A home purchase mortgage is a loan that allows you to finance the purchase of a new home. Home mortgages are a popular choice for home buyers because it offers a number of perks, including:
- Low down payment: Home purchase mortgages often require a down payment of just 5% of the purchase price, making them an accessible option for many homebuyers.
- Competitive interest rates: Home purchase mortgages typically offer competitive interest rates, which can save you money over the life of the loan.
- Flexible repayment terms: Home purchase mortgages typically offer flexible repayment terms, which can make it easier to manage your monthly budget.
- Tax advantages: The interest you pay on a home purchase mortgage is typically tax-deductible, which can save you money at tax time.
Finding the right mortgage
If you decide to find a mortgage by yourself, there are a few things to keep in mind as you compare your options:
Down payment: The size of the down payment will affect the interest rate and monthly payment you pay on your mortgage. Sometimes, a larger down payment means a lower interest rate and monthly payment.
Interest rate: The interest rate you pay on your mortgage will affect the total amount of interest you pay. If you are not using a mortgage broker, you will have to compare rates from multiple lenders to get the best deal.
Loan term: The time you have to repay your mortgage is referred to as the loan term. A shorter loan term often means a higher monthly payment, but you’ll pay less interest overall.
Mortgage insurance: If you put less than 20% down on your home, you may be required to pay mortgage insurance. Mortgage insurance is used to protect the lender in the eventuality you default on your loan. It typically costs 2.8% to 4.0% of your loan amount per year.
Prepayment penalty: Some lenders charge a fee when you pay off your loan early. For this reason, it’s recommended to ask about prepayment penalties before you choose a mortgage.
A mortgage broker can help you secure the best mortgage for your needs and budget.
- A mortgage broker can save you a lot of time and effort by doing the legwork for you. They will gather information from multiple lenders and compare loan options side-by-side. This can help you save time and energy when shopping for a mortgage.
- Mortgage brokers have a variety of lenders to work with and they have access to products that are not available to the public or if you walk into the bank yourself. Mortgage brokers can match you with the best mortgage specifically to meet your individual needs.
- Mortgage brokers are paid by the lender, not by the borrower (OAC). This means that they are able to get you a lower interest rate, better terms of the mortgage, etc .
- Mortgage brokers may be able to negotiate a lower origination fee on other kinds of mortgages on your behalf if you fall short of requirements for example having bad credit, total debt servicing ratios are too high, etc. The client can choose a 1 , 2 or 3 year term offered by the lender while fixing these shortfalls and then reapply to the banks with the lowest rates at the end of the term.
- Finally, mortgage brokers are knowledgeable about the current market conditions and can advise you on when is the best time to either buy, refinance, or transfer your mortgage.
Bottom line
If you’re thinking of buying a new home, a home purchase mortgage could be the right financing option for you as you can put as little as 5% down payment instead of paying for the whole purchase amount by yourself up front without financing. Home purchase mortgages typically offer competitive interest rates, flexible repayment terms, and tax advantages.
A mortgage broker can help you compare home purchase mortgage options and find the best mortgage for your needs. There are products that are simply not available to the public if you walk into the bank yourself. So you will save more money as this is the incentive for these banks which is to give this to mortgage brokers only as opposed to the high cost of hiring numerous mortgage agents for employees to sit in the bank.
Secondly, the mortgage broker will act as the go between the client and the lender as they are more experienced in dealing with banks all the time. Clients don’t realize everything that is said in communication by phone, email, in person is recorded pretty much forever with the lender and can imply different things. This can greatly affect the outcome of your application approval and even if it is approved, can be approved with higher rates in the wrong product.
Thirdly, the Mortgage broker only pulls your credit once to deal with multiple lenders at the same time without affecting your credit score. Every time a credit report is pulled, the score will drop as it is counted as a hard pull. As well, banks don’t like credit chasers as the report will show detailed information for every credit pull with each lender, questions can be raised as to what happened with the other lenders.
Lastly, the Mortgage broker will work for the client to get the best possible mortgage for each individual situation.
