Home Buyers Mortgages Financial Terms Video Guides

Home Buyers Mortgages Financial Terms Video Guides

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Home Buyers Mortgages Financial Terms Video Guides

Amortization Period – Home Buyers Mortgages
The period of time it will take to pay off a mortgage in full.
Amortization periods refer to the length of time it takes you to repay your mortgage.
Typical amortization periods range from 10 to 25 years.
Longer amortization periods mean lower mortgage payments, but in the end you pay more interest.
Shorter amortization periods save you money and help you pay off your mortgage faster. But they may impact your ability to save for other things, afford what is important to you, or make your mortgage payments in the event your financial circumstances change.
Only you can assess your finances and choose an amortization period that suits you and your budget.

Mortgage Pre-approval – Home Buyers Mortgages
Pre-approval is a discussion with a mortgage lender before you need the mortgage to see how much you are qualified to borrow and at what rate.
Mortgage pre-approval is when a lender assesses your credit and financial situation to determine if, and how much, you are qualified to borrow for the purchase of a home.
Getting pre-approved for a mortgage gives you a more realistic expectation of what you can afford. This saves you time and frustration during the house hunt and when you make an offer. It also locks in an interest rate for a certain time, such as three months.
Keep in mind, pre-approvals may over-estimate what you can actually afford. If market conditions or your financial situation change, a pre-approval doesn’t guarantee you will be approved for a mortgage.

Mortgage Prepayment – Home Buyers Mortgages
Payment of an additional portion or all of the balance of the mortgage loan before the end of your term.
Mortgage prepayment is when you increase your mortgage payments; make lump-sum payments; pay off your mortgage before the end of your term; or, break your mortgage due to unforeseen life changes.
Your mortgage agreement may allow you to pre-pay a portion of your mortgage. However, if you pre-pay beyond the agreed amount, you may need to pay a charge or penalty, which can be significant.
When you shop around for a mortgage, look carefully at the prepayment privileges and charges as you consider your options.

Home Buyers’ Plan – Home Buyers Mortgages
A federal government program that allows homebuyers to withdraw money from their Registered Retirement Savings Plans (RRSPs) tax-free to use for a down payment.
The Home Buyers’ Plan allows eligible buyers to withdraw up to $25,000 from their RRSPs to help with the purchase of a home.
This is a tax-free, interest-free loan that you are required to pay back over 15 years.
The Home Buyers’ Plan makes homeownership more accessible by allowing you to borrow from your own savings. A larger down payment can help you avoid the need for mortgage default insurance, reduce the amount of interest you pay to lenders and lower your mortgage payments.

Mortgage Default Insurance – Home Buyers Mortgages
Mortgage default insurance is a protection for lenders who grant mortgages to buyers with less than a 20 per cent down payment.
Mortgage default insurance does not protect you like home or life insurance. You are paying for it to protect the lender in case you are unable to make your mortgage payments.
Mortgage default insurance enables you to purchase a home with a minimum down payment of 5%.
Mortgage default insurance generally costs between 0.6% to 3.35% of the purchase price of the home. It is typically added to your mortgage which means you pay a little of it off with each payment. Over the life of your mortgage, the cost can add up.

Fixed Rate vs. Variable Rate Mortgages – Home Buyers Mortgages
A fixed rate mortgage is a mortgage loan with an interest rate that is set for the entire term.
A variable rate mortgage is a mortgage loan with an interest rate that can change during the term.
A fixed rate mortgage means your payments will be consistent throughout your term. In contrast, with a variable rate mortgage, your payments can fluctuate as interest rates change.
Fixed rate mortgages offer predictability so you know what payments to expect and can budget accordingly.
Variable rate mortgages offer less predictability, but depending on market conditions, there may be opportunities for significant interest savings.
Remember, with a variable rate mortgage, if interest rates go up, you may be required to make higher mortgage payments or have your amortization period extended.
Variable rate mortgages come in different shapes and sizes, make sure you discuss all your options with your lender.

Home Buyers’ Tax Credit – Home Buyers Mortgages
A non-refundable tax credit, based on an amount of $5,000, for certain home buyers that acquire a qualifying home after January 27, 2009.
The Home Buyers’ Tax Credit provides up to $750 in federal tax relief to eligible first-time buyers.
This tax credit can help you with the costs associated with the purchase of a home including legal fees, land transfer tax or other closing costs.
Remember, if you are a first-time home buyer, you have to apply for the credit on your tax return in the year you bought your home or you will not receive it.

Portable Mortgage – Home Buyers Mortgages
A portable mortgage is a mortgage that you can move from one property to another.
Your mortgage agreement may include the option to “port” your mortgage.
Porting allows you to transfer the terms and conditions, such as the interest rate, and the outstanding balance of the mortgage on your current home to a new home purchase, while remaining with the same lender.
If you relocate frequently for work, you don’t plan to be in your new home long or in case of an unforeseen life change, a portable mortgage may be a good option you.
By porting your mortgage, you can usually avoid paying any charges to transfer your existing mortgage loan to a new home, and you won’t have to apply for another mortgage.
This can save you a significant amount of time and money.

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