Your first mortgage can be an intimidating experience. Imagine most likely being on the younger side, perhaps never spending anything close to the hundreds of thousands it takes to buy a house in your life.
With this, you might not be sure what it takes to get a mortgage and how much you should be spending. Well, the pandemic has not helped this matter, with the average mortgage increasing by 20 percent since then partially due to the rise of housing costs.
This is exactly why you need good mortgage advice now more than ever. Here is how to get a mortgage.
One of the biggest things that can help you with getting a mortgage is to have a good down payment ready to go. The more you have to pay off the house immediately, the less total money you will need on your loan and that will save you some interest payments in the future as well.
The general recommendation is to try to have at least 20% of the cost of the house ready to go as a down payment.
Why 20%? Because, anything less than that requires PMI (private mortgage insurance) to be added to your mortgage rate, which will cost you additional money and additional interest annually.
Another key to getting an affordable mortgage, or even one at all, is to have good credit. This is because your credit score can affect the amount that you will get on your mortgage rate.
Right now, mortgage rates in Canada are lower than ever, with the average rate for a five-year rate being 4.79%. However, with an excellent credit score, that can be decreased even further and if you have a poor credit score, you may end up with a much higher rate because you could be looked at as an unreliable buyer.
This plays into the down payment but before you decide to go looking for mortgages, you should set a maximum budget for what you are willing to spend on a house.
Why? Because this will not only affect your savings, this will affect how much money you need for a mortgage.
Let’s say you had $50,000 ready to go as a down payment for a house but you could not go any higher without getting a higher mortgage. Realistically, you should be looking for $250,000 houses or less with that budget instead of being focused on a house that is priced at around $500,000.
Be smart with how much house you buy and set strict limits to avoid getting into a mortgage you might not be able to afford one day.
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This is just brief mortgage advice that can help you find the right mortgage for your situation and to avoid getting yourself into a situation that you are not prepared to handle.
Do you want to see more? Check out our Lifestyle section for related articles.