When it comes to your first mortgage in Toronto, there are many other costs and expenses that arise which are above your monthly mortgage payment. There are a number of one-time, hidden expenses referred to as “closing costs” that your mortgage experts should inform you of so you are fully prepared. Many potential home buyers are blindsided by a number of things that come their way when buying a home, but you don’t need to be one of them. To help you navigate the world of mortgages, here a few fundamental key points about the mortgage industry such as APR, rapidly fluctuating mortgage rates, refinancing, and low down-payment mortgage loans. It’s a lot to take in, and these seven mortgage facts might just give you the advantage you need when shopping for your perfect home, or looking to refinance your mortgage. Fact 1: APR is an acronym for “annual percentage rate” There’s more to the cost of a mortgage loan than the stated mortgage rate. There’s interest and then you have to consider the upfront origination fees, closing costs, and any mortgage points you may have to pay. Understanding these costs will give you a full scope of the total cost of the mortgage loan. The APR makes allowances for all of these costs, giving you a better total cost you can use to compare the cost of the loan between different lenders. For example, you’ll come across lenders that offer exceptionally low rates but have a higher APR once you include all the fees. Fact 2: Mortgage rates change Similar to the stock market, mortgage rates change throughout the day. Mortgage rates you are seeing today, may not be available to you tomorrow. If you’re in the market for a mortgage, be sure to check the current rate being offered by different lenders. The one thing to understand about rapidly changing mortgage rates is understanding the value in locking in a low mortgage rate quickly. Fact 3: Different mortgage lenders will charge different rates and fees It’s important to compare rates and fees between at least three different lenders. What you’ll notice is that different lenders have structured their fees differently. The next time you’re shopping for a mortgage, pay close attention to the rates, fees, closing costs, and points being charged. Comparing these costs with different lenders will ensure you get the best rate possible. Fact 4: Low down-payment loans are available Generally, 20% of the total purchase price towards a down payment is expected, but there are some people that struggle to save that amount. Under certain loan programs, you may be able to get financing with terms that can make down payments as low as 3.5 percent. Down payments need to be from your own resources, from work income, RRSPs, savings accounts, or investment accounts. Fact 5: You can refinance your home loan anytime Refinancing options are available anytime, but that doesn’t mean it’s always a great idea to do it. First, consider the reasons you need to refinance and perhaps get the helpful advice of a financial expert. Find out more about your options for refinancing and whether or not it financially makes sense in your situation. Fact 6: A good credit score will help you Remember, a good credit score will help you obtain a better mortgage rate. Maintaining your credit score by monitoring it closely, ensure that there are no errors and that you keep on top of your existing loan payments. Having a good credit score will give you an advantage when shopping around for a mortgage; in fact, banks may actually compete for your business by negotiating better rates and closing costs. In terms of closing costs, you can always lower them by negotiating with the seller in the purchase contract. Keep in mind that the amount the seller can pay towards the closing costs will depend on the type of loan. Another way to try and lower those closing costs is to have the lender give you a credit to cover the out-of-pocket costs. Fact 7: It’s not impossible to get a mortgage if you’ve filed bankruptcy If you’ve claimed bankruptcy in the past, you may encounter some roadblocks when attempting to get a mortgage now. Understandably, no one wants to claim bankruptcy and sometimes you can’t properly brace yourself for unforeseen circumstances. However, if you’re thinking of buying a home after bankruptcy, it may be possible, so don’t give up hope just yet. Lenders will consider these two factors:
How long ago was your bankruptcy discharged?
How long has it been since you’ve re-established good credit?
The type of mortgages that may be available to you will depend on the answers to these questions. A mortgage brokerage firm will be able to best assess your financial situation and provide you with the best options available. Mortgage professionals have experience in helping people get mortgages after bankruptcy by setting them on a path to rebuilding their credit and improving their overall financial situation. Getting a mortgage and buying your first home can come with a lot of new information and terminologies you are not familiar with. Get the advice of a mortgage and real estate expert near you. For more information, call Northwood Mortgages at (416) 969-8130 or contact us here.