Mortgage 101 - Basics of Mortgages in CanadaPosted by LEAD COORDINATOR on Friday, May 25th, 2012 at 10:45am.
So you've decided to buy some property, congratulations! This is both an exciting and rewarding experience. Now all you need is the money to actually purchase it. Don't fret, it's not as overwhelming as it may seem. There are a few basics to get you started on the right track and into the home of your dreams.
The first step in the mortgage process is finding out how much you can afford. Contacting a mortgage associate and filling out an application is how you do this. You will be asked to supply a few pieces of key information such as your social security number to run a credit report, and employment information revealing how much you make and how long you have been at your job. You may also need to supply the last 2 years of tax returns.
Your information will then be verified and the application reviewed for approval. Your mortgage associate will find the best rate available for you . The amount of money you are approved for, or the amount of your mortgage loan, will be a starting basis for your home search. Now you know how much house you can afford Though, the details of the mortgage loan itself can vary.
In Canada, there are a few different types of loans you can choose. Here are the basics:
Fixed Rate Mortgage
A Fixed Rate Mortgage is typically a loan with terms between 5 to 25 years. This is a stable loan in which the rate will not increase, nor decrease during its term. This is a good idea if you plan to have a steady income during the term.
Adjustable Rate Mortgage
Adjustable Rate Mortgage is typically a loan with terms between 3 to 5 years. This is a variable loan in which the rate will either increase or decrease, depending on bank rates. This is a good idea if you plan on staying in your house less than 5 years and do not have a problem with possible increases to your monthly loan.
Combination Rate Mortgage
Combination Rate Mortgages combine both Fixed and Adjustable Rate Mortgages. This is a good idea if you want to take advantage of both loans within your term. You can manage the risk of increasing interest rates and also have the stability of a fixed rate.
These are the most common loans. There are other options you may be qualified for. Speak to your mortgage associate to get the details on all loans available to you.
Once you choose the type of Mortgage that is best for you and your long term goals, you will review all the paperwork and sign a mortgage approval form . If additional documents are required by the lender, you will have 10 days from the time of the received mortgage approval to send them The mortgage lender will send all the documents to your lawyer. You will then meet with your lawyer to sign all the documents for the loan.
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