Buying a property is a dream come true. When you are planning to buy a property, the very first thing you look into is the financing options that are available to you. One of the most popular options is taking a mortgage. Reaching out to a Mortgage Broker Guelph is a great idea. They will assess your needs and work to find you the best deal possible. We are here to tell you all that you need to know about mortgages.
What does mortgage mean?
A mortgage can simply be understood as a property loan. It is a loan agreement that has been signed between the borrower and the moneylender. This agreement consists of all the terms and conditions. The property being purchased is used as collateral by the mortgage provider. The amount which is borrowed to buy the house is referred to as the principal.
How much needs to be paid for the down payment?
The amount which needs to be paid as the down payment is determined by the property value. The minimum which needs to be given as a down payment is 5% of the property value. However, if you pay less than 20% of the value then you need to buy a mortgage default insurance. Hence, the down payment of the house is dependent on the value of the property. The remaining balance is covered by the mortgage. While making the down payment, it is best to make a large payment if you can afford it. Making a large payment will help you to save money in the long run.
What are the payment options?
The mortgage broker usually provides the borrower with two types of repayment options:
Open Mortgage Repayment: As the name suggests, this type of repayment plan gives you the liberty to make payments and clear your loan at any time within the term of the mortgage. When the mortgage term is between 6 months to a year, a fixed rate is offered. However, for a term varying from three to five years, you will have to opt for a variable interest rate. This type of repayment plan gives you much-needed flexibility. Though you can repay the loan anytime you want without having to pay a penalty the interest rates of this type of repayment option are significantly high.
Closed Mortgage Repayment: In this type of repayment plan, some terms have been laid down in the agreement. The repayment of the mortgage needs to be carried out according to these terms. Penalties can be charged if you pay the amount before the allotted time. This type of mortgage has low interest rates.
Why should you have a pre-approved mortgage?
A pre-approved mortgage has its own pros. It helps you to save time and effort. So you can focus on the property that you can afford. It helps with the financing as you know how much you would pay as downpayment and monthly payments. As you have the money, the agents take you more seriously.