A mortgage is a loan taken out to purchase residential or commercial real estate. The borrowed amount, along with interest, is repaid in accordance with the terms specified in the mortgage agreement.

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The new rules stipulate that while you can still purchase a home with a 5% down payment, the loan must be paid off in 30 years or less (with 25 years being the standard), and a low down payment mortgage must be insured.

One of the most important aspects of the mortgage process, your credit score or credit standing provides lenders with insight into your ability to repay debts and impacts your mortgage application.

In a fixed-rate mortgage, interest rates are set for a specified period (term), offering comfort and stability that your payments will remain constant throughout the term. Variable mortgages, on the other hand, have interest rates that fluctuate based on the Prime rate, a rate influenced by the Bank of Canada's economic forecasts. This option is appealing if rates decrease but less favorable if rates rise.

In a fixed-rate mortgage, interest rates are set for a specified period (term), offering comfort and stability that your payments will remain constant throughout the term. Variable mortgages, on the other hand, have interest rates that fluctuate based on the Prime rate, a rate influenced by the Bank of Canada's economic forecasts. This option is appealing if rates decrease but less favorable if rates rise.

Getting pre-approved for a mortgage is like getting a temporary commitment for a loan amount and interest rate. It typically lasts for up to 4 months and is based on the information you provide. However, to turn this pre-approval into a final mortgage, there are usually some things you need to clear up. Think of it like jumping through a few hoops. Common examples include proving you have a steady job and income, and having some of your down payment come from your own savings or a gift from a relative.

Buying your first home? The Home Buyers' Plan (HBP) is a Canadian program that lets you tap into your retirement savings (RRSP) for your down payment, tax-free!

• Here's the catch: There are eligibility requirements. Check if you qualify at the Canada Revenue Agency (CRA) website:https://www.canada.ca/en/revenue-agency.html.
• How much can you withdraw? Up to $25,000 per person. If you're buying with a partner, that's a potential $50,000 boost!
• Repayment: There's a 2-year grace period before you need to start paying back the HBP amount. You then have 15 years to repay it all by contributing back to your RRSP each year.

Down payment and closing costs: What you need to know upfront
Buying a home involves more than just the purchase price. Here's a breakdown of the money you'll need to bring to the table:

• Down payment: This is your initial contribution towards the home's value. It reduces the amount you need to borrow through a mortgage.
  • Conventional mortgages: typically require a higher down payment of at least 20%. This lowers your borrowing risk and often qualifies you for better interest rates.
  • Low down payment mortgages: Allow you to put down as little as 5%. However, these mortgages require mortgage default insurance, which adds extra cost.

• Closing costs: These are additional fees associated with finalizing the home purchase. They can add up to around 5% of the purchase price. Here are some common closing costs:
  • Home inspection
  • Legal fees
  • Property taxes adjustments
  • Land transfer tax (varies by location)
  • Property insurance

Remember to factor In:

• Moving costs: Consider the cost of movers, packing supplies, and transportation.
• Initial home expenses: Budget for things like appliances, tools, and cleaning supplies you may need right away.

By planning for these upfront costs, you'll be better prepared for a smooth home buying experience.

Fixed for Your Peace of Mind: With a fixed-rate mortgage, your interest rate is locked in for a specific period, typically ranging from 6 months to 10 years. This gives you the advantage of knowing exactly what your monthly payment will be for the entire term. You can budget with confidence and avoid surprises caused by interest rate fluctuations.

Variable Rate Mortgages: Flexible Rates, But Watch Out for Fluctuations

Variable-rate mortgages offer interest rates that can go up or down throughout your loan term. This rate is tied to the Prime Rate, which is set by the Bank of Canada and reflects economic conditions. Here's the twist: While the Prime Rate can change, lenders usually offer a discount off Prime that's locked in for your chosen term. For example, a "5-year variable at Prime minus 0.50%" means:

• Your interest rate would only adjust if the Prime Rate itself changes.
• The 0.50% discount you get from Prime would stay the same for the entire 5 years.

The Trade-Off: Potential Savings vs. Rate Risk

Historically, variable rates have offered lower interest rates than fixed rates. This can save you money over time. However, there's always the risk that Prime Rate could increase, leading to higher monthly payments. Choose wisely! Consider your comfort level with potential rate fluctuations before opting for a variable-rate mortgage.