5 Mortgage Mistakes You Don’t Want to Make

We all make mistakes, but avoiding mistakes is always preferable. This is uniquely applicable to your mortgage because any mistakes here can cost you plenty! Using an experienced and well regarded mortgage broker can offer many benefits. Finding a Toronto mortgage brokers is a snap online.

Pre-approval

Don’t underestimate the importance of having your loan pre-approved.  Nothing says you are an earnest buyer like a pre-approved mortgage.  Real estate agents will take you much more seriously and a pre-approval gives you a leg-up on anyone competing for the same property. A pre-approval could be the make-or-break in getting the home of your dreams.

Fixed or Variable

Mortgage rates are lower now than they have been in years. Obviously, the only direction they are likely to move is up. While there may be circumstances in which a variable rate loan is a sensible choice, for the majority of prospective buyers, an attractive fixed rate that is locked-in will afford you peace-of-mind. You will know the costs of owning your home all the way through to that final mortgage payment.

Term

Establishing the term of your mortgage is crucial. It is important to consider all the expenses involved in home ownership … expenses that go well beyond the monthly payment. You must consider the costs of insurance, taxes and maintenance. If this is your first home, you must consider the cost of furnishing it as well.Changes abound as we move through life and it is inappropriate to assume the monthly payment you can afford today will be the monthly payment you can afford in the future. Choose a term that allows you to save for the unexpected. Sure, you may be able to afford a high payment, but can you handle that payment and save for your future? Try to strike a balance when selecting the mortgage term. Make certain you have allowed some financial breathing room. You can always pay ahead if fortune smiles upon you, but it is almost impossible to pay less than you have committed to contractually.

Down payment

Avoid wiping out your savings to make your down payment. While you should make the largest down payment possible, that doesn’t mean you should take your savings account to a zero balance. You will learn that owning a home makes saving money a more difficult proposition. You will undoubtedly find many reasons to spend money on your home, some necessary and some not so necessary. Your new home won’t bring you much joy if you have boxed yourself into living paycheck to paycheck. Retain some financial cushion.

Pre-payment Penalties

If possible, avoid mortgages that carry a pre-payment penalty clause. These penalties can add up to a significant amount of money and favor the lender—not you and your family. At the very least, make it clear to your mortgage broker that any mortgage with a pre-payment penalty clause must be thoroughly explained so that you can make an informed decision.