The Gale at Godrej Park World Hinjewadi Pune Brochure.pdf
LowestRates.ca Presents the Mortgage Journey, a Step-by-Step Home Buying Companion for Canadians
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FIND THE LOWEST RATES ANYWHERE ... INSTANTLY!
The Mortgage
Journey
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3. Part One: Big Decision Time
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AND TI-lE LOWEST RAlES .ANYWHERE... INSTANID'l
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Part One: Big Decision Time
The good news is that it's never been
( You should also think about whether
easier to find basic mortgage
you're up for the routine maintenance
information. From bank websites to
and repairs that come w ith home
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ownership. Chores like shoveling
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brokers, learning about mortgages is as
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troughs are not for everyone. If you
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picking up the phone.
want to contract out these services you
should have enough money left in your
budget to comfortably pay for them:
( Wh ile taking the first step on your
figure at least $200 a month at a
mortgage journey means education L minimum.
learning about how mortgages work - it
also means introspection, where you
think about whether you're ready for
home ownership and the comm itments
that come with it.
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As w ith most big decisions, introspection
is the hard part!
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your next two, three - even five years
will probably look like. While no one has
a crystal ball, if you think you might be
moving for a job, retiring, going back to
school, etc. , then taking out a mortgage
might not be the right financial move.
Your timeframe for staying in a home is
important because buying and selling
property brings substantial transaction
costs. You also don't want to be
exposed to the caprices of the housing
market. If you know you' ll need to sell in
a year or two, buying could make you
vulnerable to a market downturn.
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5. Part One: Big Decision Time
Key Benefits of Home Ownership
- Allows you to build equity over time
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- Allows you to make improvements to the
property
Of course, you won't get far on your
mortgage journey without income.
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Here, you' ll need to decide whether
your household's monthly income is
stable enough to handle regular
mortgage payments. Borrowers too
often focus on the total dollar amount of
their income rather than the stability of
the income stream. In general, two or
more sources of income are better than
one, and regular income is preferable to
income that fluctuates greatly. There are
no absolutes here, but income security
and stability is definitely something to
think about as you start the mortgage
journey.
- A home's value generally rises over the
long term
- A home is a tangible asset in today's
uncertain times
- Home ownership is a great way to put
down roots in your community
- It's yours!
Key Drawbacks of Home Ownership
- Requires a substantial downpayment
- Substantial closrng costs on both
purchase and sale
- Requires maintenance, repairs and
upkeep
- Owner must pay property taxes, insurance
and utilities
- Real estate cannot necessarily be sold
quickly; vulnerable to market fluctuations
- Substantial interest rate risk with variable
mortgage products
In the end, the first step of the mortgage journey is about looking yourself in the mirror as
much as it is about crunching numbers.
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Part Two: Figuring Out Your Budget
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The Gross Debt Service ratio is based on a simple princi~
a borrower's monthly housing costs shouldn't be more than 32
percent of their gross monthly income.
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So what constitutes a monthly housing cost? In the eyes of
Canadian lending institutions, housing costs are monthly
mortgage payments, including both principal and interest,
heating expenses, property taxes, and condo fees (calculated at
50%) where applicable.
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The Total Debt Service ratio takes into account your total
monthly obligations from all sources. TDS includes your
monthly housing costs, plus any other debt payments,
including credit card bills, car loans, lines of credit, student
loans and other personal debts. Here again the rule is simple:
your total monthly debt payments should not exceed 40
percent of your gross monthly income.
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GDS and TDS Calculations
Here is an example of a GDS Calculation:
Here is an example of a TDS calculation:
$1,000 Mortgage Payment
$300 Heating Expenses
$400 Property Taxes
+ $300 Condo Fees
$2,500 Housing Costs
$200 Credit Card Bill
+ $300 Car Payment
$3,000 Total Monthly Obligations
$2,000 Monthly Housing Obligations
Monthly Housing Obligations $2,000
Gross Monthly Income $8,000
Total Monthly Obligations $3,000
Gross Monthly Income $8,000
= 25 % GDS
Divide your monthly housing obligations by your gross monthly
income. A mortgage applicant with the above numbers would
almost surely qualify: they are well below the 32 percent GDS
threshold.
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= 37.5% TDS
Divide your monthly housing obligations by your gross monthly
income. Once again, a borrower with these numbers should qualify:
well below the 40 TDS threshold.
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Banks take your GDS and TDS together to arrive at a final lending decision. These ratios are standard but not absolute; borrowers
with superb credit and an extremely large down payment may be able to qualify even if they breach the 32/40 thresholds.
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Part Two: Figuring Out Your Budget
It takes time to save all that money!
Nonetheless, you can 't finalize your
budget until you know rough ly how
large your downpayment will be.
First-time home buyers are allowed to
withdraw up to $25,000 from their
Registered Retirement Savings
Plans (RASP 's) to put toward a
downpayment under the Home Buyers'
Plan. The money can be taken out tax
free but must be completely repaid with in
i 5 years. This is a great tool for
Canadians taking their first mortgage
journey.
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As a general rule, it's wise to muster as
large a downpayment as you can so
that you minimize CMHC premiums and
keep your loan as small as possible.
You should also have cash available for
closing costs, which include land
transfer taxes, legal fees, title
insurance and in some cases a land
survey. As a rule of thumb, buyers
should have at least 5 percent of their
prospective home's purchase price
available for closing costs and
unforeseen contingencies.
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To see a list of closing costs, click here
or go to page i 9 .
If your downpayment is less than 20
percent of the purchase price, you
will need CMHC mortgage insurance
by law. Mortgage insurance protects
lenders against defaults and allows
borrowers to purchase homes with as
little as 5 percent down. As with all
forms of insurance, premiums must be
paid, and the CMHC currently charges
between 0.5 and 2.9 percent of the
total loan amount, depending on the
size of the down payment and the
perceived riskiness of the borrower. The
smaller the down payment, the higher
the premium.
Once you've taken the time to tally up your available funds and figure out how much
mortgage you can afford, you can set a budget that you're comfortable with and start
shopping for a home.
Now you're ready for the fun part - house hunting!
9. Part Three: Preparing Your House Hunt
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10. Part Three: Preparing Your House Hunt
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ffilemished credit can stop your
mortgage journey in its tracks. That's
why you have to check your credit report
very early in the home-buying process.
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Canadians can get their credit report at
either transunion.ca or equifax.com for
a small fee. Check the score and read
the report for any unexplained notations
or factual errors. Generally, a score of
over 600 is considered good, while a
score above 750 is deemed to be
excellent.
Document Checklist
Required documentation does vary slightly from lender to lender, but you'll
definitely need:
D An employment letter with your employer's name, address, current
telephone number, HR contact and your length of employment.
D A pay stub or letter verifying your compensation.
D Two years' Notice of Assessments from your tax return if self employed.
D Most recent T2 statements.
Don't be afraid to call the credit bureau
if you fi nd inaccuracies in the report I ~ou'll want to sort out any issues as
~ uickly as possible.
D Two months of bank statements.
D All investment statements, including account balances and the current
market value of all financial assets, such as stocks and bonds.
D RSP statements.
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anathema to all but the most organized
home buyers, but it still has to be done.
Before you engage a lender for
pre-approval, you should get copies of
all required personal and financial
information . Usually, digital versions such
as scans or PDFs will suffice.
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D All liability statements, including credit card balances, line of credit statements, lease agreements, loan agreements, and alimony and child support,
where applicable.
D Proof of 10, including your social insurance number and valid government-issued photo 10 with your current address.
11. Part Three: Preparing Your House Hunt
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immensely as you begin your house
hunt. You'll have the confidence of
knowing that a bank has analyzed your
finances and is willing to lend you a
specific amount of money to purchase
a home. You' ll also be in a better
bargaining position when it comes time
to make an offer.
What is Amortization?
The process of paying off a loan over a period of time by making regular
payments toward both interest and principal. The amortization period is the
total amount of time it will take to pay off the loan. Most mortgages in Canada
have an amortization period lasting 25 years.
What is a Term?
Your lender will want to know the
approximate size of your downpayment
and the kind of mortgage you want. By
now you've familiarized yourself with
mortgages.
The length of time a borrower and lender must abide by the provisions of the
mortgage agreement. Such provisions include the interest rate to be paid and
the method in which it is calculated. the payment schedule, as well as other
details such as prepayment options, break fees, etc. Most lenders offer terms
ranging from 6 months to 10 years, with 5 year durations being the most
popular in Canada.
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You should know the amortization
period you want (e.g. 20 years) and the
term you'd like (e.g. I 0-year fixed) . You
can visit our help centre if you need a
refresher on the different mortgage
products available to Canadians.
Once you qualify, your lender will issue
you a w ritten confirmation of the
pre-approval. Most lenders will allow
you to lock in your interest rate for 90 to
120 days while you search for a home.
This is called a rate hold. Insist on one:
G want to be protected if rates move
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With your prep work complete you'll be ready to visit open houses and comb
through listings with confidence. Having a pre-approval in your back pocket
allows you to move quickly and decisively when a great property turns up.
12. Part Four: The House Hunt
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13. Part Four: The House Hunt
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Figure out what your housing needs wil~
be both now and some time into the
future. You can do this by asking
yourself some fundamental questions:
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- How much indoor space do I need?
- How much outdoor space will I need?
- How many bedrooms and bathrooms
should my home have?
- What features do I need?
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- What neighbourhoods work for my
needs and budget?
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It's important to get an idea of what
different homes are worth in the areas
you're interested in. The Canadian Real
Estate Association has an excellent
Multiple Listing Service website,
Realtor.ca. You can search properties
by map and filter your results by price,
available parking, etc.
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14. Part Four: The House Hunt
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Agents have access to information that
is otherwise hard to find, like the recent
selling prices of other homes in the
neighborhood, and how many days
those homes were on the market. While
it's certainly possible to buy a home
without an agent, most Canadians still
l :ose to work with one when they
rt their house hunt.
Agents can help you in a variety of
ways, including:
- Informing you on current market
conditions.
- Previewing properties to save you
time.
- Arranging showings.
- Drafting a purchase agreement.
- Providing you with advice along the
, way.
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through referrals from friends or family.
Checking out the "For Sale" signs in the
neighbourhoods you're interested in is
another tried and true method of finding
a real estate agent.
A great way to get a feel for a
prospective agent is by visiting some
of their open houses. You' ll be able to
tell a lot about their manner and
professionalism from this type of
interaction. You' ll also be able to see if
they stage their homes well .
In the end, an agent has to pass that
essential 'gut check. ' Do you feel
~omfortable w ith them?
(Yes, it's time to hit the open house
circuit! The more homes you see, the
better you' ll get at judging their relative
value, because you' ll have a good basis
for comparison. Also remember to
follow up w ith your realtor on the final
sale prices of the homes you have
already seen. This will tell you how hot
l the market really is and how accurately
altors are pricing their listings.
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You want to spend your mortgage dollars as wisely as possible.
That's why taking a smart, thorough approach to house hunting is
so important.
15. Part Five: The Offer
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16. Part Five: The Offer
Once you've decided to buy a house,
you' ll need to submit an Agreement of
Purchase and Sale to the seller. The
Agreement of Purchase and Sale is
basically what it sounds like: a legally
binding document between the buyer
and seller of a property setting out the
terms of the transaction.
This is where working with a real estate
agent can be really helpful, because
they know the process well and should
have all of the required paperwork you
need.
Like all contracts, you should read the
Agreement over very carefully before
you submit it, because the terms are
binding. You may even want to have it
reviewed by a lawyer or notary to make
sure it is complete and says what you
think it says.
If you have a real estate agent, they will
most likely present your offer to the
sellers and the sellers' agent on offer
day.
Generally the offer is either accepted or
sent back with a counter offer.
Occasionally it is rejected outright. W ith
a counter offer, the seller usually asks for
a higher price or a change in the terms
of the agreement. You can either agree
to the new terms, make a counter offer
of you r own, or walk away from the
~urchase.
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If you live in certain Canadian cities,
offer day can be a stressful,
pressure-packed occasion. You'll likely
be one of several bidders interested in
the property and you could even face
the temptation to enter a bidding war
w ith the other potential buyers. Here too,
working with an experienced real estate
agent can really come in handy - they
should be able to assess whether or not
you have a likely shot at getting the
house, and they' ll be able help you
decide if bidding up the price makes
sense.
In most cases, bidding wars are to be
avoided, but each offer is unique. The
most important thing to do is to keep a
cool head and not get emotional about
t he property in question. You don't want
to end up overpaying or spending more
on your house than you can reasonably
afford.
If your offer is accepted you ' ll need to
supply the deposit within 24 hours
usually. Deposits can range from 5 to
I 0 percent of the purchase price. Have
your check ready!
Having an offer accepted is one of the most thrilling parts of the mortgage
journey- it's a moment you will remember for a long time.
18. -
Step 1: Select the term option you want
Part Six: The Transaction
( once you have a signed Offer of ~
Purchase and Sale in hand, you need to
contact your lender. They will verify your
financial information and prepare your
application for final approval by the
underwriting department.
Your lender may also ask you to provide
a property appraisal and land survey.
This lets them verify the value and
legitimacy of the property that the
mortgage funds will be secured against.
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processed, you'll also need to finalize
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wh ich mortgage product you are taking.
Even though you've already spent some
time learning about mortgages, making
the final decision is often difficult. You'll
need to really think about how much
interest rate security you require and
how long you want the mortgage term
to be.
Keep things simple by breaking your
decision down into steps:
'--
The term is the amount of time that you are bound to the conditions of the current
mortgage contract. Your term sets out all aspects of the mortgage, including interest
rates, payment options, etc. In Canada, terms usually last from 6 months to 10 years.
At the end of the term the contract expires and you can renegotiate a new term at that
time. Terms can be open or closed - open terms allow you to pay off the mortgage at
any time, making them an ideal choice if you are going to sell your home. You can also
usually convert to a closed term at any time. Closed terms lack this flexibility: they place
restrictions on how much of your loan you can pay off every year, and charge large
penalties for discharging your mortgage early.
Step 2: Select your mortgage interest rate structure
The main choice here is whether to go with a variable or fixed rate. You can learn more
about each option in our help centre.
Variable rates tend to be lower but rise or fall based on market conditions. Most variable
rates are tied to the Bank of Canada overnight rate. When the Bank raises this rate,
your mortgage interest rate will rise too. Fixed rates stay the same for the duration of
the term. You get security and predictable payments, but your interest rate will be
(slightly) higher. The longer the term, generally the higher the fixed rate will be.
Step 3: Select your amortization period
This is the total period of time until the loan is paid off in full . In Canada, most borrowers
opt for a 25 year amortization, but you can also select other durations. Amortizations
lasting 15 years are popular with those who want t o pay off their mortgage quickly. Of
course, the shorter the amortization period, the higher your monthly payment will be,
because you are paying the loan off more quickly.
Step 4: Select your payment schedule
Even though most people think of mortgage payments as being made monthly, you can
repay the loan bi-weekly or weekly as well. In fact, more frequent payments can reduce
your interest costs and allow you to pay off your mortgage months sooner!
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19. Part Six: The Transaction
In the period between offer day and
closing day, there are a lot of loose
ends to take care of. You may want to
have a home inspection done, to make
sure the house is structurally and
mechanically sound. Home inspection
agencies vary by region, but you should
make sure they are fully licensed and
come with strong recommendations.
Your real estate agent will likely be able
to provide you with some names.
You'll also need to make arrangements
for movers, as well as electricity, cable
and gas hook-ups, etc. Most Offers of
Purchase and Sale have one or two
viewings written into the agreement,
I~here you can view the property again
~ see what you'll need for it.
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closing day - that's when you finally
obtain legal possession of the property.
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Both you and the seller will have to go
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in to your respective lawyers' offices to
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sign a raft of legal papers on that day.
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Your lender will transfer your mortgage
funds to your lawyer, who will in-turn
transfer the money to the seller or the
seller's lawyer.
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You'll have to provide your down
payment (minus the deposit) to your
lawyer, as well as most of the closing
costs.
Of course, you've already set money
aside for closing costs, which can be
substantial. You should have funds
available for a variety of expenses,
including:
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Closing Costs
Land Survey: $800-$2500. Some lenders require a new survey to outline the
boundaries of the property.
Downpayment. Usually 5 to 25 percent of the purchase price, minus whatever
deposit you've already paid.
Mortgage Insurance. If your downpayment is less than 20 percent of the purchase
price, you'll have to pay a mortgage insurance premium, at 1. 75-2.75 percent of the
mortgage value.
Land Transfer Tax. One of the biggest closing costs there is, at .5 to nearly 4
percent of the purchase price, depending on where the property is located.
Legal Fees and Disbursements: $500-$1500. You'll need a real estate lawyer to
handle all the paperwork.
Title Insurance: $100-$400. This insures the lender's mortgage funds if there is a
dispute about the ownership of the property.
HST on all services related to the purchase of the home. Also applies to the
purchase price of a newly built home. Must be paid in cash at the time of closing.
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Once the funds have been received, the seller's lawyer will send the keys to your
lawyer, who will send them along to you when the deal closes. You'll also be
given a copy of the deed. Congrats -you now own the home!
20. Part Seven: Paying Down Your Mortgage
Rates
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21. Part Seven: Paying Down Your Mortgage
One of the easiest ways to pay down a
mortgage faster is increasing the
frequency of your payments.
More payments per month can cut
down the amount of interest you're
charged over the long run and allow
you to pay off your mortgage principal
far more quickly. And of course,
reducing the number of years that you
take to pay off your mortgage can add
up to huge savings.
Most banks in Canada allow you to
choose between monthly, bi-weekly,
accelerated bi-weekly and accelerated
weekly payment schedules. Bi-weekly
payments are popular with many
Canadians because they allow
mortgage payments to be coordinated
with bi-weekly paychecks.
Most people are shocked by the
amount of money they can save by
making more frequent payments. It
seems like magic, but the math if
undeniable: accelerated bi-weekly
payments, for example, can save you a
huge sum of money over the life of your
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With a mortgage of $400,000 taken out
at 5 percent interest, for example, a
borrower would save $33,941 .36 on a
25 year loan simply by making
accelerated bi-weekly payments rather
than monthly payments. And just think,
weekly payments will save you even
more money!
Accelerating your payment schedule is
a great way to shorten your mortgage
journey and make it far less expensive
in the long run. It's a step that every
Canadian borrower should at least
consider.
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22. Part Seven: Paying Down Your Mortgage
Another great way to pay off your
mortgage faster is by making lump sum
payments. Most mortgage contracts in
Canada allow you to make at least one
lump sum payment toward your
principal every year.
Many Canadians who find themselves
with extra cash in the bank after a tax
refund or annual bonus use the lump
sum allowance to whittle down their
mortgage principal and save
themselves interest. You can also make
lump sum payments when your
mortgage comes up for renewal.
Some lenders also provide other
prepayment provisions in their
mortgage agreements, such as
allowing borrowers to "double-up" their
payments each month up to a
pre-determined maximum.
Make sure you' re aware of all the
prepayment and lump sum payment
options that are available to you, and
take advantage of them as much as
~ r finances will allow.
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rYou should always keep tabs on where ')
I interest rates are headed. A lower
interest rate on your mortgage will allow
you to pay it off years sooner. If you
have an open mortgage, you may want
to lock in at a certain point to take
advantage of lower rates or avoid
impending rate increases.
Even if you have a closed term, it may,
under certain conditions, be to your
advantage to break your mortgage to
reap savings from lower interest rates.
It's often a good idea to check in with
your mortgage broker or financial
advisor halfway through your term to
get a sense of whether it makes sense
to stay in your mortgage given the
Lcurrent interest rate environment.
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Interest Rates
23. Part Eight: The Final Stretch of the Mortgage Journey
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24. Part Eight: The Final Stretch of the Mortgage Journey
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( Your first consideration shouldn't'
be how much money you need
or how you ' ll get the best deal,
but rather, why you need the
cash in the first place.
Remember, to access home
equity funds you'll be pledging
your house as collateral and
paying interest - that means you
should only tap equity for a
worthwhile purpose.
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If you've decided to tap your home's equity,
you'll want to choose between a standard
home equity loan and a home equity line of
credit, or HELOC.
A home equity loan is essentially a second
loan secured against your house in addition
to your mortgage. But unlike a mortgage,
funds from a home equity loan go into your
bank account as cash. Sounds tempting,
right?
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So, what are some valid reasons
to tap equity? There are many,
but three really stand out:
HELOCs allow you to withdraw funds as
needed rather than receiving the entire loan
up front. Basically, the bank assesses your
equity position and approves you for a line
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Three Good Reasons to Tap Home Equity
Debt consolidation. By pooling together multiple debts into one home equity loan,
you can simplify your payments and potentially save big on borrowing costs.
Sending a son or daughter to school. Post-secondary education isn't cheap, and
sometimes it's hard to top up those RESPs every year. Some parents tap their
home's equity to help pay for their children's education.
Home renovations. Using home equity to pay for home improvements is a tried and
tested strategy, but be careful: reno costs can escalate quickly, and even though
improvements to your home will increase its value, you still need to pay the home
equity loan back, with interest.
of credit secured against your house1
You can borrow funds up to an
approved limit and pay them off on an
ongoing basis. There is generally a
minimum payment due each month, as
well as the option to pay off as much of
the loan as you want. You can withdraw
and repay a HELOC in true revolving
fashion .
HELOCs are usually offered w ith a
variable interest rate based on the
prime lending rate plus whatever margin
the bank is charg ing . Standard home
equity loans, in contrast, usually have
fixed interest with a fixed payment
schedule. See your bank or use a
comparison site like LowestRates.ca
to compare products and see which
one makes the most sense for you.
In general, HELOCs tend to be a better
choice for those with ongoing cash
needs, such as parents making tuition
payments, etc. Home equity loans are
better if you need a one-time lump sum
to do something like a debt
consolidation.
25. Part Eight: The Final Stretch of the Mortgage Journey
-
The most exhilarating part of the
mortgage journey is getting to the finish
line - the final payment. Paying off a
mortgage in full is a liberating, th rilling
moment. It's the point at which you
cross over from being a borrower to a
true homeowner, in every sense of the
word. Your bank no longer has a claim
on the roof over your head - what a
nice concept!
After you make your final mortgage
payment you should receive a notice
from your lender documenting that your
mortgage is paid in full. Some lenders
will send you your canceled mortgage
note as well. Keep these documents in
your records for safekeeping.
As a follow up, it's a good idea to check
your credit report after a few months
to make sure that your mortgage payoff
has been recorded by credit agencies.
You don't want them thinking you still
owe money on your mortgage when it's
been paid off in full.
Some homeowners celebrate the end
of their mortgage by throwing a party or
going out for dinner - after all that hard
work, it's time to smell the roses.
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Congratulations - you've finished the mortgage journey! We hope you've found
the eight-part guide we've put together to be useful.
As you've seen, taking on a mortgage doesn't need to be intimidating -you just
have to follow the right steps along the way and do some smart planning. From
all of us at LowestRates.ca, we wish you the best of luck with your mortgage,
whether you're just starting out or already well along the path to becoming
mortgage free.