Mortgage term – Typically from six months to five years, the ‘term’ refers to how long the bank
has agreed to lend you the money. At the end of the term, you usually renegotiate a new term.
Amortization – The length of time it will take you to pay off the whole mortgage. Often as long as 25
years, if you don’t accelerate your payments. The longer your amortization, the lower your monthly
payments, but the more you pay in interest over time.
Interest rates – Interest is the cost of borrowing money, and the interest rate tells you exactly how
much. Using this mortgage calculator, check the difference between borrowing $100 000 at 6% and
at 9% at the same amortization. Surprising, no? That interest rate not only affects how much you
pay, it also affects how much you can borrow. So remember to keep searching for the best rate!
How big a down payment?
You want as small a mortgage as possible, which means making the biggest down payment possible.
Just remember to set money aside for all the feesassociated with buying a home. Not to mention moving,
repairs, renovations, new furniture... think ahead.
THE RRSP HOME BUYERS’ PLAN – A little sweet relief.
If you’re a first-time homebuyer with money in an RRSP, you can withdraw up to $25 000
without paying any income tax. If your spouse isalso eligible, that’s $50 000. Ask your REALTOR®
how to best take advantage of this plan.
Lock into an interest rate; for how long?
It’s a tough question. What if you ‘lock in’ for five years and rates go into a period of decline? That
could mean you’re stuck paying more than you had to for a long time. But if rates were to steadily climb
over the next five years, locking in for five years now would be a great move. For many, a long term
mortgage offers peace of mind in knowing that their mortgage payments will stay the same for several
years. Your REALTOR® will have a lot of good advice.
(CREA)