Have you considered how important is it to choose the right mortgage term?
Buying a new home is probably the most important decision most Canadians make. This means you will most likely look for a new mortgage. When choosing a mortgage, you need to consider many factors. If you get the wrong combination, you may have to suffer the consequences for many years or pay a penalty. At Sky Financial, we always meet people looking to change their mortgages – be it for a lower mortgage rate or a new mortgage term. Here are some important factors to help you choose the right mortgage for you.
Know how a mortgage term affects your mortgage.
In Canada, mortgages are available in almost any amortization period – 5, 7, 10, 15, 20 and 25 years. You will most probably come across the 5-year mortgage with an amortization period of 25 years as the most standard mortgage term. Effects of the mortgage term on the mortgage are simply about dynamics such as transaction costs and monthly mortgage payments.
Transaction Costs
Every time you renew a mortgage, you incur some cost. For a longer-term mortgage, this process is less frequent, meaning you have to pay for fees-courier, title insurance, mortgage registration, land transfer, interest rate adjustment, etc. –less often. Short-term mortgages are obviously costlier in this regard.
Monthly Payments
Choosing a short-term over a long-term mortgage may mean paying a lower interest rate, but it translates into higher monthly payments. For example, a 30-year mortgage is cleared in double the time of a 15-year mortgage. If you choose it, you have the privilege of coughing less in monthly payments. For many Canadians, this is a better deal than having to strain monthly for a quicker payout of the mortgage.
Deceiving Interest Rates
The interest rates in Canada are currently very pleasant for homebuyers. There is no better time to plan for your financial future than now. Getting the right mortgage term can help you lock the interest rates. However, there is more to just locking a rate. Many lenders will not want you to look beyond deceiving interest rates.
In Conclusion
No matter your preference-long or short-term mortgage-the most suitable product depends on your current situation. It is worthwhile to consider more than just rates when choosing a mortgage in Canada. The mortgage term affects the transaction costs and monthly payments of your mortgage. Get an expert to help you choose a mortgage term depending on the financial burden you can handle now and in future. Contact us at Sky Financial today to find an agent to help you.
