24 Jul

How-to Choose the Right Length for Your Mortgage Term

Mortgage Tips

Posted by: Krishna Menon

While it’s common for most homebuyers to first consider mortgage interest rates when shopping for a mortgage, choosing the right length of your mortgage term is extremely vital as well.

 

Examining Mortgage Terms

Your mortgage term is also known as the term in which you’ll pay your mortgage. At the end of your mortgage term your lender will review your contract with you and re-negotiate your new terms with you. Once you choose the length of your term, it cannot be changed until your mortgage is up for renewal or your break your mortgage agreement. However, breaking your mortgage can come with extra fees and penalties.

Term Length

It’s quite unfortunate but a number of homeowners often overlook or don’t take short mortgage terms into consideration. As a result money is often lost. Home borrowers typically go for longer term mortgages for a greater peace of mind, but they are also required to pay a premium.

Interest rates can be uncertain, which is why your mortgage term is so important. Essentially, it can help you to determine how much interest you will end up paying. However, if you go with a closed mortgage, the interest rate you get is what you’ll be stuck with until the end of your term. No frills mortgages offer lower rates, but you can’t switch lenders during your term, only if your term ends or you sell your property.

Long vs Short Mortgage Terms

Long term mortgages are those of 10, 20 and even 30 year terms, whereas short term mortgages can be around 5 years.

Longer terms make more sense to some people, especially if you cannot afford to experience any increase in the amount of your monthly payments, or you don’t have at least 6 months of savings to cover your costs. A longer terms allows you to lock in without any worry.

There are circumstances that may call for a short term as well, depending on your needs.

How Your Credit Factors In?

 

If your credit is not that great, a shorter term may be best. Once you’ve paid on your mortgage for a year or more, it may allow you to increasing your borrowing amount while possibly reducing your interest rate. A short term eliminate the need to locking in at a high rate and offers a bit more flexibility for change in the future. Same goes, if you want to sell your home in a few years.

 

Choosing the Best Term

 

Choosing the best term may seem impossible or even confusing at times. Why not hire a professional to help you in your decision-making? A licensed mortgage broker can help you choose a product that meets your needs, and they’ll even factor in the level of risk you’re willing to take.

 

If you have questions about Canadian mortgage, contact us.

18 Jul

Financing Options for Homeowner Hoping to Renovate Their Homes

Mortgage Refinancing

Posted by: Krishna Menon

You may be looking to become more energy efficient and save money on your monthly utility bills, expand your family, improve your family’s safety or your home’s resale value, or just give your home a facelift. Whatever your reason for your home renovation, know there are many financial options available to help you finance it.

 

Before You Start

If you’re considering borrow money to finance your reno, it may be a good idea to speak to a mortgage broker first. You need to fully understand your options in order to know how much you can borrow based on a loan pre-approval. Otherwise your financial plan may not be very realistic.

 

Exploring All of Your Options

It’s extremely important that you explore every single one of your options before making a sound final decision with your finances for your home renovation. Here are a few options to consider:

 

  • Self-fund your project. If you’re working on a smaller renovation project, then you may have the financial ability to cover your own costs for materials and labour.
  • Use credit. Another option for smaller renos if you don’t have cash on hand, is to use your available credit to cover costs. However, since interest rates are usually high, you should also have a payment plan in place if you decide to take this route, otherwise it could result in negative impacts to your credit history.
  • Get a personal loan. Bigger renovation project may require a longer period of time in order for you pay it off. If this is the case you can get a personal loan and make monthly payments on the principal amount, plus interest, over a one to five-year term. This is definitely a better route to take than using credit, as interest rates are typically lower.
  • Apply for a personal line of credit. When financing an ongoing or long-term renovation, this is probably the best option for you. You’ll have access to the money you need when you need it. You’ll also receive monthly statements, so it’ll be easier to keep track of your spending for better budgeting. The best part is that a line of credit also has a lower interest rate when compared to credit cards. You’re only charged interest on the funds you use on a monthly basis..
  • Apply for a home equity loan. With this type of financinh you’ll get all of the same advantages that come with a personal line of credit. The only difference is they’ll be secured by the equity in your home. They are very popular due to the fact they are more economical, as they offer better interest rates. They also enable you to borrow up to 80 percent of your home’s value.
  • Refinance your mortgage. If you’re undergoing a major renovation, then refinancing is probably the best option for you. You’re given a longer period to repay with lower interest rates, when compared to both credit and personal loans. Similar to a home equity loan, you can borrow up to 80% of the appraised value of your home
  • Finance your renovation at the time of purchase. If you’re buying a fixer-upper then consider the many advantages of financing when you purchase. This will allow you to the estimated costs of your renovation to your mortgage.

 

Are you considering a home renovation? Speak to a mortgage expert today to explore your options further.