People have been purchasing houses for centuries; it is why a majority of us think that it is easy to get a mortgage. Unfortunately, getting a mortgage is not as easy as you think. The process is a bit complicated and can take a while.
Here are some important things you might not know about Canada mortgage.
It depends on your income
You need money to get a mortgage. The more money you own, the more you can afford. You will get surprised after knowing that the loan of a lot of people gets rejected because of their income, especially first-time home buyers.
Some people expect that as their salary will increase by next year, they will have sufficient money to make payments. But the bank doesn’t consider what will happen next year. The person must show sufficient cash to get qualified as a potential lender.
You can avail longer terms
Usually, mortgage terms extend up to five years; after that time, you will need to refinance at a different Canada mortgage rate. However, you can get longer terms, for example, 7 or even 10 year mortgage rate in Canada. The longer the term, the higher will be the interest rate; but you will be able to cling to those terms for extended time. To calculate how much you will end paying interest over your term, take help of mortgage calculator Canada. If rates rise above a decade, you could conclude paying up a lot less that what you had agreed to a new rate for five years.
Payment goes toward interest
Mortgage payments, also called blended payments combine repayments of the principal as well as the interest rates. When you start paying off your loan, a considerable part of your payment goes towards the interest, not principal amount. In due course of time, the principal of your loan decreases, resulting in the lowering of the amount of interest as well. In the same manner, the portion of payments that move toward the interest decreases over time. It is the reason, why additional lump sum payments make such a big difference when it comes to mortgage, they move toward the principal.
Amortization period have dropped
You may need to earn more money to qualify for a loan than you did a few months ago because the government of Canada has reduced amortization periods from 30 to 25 years, which means that loan lender can’t stretch out the monthly payment – reducing the amount.
Weekly payments are beneficial than monthly
The dollar value you pay the lender every month is quite similar to what you pay once a week or once a month. Weekly payment can reduce the amortization period by months. If you pay weekly, there are two extra payments. And the biggest advantage is that you are paying off interest at a faster pace. There is lesser duration for interest to accumulate. The lower you pay interest, faster are the period you will pay off your mortgage.
Don’t stick to the same lender for the best deal
Most homeowners renew their loan with the same lender. However, you can negotiate different terms with the various lenders at the time of renewal. It is no surprise that you can find better rates and more flexible terms in this. If you can’t do it, let a mortgage broker do it.
Every homeowner wants to pay down his/her loan as quickly as possible. To do so, it is advisable to know more about the process.