Mortgages made easy.
Monday March 05, 2018
Homeownership: for many of us, it’s the big dream. Still, buying a home is a major investment that, for most people, will entail substantial financing. Fortunately, there’s something called a mortgage that can help you realize your dreams. And with the vast range of products out there, there’s one to fit every lifestyle and financial situation.
A sufficient down payment
To buy property, you need a down payment that’s at least 5% of the purchase price. This amount can come from your own savings account or TFSA, or if you’re lucky, from an inheritance or a gift. Got any RRSPs? The Home Buyers’ Plan (HBP) lets you “borrow” up to $25,000 ($50,000 for a couple) from your retirement savings to put toward your down payment. It’s essentially an interest-free loan to yourself that you won’t be taxed on, provided you repay the amount you borrowed within a set time frame.
Choosing the right product: tailored to your needs
Once you’ve taken the plunge and committed to the idea of buying property, you’re best advised to make an appointment with your financial advisor, who’ll take you through the many products and possibilities. Topics you’ll discuss will include the mortgage term, i.e. the period during which you make the agreed-upon payments and during which you will be unable to renegotiate the loan conditions. Together, you’ll decide whether, for example, your repayment schedule will be every two weeks for five years or on a monthly basis for the same period.
Your advisor will also discuss the different types of interest rates. “Fixed” means your rate stays the same throughout the term of your loan; “variable” means it will fluctuate according to the rates set by the Bank of Canada.
You also need to consider the amortization period. This refers to the period covered by the loan—in other words, the total number of years you’ll need to pay off your mortgage. While generally 20 to 25 years, it can be shorter if you’re able to make larger payments. Keep in mind that the shorter the amortization period, the higher your payments—but the lower the amount of interest you’ll pay overall, something definitely worth considering!
Once you’ve determined the product that best suits you, your advisor can pre-authorize your loan. This is to your advantage, since it lets you target a price range that’s within your means. With this stage complete, you simply need to start the hunt and find the house of your dreams.
Looking for advice? Your UNI advisor will partner with you to determine the best mortgage for your profile. Click here to contact us.