Buying a home is the single biggest purchase a person will make
in their lifetime. It’s an overwhelming purchase with many different factors
that will benefit your financial security over time. Making smart decisions as
to what type of mortgage to choose initially will have an impact over time.
Building home equity will offer you financial options in the future. This could
include equity to fund a second mortgage or the option to take out a home
equity line of credit to finance the purchase of additional property, vacations
or necessary home renovations. The various types of mortgages for Thornhill
homeowners can be explained by expert advisors who work for mortgage
brokerages. They can highlight the different types of mortgages available to
Financing for First-Time Buyers
First-time home buyers should take time to assess their monthly budget and take
into consideration how a mortgage repayment
will fit into the picture. Experts suggest pre-qualifying
for a mortgage. This will make your initial house hunting adventure in
Thornhill a fair bit easier because you will know what purchase can fit in your
range and your budget. According to authoritative sites, lenders determine
affordability by looking at two components. The Gross Debt Service ratio (GDS)
and the Total Debt Service ratio (TDS) determine how affordable a home is for a
buyer. The GDS is based on what you can afford to pay each month, and the TDS
includes this monthly payment as well as all the other financial obligations
associated with owning the home, including taxes, utilities, mortgages and
other debt payments.
Once you qualify for a pre-approved mortgage, the interest
rates attached to that approval last for 60-120 days, depending on the lender.
Types of Mortgages:
Thornhill homeowners should consider the following choices when selecting
the right mortgage for their particular situation. Understanding the basics
will give you a good start on finding the right options available to suit your
- Short-term or Long-term: The length of time it takes to pay back your loan will be your first selection. If you believe
interest rates will lower at the time of renewal, or simply want to pay your
mortgage off in a shorter amount of time, a short-term mortgage will be your
best bet. Monthly payments will be higher, but equity will be built in the home
quicker. Long-term loans are appealing if interest rates are likely to stay the
same. Monthly payments will be lower and budgeting will be more consistent.
- Fixed-rate or Variable-rate: A fixed-rate also
empowers homeowners to budget effectively with the same payment each month. If
buyers are confident the interest rates will stay consistent (much like
choosing a long-term loan), then a fixed-rate is the best way to go. Variable
rates fluctuate with the market and are usually chosen with short-term loans. Variable
rates are generally "prime rate” less a percentage, or plus a percentage.
- Closed and Open mortgages: The terms "closed”
and "open” refer to pre-payment options that put an extra amount against the
principal amount of your loan. Closed mortgages usually offer a lower interest
rate, but open mortgages offer the flexibility of paying down more, if
borrowers have a little extra, without penalty.
Meet with an expert financial advisor who has experience
with mortgages specifically. They can help by answering any questions you have
about finding a home in Thornhill, as well as what type of mortgage will best
suit your needs.