Mortgages are necessary when you need funds for your home purchase. In spite of the ever-growing demand for mortgages, there’s still much overlooked information about applying and paying for a mortgage.
You have questions about mortgages, we have answers. We’ll take a look at these 5 questions and unravel the facts about mortgages to better equip you on your journey towards purchasing your home.
5 Facts about mortgages you need to know
1. Where can I get the best interest rate for my mortgage?
Before finding the best interest rate for your mortgage, it’s recommended to evaluate your financial status, which includes your income, debts and expenses. An effective way to do this is by using a mortgage calculator to estimate your monthly payments, including the principal, interest, taxes and insurance.
You can also go mortgage shopping and compare. An experienced mortgage broker can help you find competitive mortgage rates from various financial institutions and lenders.
2. What if I have a joint mortgage?
If you enter into a joint mortgage, the financial health of all applicants will be included in the application, including income, assets, liabilities, etc. One of the many benefits to joint mortgages could help you purchase a home you might not otherwise be able to afford on your own. It should be noted that all parties on the joint mortgage share legal responsibility for paying back the loan, as well as property maintenance, utilities and taxes. Joint mortgages also pose a credit risk if any of the co-borrowers don’t live up to their responsibilities.
3. How much down payment is needed for a mortgage?
One of the biggest barriers when buying a home is coming up with the down payment. Typically, you’ll want to have a down payment of at least 20% to avoid additional fees and the cost of mortgage insurance. You may be surprised to learn that some mortgage applications can be approved with as little as 5% down.
4. What are the risks of getting a mortgage and how do I manage them?
Applying for a mortgage involves more than just qualifying for a loan. It’s certainly one of your biggest financial commitments but it does come with some risks. Therefore, it’d be wise to know what some of these risks are. Below are some of the potential risks.
- Your current financial situation
Before applying for a mortgage, ask yourself if you’ll be able to afford one. Evaluate your current finances, including income, down payment, credit history and lifestyle.
- Employment and income stability
One of the most important factors to consider is the stability of your income and employment. When applying for a mortgage, financial institutions and lenders will look at the length of your current and previous employment history; frequent changes in employment will typically raise more questions.
- Future plans
Consider your long term financial goals. Without prior planning, unexpected financial hardships may affect your capabilities to repay your mortgage. Thus, it’s important to consider other sources of income should the unexpected happen.
5. What will happen to my mortgage if the unexpected happens?
In the event of the unexpected, such as an accident, illness or death, the mortgage payments must continue. For instance, if you applied for a joint mortgage with your partner, they’d still be responsible for the remaining mortgage payments. Thus, it’s important to do proper planning and speak to a financial advisor. They can help you with funding options, such as mortgage life insurance to help with those expenses.
Why work with an experienced mortgage broker?
Finding an experienced mortgage can be time consuming and very challenging, especially if you’re a first-time home buyer. Possessing the essential mortgage knowledge is vitally important as you prepare for one of, if not your largest financial investment.
A professional mortgage broker and financial security advisor such as Daisy Raouph can share both her knowledge and experience. She can help you understand these risks and help to prepare and guide you. Schedule a consultation today!