A residential mortgage is simply a loan that’s intended to help you buy a home to live in. The property acts as security for the loan, so the value of the property itself is an important aspect of being approved for a mortgage. A mortgage is also a contract between the property buyer (borrower) and the financial institution (lender). When you take out a mortgage, Kindred’s lending experts will help you navigate the process and understand the costs involved in buying your first home, which will include interest and may include some fees.
The total amount of interest you pay depends on three factors:
1. How much you borrow (the principal)
2. The interest rate on the mortgage
3. How long you take to pay it back (the amortization period)
Fixed or variable? Open or closed? Amortization? There’s a lot to learn when it comes to buying a home. Get familiar with your home buying options by reviewing the information below.
This is a rate you commit to for a defined period of time, between one and five years. The longer you commit, the lower the rate (usually)! Typically your payments are locked in for the same period of time with a fixed rate.
A variable rate ‘floats’ with Kindred’s prime rate, which in turn is related to the Bank of Canada’s prime lending rate. If interest rates appear to be on the way down, you could benefit. On the other hand, it’s a bit of a risk because rates could go up; in that case, your rate and your regular payments will also increase.
If you think you’ll sell your property soon, an open mortgage might be a good idea. Your rate will be slightly higher, but you’ll have the flexibility to pay down the balance when it works for you because there’s no charge for making prepayments (meaning, paying off the mortgage whenever you like).
The most typical arrangement, a closed mortgage means that you’re committed for the term of the mortgage. You benefit from a steady interest rate and set payments. If you do decide to sell in the middle of your term, you’ll have some options including ‘porting’ or moving your mortgage to your new home. There may be a prepayment charge should you wish to pay more than your regular payments.
After choosing a mortgage type, you also need to consider your payment options. You can choose to make payments weekly, bi-weekly, semi-monthly, or monthly, depending on your cash flow needs. However, your payment frequency can have a significant impact on your overall interest costs. Ask us about an accelerated bi-weekly or accelerated weekly payment schedule, which may help you pay off your mortgage years sooner.
You also need to bear in mind that you’ll need a minimum down payment of 5% for homes that cost up to $500,000. For the portion of a purchase price between $500,000 and $1 million, you’re required to provide a 10% down payment. If your down payment is less than 20%, you’ll need a high ratio mortgage, which requires mortgage default insurance. More helpful information about how much you need for a downpayment is found at Canada.ca.
We have a number of different mortgage options to suit your needs. Get familiar with your home buying options by reviewing the information below.
Get your first mortgage at Kindred, and we’ll contribute up to $1,000* to help you get into a home of your own and cover some of those extras!
The FHSA is a registered savings account that offers the benefits of both tax deductions on your contributions and non-taxable earnings! Learn More.
The First-Time Home Buyer Incentive is a federal government program that helps qualified first-time home buyers reduce their monthly mortgage payments. Learn More.
The Home Buyers’ Plan (HBP) allows you to withdraw from your registered retirement savings plans (RRSPs) to buy a qualifying home. Learn More.
What does it mean to be pre-approved? Getting pre-approved for a mortgage is a smart first step towards buying a home. Basically, pre-approval lets you know how much you can afford, so you know how much you can offer on a home. A fairly quick check helps us understand your credit history and ability to borrow so that we can provide you with a “Yes!” Then you can hit the open houses and make an offer with confidence.