Mortgage Basics for First-Time Thornhill Homeowners

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 you.

Affordability and 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: The Basics

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 needs.
  • 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.


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    By Flux
    Very Helpful financing and lending information!