The Globe and Mail has posted a good short video featuring Douglas Melville, Canada's Ombudsman for Banking Services & Investments. The video describes 5 important points a mortgage virgin should consider before signing on the dotted line!
1. Term of Payments: How long do you want to be in the home and how frequently do you want to make payments? The vast majority of mortgage lenders will allow you to make weekly, bi-weekly or monthly mortgage payments, however, some exceptions apply. Make sure you ask your banker or broker what payments frequencies are available!
2. Type of Rate: Do you want a fixed or floating mortgage? How risk averse are you? Mortgages are not a one-size-fits-all kind of deal. Some borrowers may be very comfortable with having a mortgage payment that fluctuates while others can sleep better at night if they know they have a locked in rate.
3. Privileges & Penalties: Do you plan on making extra payments on your mortgage? Different mortgage lenders have different pre-payment privileges. It's important to know how much you can pre-pay without penalty every year and how the mortgage penalty is calculated should you wish to pay off your mortgage before your term is up.
4. What if you move? It's important to know if your mortgage is portable to a new property or not. Even if you aren't planning to move until your term is up it's important to have the facts. Life has a history of throwing curve balls and you never know what's in store for you down the road.
5. Insurance: you don't have to get life insurance when you get a mortgage. It is a good idea but is, ultimately, optional. You certainly don't have to take the life insurance offered by your lending institution. You are free to shop around to find the best life insurance option for you!
Click HERE to watch the full video!