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Understand what you’re getting yourself into
Most Barrie residents aspire to home ownership but purchasing a home can be a daunting task especially if you are buying your first home. There is no doubt that this is an exciting time in anyone’s life, but the road to home ownership is fraught with risks.
Almost everyone dreams of owning their own home. In recent years it has become more and more difficult for young people to turn that dream into reality. When the time comes to start looking for your own home you’ll find that it is an uncertain but exciting time, and you need to understand all the technicalities, the terms and conditions and the practical ins and outs of negotiating your first mortgage.
Your First mortgage in Barrie
As a first-time homeowner, you will, no doubt, need to take out a mortgage to buy your Barrie home. A mortgage is a large loan that is taken from a mortgage loan provider using the purchased property as collateral.
What this means is that if you fail to make the payments in the agreed amounts at the agreed times, your house will be repossessed and sold and the money used to pay the mortgage provider. A mortgage can take up to twenty-five years to repay. The period that you take to pay for the property is called the amortization period. Over this period, you will pay both the interest and the principal amount.
When you take out a mortgage, you will agree on certain terms and conditions. One of these will be the term of the mortgage. This can be anything from six months to ten years. In Canada, the most popular term is five years.
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Fixed versus variable interest rate
You should start the process of property investment by applying for a pre-approved mortgage. This way you will be sure to choose the property that you can afford, saving a lot of time and considerable disappointment if you had chosen a home but didn’t qualify for the loan you needed.
A pre-approved mortgage will include the loan amount, the interest rate and the monthly repayments.
Buying your own home is an important decision which can have long-term implications for you and your family. In choosing a home you must select one with the future in mind. For example, if you plan to expand your family over the next decade you should find a house that will provide for this.
The location should cater to your work and recreational needs, and it should be in a marketable area. If you are purchasing a condominium you should be even more cautious and ensure that the building is properly run by checking the relevant audits.
Open or closed mortgages
An open mortgage can be renegotiated or broken at any time without penalty. A closed mortgage costs less but you will pay penalties if you break the contract prematurely.
If your bond is subject to prepayment charges you will be penalized for making early payments on your mortgage. If you feel you may want to make early payments, you should negotiate prepayment privileges. In this way, you will not have to pay penalties for early payment.
There a number of fixed costs involved in purchasing property and you will need a down payment. A down payment of 20% or more is advisable. Less than this and you will have to pay insurance for the full amortization period of your mortgage.
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