Working in the housing sector gives us a lot of insights into home buyers' thoughts, behaviours, fears, and more. And we found there are a lot of myths around mortgages that need to be dispelled for home buyers to have clarity when they are shopping around for a mortgage. Amortization period as 25 years A lot of people believe that 25 years is the maximum amortization period for insured mortgages. Though this is true, one must know that those who have uninsured mortgage and have made a minimum down payment of 20% can have a greater amortization period that can go upto 30 years. So how does this help? The prolonged your amortization period, the less you would have to pay towards your monthly mortgage amount. Mortgage pre-approval and pre-qualification are not different Many are of the belief that mortgage pre-approval and pre-qualification are the same thing. Mortgage pre-qualification is the initial step towards buying your home and it happens before pre-approval. Pre-qualification is only a way of telling the bank that you have some income and assets in order to qualify for a mortgage. 0On the basis of this information, your to-be lender can tell you the kind of mortgage you could apply for and the approximate amount of mortgage payments you would need to make. Pre-approval on the other hand gives detailed inputs about the interest rate. The former is also an informal process while the latter is more formal. The minimum down payment amount It is often misinterpreted that you would have to pay a minimum amount of 20% of the home value towards the down payment for the mortgage. The fact is you don't always have to pay 20% down payment. 20% down payment is only required if your home value is more than $1 million. But if your house is priced less than the down payment amount is also lowered. Pre-approval is the guarantee of getting mortgage When your mortgage is pre-approves it does not imply that you will certainly get a mortgage. It is just a step towards getting a mortgage. In the pre-approval process the bank ascertains the size of mortgage you may qualify for and also determines the interest rate which will be extended to you. There are other factors which need to be seen by the lender such as the down payment you will be making, the price of your home etc. Spring season is a good time for home purchases Another big myth surrounding the housing market is that March onwards is a good time to buy a house. While it is true that buying activity sees frenzy during this time, the reason is not low rates of interest during this time. The reason is that during warm weather it becomes easy to scout for a house and even put it up for sale. In reality, you can buy or sell a house at any time of the year you deem fit.
If you have any questions or doubts about your mortgages, do reach out to us at LendX Financial in Brampton, Greater Toronto Area. We are happy to help.