Your first mortgage can be a scary thing, but if you plan ahead and stay committed, you can conquer it.
Gerri Vaughan, a mortgage specialist with Invis in Edmonton, recommends “practising” mortgage payments by saving chunks of money as if they were going into a mortgage, long before you get a home.
“I like to have clients pretend they’re making a mortgage payment before they buy. Put away $1,000 or $1,500 every month for three to six months, that way you either collect a larger down payment or more money for incidentals while seeing if you can handle a mortgage,” Vaughan said.
A major change to mortgage financing means first-time homebuyers need to be aware that if they choose a variable rate, they will still need to qualify for the five-year fixed rate, Vaughan says. What this means is that lenders want to see you are picking the cheaper variable rate for strategic reasons and not out of desperation. This is not necessarily a bad thing, Vaughan says, since it just means you’ll have to be in better financial shape before you take on a mortgage.
If you do qualify for a variable rate, Vaughan suggests making payments based on the five-year fixed rate anyway, because anything extra you put into your mortgage will go directly to your principle — thus creating a nice buffer in case rates do rise while helping you pay off your mortgage quicker.
Peter Veselinovich, vice-president of banking and mortgage operations with Investors Group in Winnipeg, says that when it comes to shopping for a mortgage provider, don’t fall into the trap of looking solely at interest rates — the terms of your mortgage itself are very important too.
“Among the big traders, the interest rate is usually very similar, so what you’re really looking at are the features of the mortgage. Does it have flexibility? Are you able to make changes to it? The reality is most individuals touch their mortgage at least once or twice during their term, it’s seldom a once-and-done deal,” Veselinovich said.
If you end up needing to make changes in your mortgage and find your mortgage doesn’t have built-in flexibility, you’ll likely pay a penalty much higher than what you would have paid for a more flexible mortgage.