If you’re considering purchasing a home in Ottawa, you’ll first want to review your credit score. Once you know what it is you’ll be able to better decide on what type of mortgage is right for you. Obviously the better your score is the lower your mortgage rate will be, thereby keeping your monthly payments down to a level you can afford to repay. To be safe, you’ll want to keep your payments to around 30% of your monthly income.
Types of Mortgages:
Since you probably don’t have enough money to purchase a house out of pocket, you’ll probably need a mortgage. There are six different types of mortgages you can choose from: Conventional, High Ratio, Open, Closed, Fixed Rate, Variable Rate or Adjustable Rate Mortgage (better known as ARM). Low-ratio mortgages, or a conventional mortgage, typically doesn’t require mortgage protection insurance and only requires the down payment to be 20% of the property’s purchase price. This is the most desirable mortgage you can get because it is the safest. A high ratio mortgage requires the buyer to pay less than 20% of the purchase price as the down payment. This type of mortgage requires mortgage protection insurance through one of the three mortgage companies in Canada: CMHC (Canada Mortgage and Housing Corporation), Genworth Financial, or Canada Guarantee. Open mortgages allow you to make payments whenever you want without penalty while closed mortgages can’t be prepaid or refinanced before reaching maturity. A fixed rate mortgage allows you to repay your mortgage more quickly and an adjustable rate mortgage is the riskiest of all six because the interest rate starts out affordable and then inflates to very high levels, making repayment easy in the first year or two and then very difficult as the years progress.
Buying a House:
After you’ve checked your credit score, make sure you have between 10%-20% of the home’s cost that you want set aside. If you can’t afford the 10% you may want to reconsider buying in general. There are many small surprises that add up quickly when purchasing a new home. These can range anywhere from closing cost fees, past due property taxes, renovations, maintenance, etc. If you choose to purchase a home outright that needs “a little fixing up” be prepared for more than just extra costs in property repair.
If you’re lucky enough to be approved for a mortgage, be sure you do some research to find the right real estate agent. This is especially important if you’re looking to invest in a property rather than making it a primary home.
Surprise Expenditures After Purchase:
One of the biggest things first time buyers don’t plan for are the extra expenses after paying for the closing cost on their new home. Make sure you set aside plenty of money for your bills for turn on fees and such, new furniture, moving truck costs, new door locks, food (because there’s no way you’re going to feel like making dinner the day of the move), and possibly maintenance costs. Although it’s expensive if you can afford to set aside enough money, it’ll be worth it all in the end. Be proud to join the millions of other homeowners across the globe. You deserve it so get searching for your dream home today!