What you need to know before signing your first mortgage
Misconceptions, whether they are maintained by popular wisdom or the mortgage industry for commercial reasons. And, the subtleties of the tax legislation and the mortgage loan agreements themselves: finding your bearings in this universe is not always easy. Here are the basic tips to follow before you sign your first mortgage.
1. Contract your mortgage insurance with another institution
It is tempting to want to contract mortgage insurance with the lender, centralization is very convenient. But, the concern is that if you opt for this easy solution (and the bank will push you there), this strategy will turn against you if you want to change lenders at the end of the term. Indeed, it will be more expensive since the price is fixed according to the deadline of the disbursement and the age of the contractor.
2. The lowest rate is rarely the best choice
It is obvious that the rate of your mortgage is a major factor. However, the lowest rates often hide unfavorable clauses, especially in the event of a break. Get advice from our mortgage brokers to find the loan that best suits your situation.
3. The mortgage is what you need to repay last, preferably at the end of the year
If you have the idea of getting yourself out of debt, you will have to pay off your other debts before you start your mortgage. Why ? Because it is the one that costs you the least in interest. Start by repaying loans with the highest interest rates in terms of percentage (credit cards, personal loans, lines of credit, etc.). If your mortgage is your only debt and you want to repay it early, make the prepayment at the end of the year since the interest is calculated every 6 months.
4. Prefer long amortization periods
You never know what the future will be like. To give you budget latitude, it is better to opt for a long amortization period. Despite the gradual rise in key rates, mortgage rates remain very low from a historical point of view. It is therefore consistent to benefit by spreading your mortgage over a long time.
5. Attention to the limitations of the HBP (home ownership scheme)
In order to allow young households to raise the down payment required to purchase a first property, the government allows them to withdraw the required amount from their registered retirement savings plan (RRSP). But beware, this measure is not possible if one of the purchasers lived with a spouse owner during the previous 4 years, or was himself the owner.
6. Weekly payment of your mortgage?
If the lending institution does not offer you any financial benefit in the event of a weekly payment of your mortgage, there is no reason to impose such a settlement plan on you. A simple calculation of multiplication will allow you to determine if this weekly payment is more economical, or a simple way for the bank to grant itself faster cash receipts.