Before you start looking for any kind of Canadian mortgage, you need to know three things. You’ll want to understand the differences between a fixed rate mortgage and a variable rate mortgage, you’ll need to befriend a good Canada mortgage broker and you’ll want to make sure you’re up on the tax breaks that will help you save big that first year you buy your home. Following these steps you’ll be able to have a smashing success with your mortgage and save a bundle – just make sure that you really know what you’re doing!
What’s the Difference?
When you get a mortgage you’ll have two fundamental choices to make:
Fixed Rate Mortgages – A fixed rate mortgage is a traditional mortgage. The rate you get now is the rate you’ll have ten years from now, with no regard to inflation. Since interest rates now are at near all-time lows many Canadian borrowers are trying to get the lowest rate possible, locking in that great rate for the life of a 25 year loan. It’s one of the best types of mortgages if you’re going into this for the long haul. If you need something more short term that you can repay quickly, the other option is for you.
A caveat you need to know about fixed mortgages is that you’ll end up paying much more to interest with these, since it’s collected over such a long period of time.
Variable Rate Mortgages – These are also known as sub-prime mortgages, “hit and run” mortgages; they’re basically there for people that need funding now but plan to pay back within the term. In the initial stages, usually the first few years, you’ll have a low interest rate and an easy monthly payment. You’ll want to triple up on your monthly payments and repay this back as soon as possible. If you don’t pay up by the end of the loan term your interest rate can triple or quadruple, leaving you underwater.
Find the Right Canada Mortgage Broker
You’ll want to work with a Canada mortgage broker to see if they can help you find an amenable lender. Regardless of whether you want a variable or fixed rate mortgage, you need a broker! They’ll be able to look over your credit history, your borrowing needs and help you locate the lender that will give you a good deal.
Tax Breaks Work
You’ll want to make sure that you know what tax breaks you can take when you buy a home. Points added on top of your mortgage due at signing can be tax deductible, your state taxes, property taxes, home energy efficiency credits and more can help ease the burden of buying a home for the first (or second) time. You’ll want to work with a financial advisor or your mortgage broker to see if you can cash in on any of these credits – after all you’re going to have to start paying a lot more towards things once you own a home.
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