Weighing Your Options
Mortgage details can be a bit overwhelming. Your broker is there to explain things and clarify the options you have.
Downpayment
If you only have 5% towards your purchase price, than your decision here is essentially already made. But if you have more than 5%, then you may consider whether or not you want to put all your savings towards that purchase.
It’s always a good idea to look at your needs for your money as a whole. For example, if you have the option of putting less downpayment and keeping some of your savings, that may be beneficial in the future if an emergency arises. It’s always good to keep an emergency fund at the ready.
Fixed vs. Variable/Longer or Shorter Terms
Lots of people get hung up on the decision between fixed and variable rates. There are pros and cons to each option, so you’ll want to make a decision based on your financial goals and your tolerance for risk.
Want more cash in your pocket now and are less nervous about rates going up? The variable rate might be best. Want to know your payment will always be the same? A fixed rate might be best. These are just a few things to think about when making your decision.
Working with a broker can take the confusion out of this decision and make sure you are comfortable and happy with the rate and option you choose.
Here are some examples of factors that might sway you towards a fixed or variable rate:
Fixed Rate Mortgage
You would probably select this type of loan when you:
- Plan to live in home more than 5 years
- Like the stability of a fixed principal and interest payment
- Don’t want to risk your payment increasing in the future
- Believe your income and spending will stay the same
Variable Rate Mortgage
These typically last for 3 to 5 years, but interest rate on the loan may go up or down. Monthly payments could increase or decrease. You would select this type of loan when you:
- Plan to stay in your home for less than 5 years
- Are comfortable having your monthly payment periodically change (up or down)
- Don’t mind the risk of payments increasing in the future
- Believe your income will probably increase down the road
Longer term mortgages are a better match for people looking for consistency and want to feel secure about being able to make payments comfortably, even a few years down the road. This might also be a good choice for people buying for investment purposes, because you’ll be able to project your future earnings more accurately.
Some people might be in the position to pay down a mortgage faster, or feel more comfortable with the ups and downs of varying interest rates. In this case, they might decide on a shorter mortgage term… but be sure to chat with your broker about why it’s not always the best idea to pay off your mortgage faster.
Mortgage Lender Options
When considering your mortgage lender, you will want to factor in prepayment penalties and options the lender may give you to payoff your mortgage faster. You may also want to consider if the lender is offering you any additional products you may find useful, such as a line of credit or other banking services.
Generally, the banks will offer you a range of financial services, while specialized mortgage lenders only offer mortgages.
While the above factors may affect your decision, ultimately, the largest two factors to consider are, which lender will approve my mortgage, and which lender is offering the lowest rate?
Why Olympic Mortgages
Purchasing a home is an exciting time, with lots to do. At Olympic Mortgages, we help you from your pre-approval, right up until you get your keys. We have a step by step mortgage process which helps you stay organized and stress free. We also coordinate with your realtor and lawyer, making sure everyone involved is up to date.
Lenders also require an abundance of documentation, but we’re here to help. Our documentation system makes it easy to gather and sort out what you need for your approval. We’ll send you reminders of anything that’s still needed, and keep track of the documents you’ve already sent in.
What it comes down to is advice, and service. Sure, we offer the same low rates as mortgage brokers in Victoria. However, we go above and beyond to make sure you are getting the top notch service you deserve. We also offer you REAL financial advice and insights, which you’ll definitely find useful not only for your property purchase, but for your overall financial picture.
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