Buying property can be a complex and confusing process for first-time buyers, but it doesn’t have to be. Here are some of the answers to the most critical questions about mortgages and buying a home.
What is a mortgage?
A mortgage is a loan, usually given by a bank or other financial institution, large enough to be used to pay for real estate. You can get different mortgages, such as:
- Open mortgage. These are ideal for the short term and can be paid off as quickly as you want.
- Closed mortgage. With a closed mortgage, there are penalties for paying it off before the term is done.
- Variable mortgage. Here, the interest rate can change throughout the term.
- Fixed mortgage. In this case, the interest rate stays the same throughout the term.
To find the right mortgage solution for you, talk to a professional.
How do I get a mortgage?
Homebuyers need to make an application to their bank or financial institution for a mortgage. The application process includes submitting financial documentation, including:
- Notice of assessments
- Letter of employment
- Proof of other income such as rental income
Your bank will then decide whether to approve the application or not. If you are not approved during the first try, don’t give up on your homeownership dreams. Just because one bank was not willing to lend you the money doesn’t mean you won’t be able to find one that will approve a mortgage for you.
When should I apply for a mortgage?
It is not always easy to know when the right time to apply for a mortgage is, and homebuyers can have different approaches. Some people want to wait until they have picked the house they want, while others prefer to apply before they shop for property. In either case, getting prequalified for a mortgage is a good idea. While it is not the same as getting one, prequalification can help you know how much of a mortgage you can get, which can narrow down what you can afford in a house.
What else do I need to know about buying a home?
It is important to remember that when you buy a home, there are some extra expenses that you should prepare for. These include:
- Down payment
- Closing costs
- Legal fees
- Inspection costs
What is refinancing?
Sometimes, you may want to change the terms of your mortgage, or you find better interest rates. In these cases, you can refinance it. Refinancing is just taking out a new mortgage that allows you to pay off the balance on the current one. If done for the right reasons and at the right time, refinancing can save homebuyers a lot of money in the long term.
If you are interested in learning more about getting a mortgage or other mortgage solutions in Ontario, call Northwood Mortgage™ at 888-492-3690 or contact us here.