts.

Choose Between A Broker Or Bank

Mortgage brokers often search multiple lending options and banks for clients to find them the best rates and terms on a mortgage. Many people however, choose to acquire their mortgage from a bank they deal with regularly. In the end, you need to balance not only what will get you the best rates, but also what offers security, and the option you're most comfortable with.

What's The Difference Between Fixed Mortgage Rates and Variable Mortgage Rates?

A fixed mortgage rate is based solely on the rate at the time of your home purchase, and the principle price of your home. It will remain the same for a set period of time, typically 2-5 years, regardless of what happens to interest rates globally. This is great if interest rates are very low or you want to be able to strictly budget. A variable mortgage rate will fluctuate throughout the term of your mortgage as interest rates on the market change. This can work out great if interest rates drop, but can be costly if mortgage interest rates climb.

Deposit and Repayment Plan

Once you've selected a mortgage style and signed your deal, it's time to put a down payment or deposit on the mortgage. The more you can pay off initially on your Chatham-Kent home, the less interest you'll have to pay over the term of your mortgage. Similarly, rather than paying only the minimum payment on your mortgage each month, anything extra you can budget in will lower your overall interest, go directly off your principle, and shorten the term of your mortgage. For more Chatham-Kent home buyers, this is one of the best investments you can make.

If you're looking to buy a home in Chatham-Kent, give me a call at 519-360-0141, or to start deciphering what you can afford in a home and mortgage, click to visit our online mortgage calculator (provided by FamilyLending.ca).