Realestock Blog

Choosing a mortgage can be an incredibly complicated process. Fixed rates, variable rates, deposit percentages and repayment plans options can make your head spin. Check out these expert tips on getting through the mortgage minefield with your dreams-and your sanity-intact!

Choose a Broker or a Bank
Brokers operate independently from banks and have access to many different lenders and borrowing programs – which means he or she may often be able to find you the best bang for your buck. A broker will create a loan, process it and then pass it along to the lender, who will sell it to you for the negotiated rate.

Plan Ahead
Get pre-approved, the current rate will be protected for 120 days while you look for a home. Just contact your broker or lending institution. Don’t worry – you’re not under any obligation and if the time limit on your pre-approval runs out, you can simply sign on for another one.

Find Your Dream Home
The value of your home may dictate your financial security in the future, so choose this purchase carefully. If you choose to renovate, talk to your broker or lender about working the costs into a mortgage. Many institutions offer lines of credit for renovations.

Determine What You Can Afford
Most lenders set lending ratios that guarantee the mortgage payments never exceed more than 1/3 of a person’s income. Once you find a home you love, start crunching numbers. Can you really afford the mortgage payments? Mortgage rates fluctuate and life situations change so strapping yourself with debt may not be the best move.

Think About the Consequences
Review your current mortgage situations before entering into a new agreement. Before you jump into a new mortgage, it’s crucial to understand how your next move may affect agreements you may have with other lenders.

Learn About Fixed Mortgage Rates
The first and most conservative option for investors is a fixed mortgage rate, which means monthly mortgage payments on interest and a principal balance that doesn’t change. The interest rate is set for a defined period of time so homebuyers can rest easy if lending rates start to climb. If lending rates fall, though, those bound in a fixed rate agreement won’t benefit.

Learn About Variable Mortgage Rates
Investors who choose a variable rate agree to pay the current lending rate, which changes often. If you set up payments at a higher rate, you build a cushion in case rates go up. In the long run, you may be able to pay off your mortgage faster this way. But, it’s impossible to predict what the next 15 years will bring in terms of rate fluctuation – so if you can’t stand the uncertainty, it’s better not to gamble.

Make a Decision

Brokers and banks will lay out the pros and cons of each option, but they won’t lead you in one direction or the other. Remember, you don’t have to lock into one type of mortgage rate for the rest of your life. You can try out one option for a year or two, and then switch over if it isn’t working for you or lending rates appear to be taking a turn for the worse.

Establish a Deposit and Repayment Plan
Often, the best move is to put down as large a deposit as you can afford. This will lower your interest payments and get you started off on the right foot when it comes to paying off debt. It’s also a good idea to think seriously about a long term repayment plan rather than paying the minimum each month.

Relax!
As the years go by, be sure to stick to your repayment plan and apply cash windfalls to your mortgage whenever possible, thereby shortening the length of your days in debt.