Talking Mortgages with Rebecca Awram
Sep 12th, 2017
If you’re buying your first home (even if you’re a seasoned homebuyer), mortgages may be a tricky thing to wrap your head around. But they don’t have to be. We approached Mortgage Advisor Rebecca Awram at Origin Mortgages for her insightful advice on financing your home purchase. Keep reading to discover her top five mortgage tips.
Get a Pre-Approval
Start early and be prepared. Yes, I know, the home shopping is the fun part, not the mortgage application. It helps to know how much you qualify to borrow, but you also want to know if that amount really works with your budget and monthly cash flow. Work with a banker or broker who doesn’t just do a quick calculation (you can do that yourself online with a mortgage calculator), but actually takes a full application, pulls your credit, and collects income documents to review. And remember, a pre-approval is not a firm approval, the lender still has to approve the property.
Decide if You Are You a Variable or Fixed Kinda Person
Variable rate mortgages out-perform their fixed counterpart about 80% of the time. In addition to their historical money-saving advantage, variable rate mortgages almost always come with an easy-to-understand 3-month interest penalty for early payout, whereas a fixed-rate mortgage can be much, much higher. However, the attraction of the fixed is that you know exactly what the payment is going to be for the term, and the predictability that adds to your budgeting. Additionally, thinking about whether Prime rate is going up will never keep you awake at night.
Don’t Hyper-Focus on Just the Rate
Yes, the rate is certainly relevant, but not at the expense (literally!) of ignoring other terms of the mortgage. There are no-frills rate specials out there that come with some pretty restrictive terms. Even a completely “normal” mortgage from banks and credit unions that you recognize can have wildly different terms, implications and repercussions. Ask how the mortgage will be registered on title (Standard Mortgage Terms? Or a collateral charge?), how the penalty will be calculated (very different from lender to lender), what your pre-payment allowance is, lots of detail about the porting policy, and on and on and on. Ask many questions. You are not wasting anybody’s time – it’s our job.
Understand the Time-Value of Money
Make sure you are explained the value of principal repayment. This could include lump-sums, doubling up of payments, increasing the regular payment, or paying bi-weekly rather than monthly. The take-away here is that every extra dollar that you put towards your mortgage now is a dollar you won’t be paying interest on for the next 25 – 30 years. One cool example is the impact of paying accelerated bi-weekly: it takes over 2 years off of a 25-year amortization. So imagine the further gains if you layer it with other strategies, such as modestly increasing payments or making a couple small lump-sums per year.
Remember That YOU Are in Charge
Mortgage lending is more competitive than ever, and qualified buyers are highly prized. The lender is not doing you a favour, and you probably have more leverage than you think. That doesn’t mean you need to approach multiple institutions or brokers, but you should feel like you are receiving top-notch customer service and that your file is important. If not, look elsewhere.
Get in touch with Rebecca if you’d like to know more!