You’ve many mortgage options

With so many new mortgage features being introduced in the Canadian marketplace, the choices for the consumer are immense. Perhaps the most anxiety-ridden part of house hunting is figuring out how much you can afford. Your real estate Agent or a specialized Mortgage Consultant offers the expert, impartial mortgage advice you need, and can educate you on the range of mortgage types which are now available.

The formula used to be simple. For decades, the thinking was that your monthly mortgage payment, including taxes and insurance, should not exceed 28 percent of your gross pay, and that all your loans, mortgage included, should not exceed 36 percent. Lenders used that formula to qualify people for loans, and people relied on lenders to tell them what they could afford.

Today, lenders rarely use this cookie-cutter method. Some focus more on how much of a person’s monthly income goes toward paying off debt. Some do not use ratios at all. But whatever method lenders use, borrowers should play it safe and stick to the old formula, even if it means scaling back expectations.

You may need to start with a condominium or a small house, look at your purchase as the first investment, and then move up. Do not assume that because a lender is willing to loan you a certain amount of money, you should take all of it. Instead, assess your financial situation, make a budget and decide how much you can afford to sink into a mortgage each month.

Start by figuring out how much you now pay for housing. Do you have to pay the same amount on a home loan? Can you afford to pay more? If so, how much?

Below is some of the Mortgage options currently available in the Canadian Market:

Fixed Rate vs. Variable Rate Mortgages

With a fixed rate mortgage, the interest rate stays the same throughout the term of the loan, providing a measure of stability that some prefer. A variable rate mortgage can allow the borrower to take advantage of low rates as it typically has an interest rate that is calculated on an ongoing basis at the Bank of Canada prime lending rate minus a set percentage.

An Open or Closed Mortgage?

Open mortgages allow the borrower to pre-pay, renew or refinance at any time before maturity without penalties. A “closed” mortgage, on the other hand, usually allows for a set percentage of the principal to be prepaid without penalty. A “closed” mortgage may also be renegotiated or refinanced in most cases with the payment of a penalty which varies from lender to lender.

High-Ratio Mortgages

While a conventional mortgage is a loan for up to 80% of the purchase price of a property, a high-ratio mortgage allows you to borrow up to 95″“100% of the purchase price. This type of mortgage must be insured.

The above-mentioned options are just a starting point ““ there are numerous other mortgage features to be explored, a specialized Mortgage Consultant will work with you to determine which mortgage best meets your individual needs and objectives.