Purchasing a home is an exciting life event. However, it comes with many responsibilities. If you need to finance your home, you will need a mortgage. This complex loan can be confusing and a little overwhelming with its jargon and rules for many homebuyers. Let’s talk about four things you need to know about your mortgage prior to purchasing a home.
1. You Will Need a Down Payment
To qualify and receive a mortgage, you will need to provide a down payment. However, the amount you provide will differ depending on the type of loan you desire. For example, a conventional loan requires a minimum of 20% of the home’s purchase price. High-ratio mortgages require smaller down payments but include default insurance, which will increase your monthly house payment.
2. Your Credit Score is Critical
Having a good credit score will help you more easily qualify for a mortgage. It will also help you receive a lower interest rate on the home loan. In Canada, your credit score can range from 300 to 900 and ideally, you want a score of 740 or greater. If your credit score is poor, it may be in your best interest to improve your score before purchasing a new home.
3. You Can Choose When to Pay Your Mortgage
There is much flexibility when it comes to paying for your mortgage. For example, you can decide if you want to pay once a month, twice a month, every week, etc. These options allow you to make a large payment according to what is best for your own financial situation. Before you choose, sit down and determine the pros and cons of each option and your household budget.
4. You May Be Penalized For Paying Your Mortgage Early
There are several types of mortgage options available. Depending on which option you choose, you could be faced with fines or fees. You also need to ensure that your mortgage doesn’t have any penalties attached to it. For example, a closed mortgage may look tempting as it typically offers much lower interest rates. However, you could face large penalties if you pay off the mortgage early.
Prior to choosing a mortgage, do your research. Learn about the different options as well as the pros and cons of each. For more information on purchasing a home in the Markham area or to ask questions regarding the real estate market, contact Markham real estate agent Martin MacFarlane today.