What To Know About First-Time Home Buyer Loans
When you decide to purchase your first home, you'll want to know all your financing options for a first-time home buyer loan. Usually, you'll approach a bank or a mortgage broker. Here are several things to keep in mind when hunting for your first-time home buyer loan. Call us today to help simplify the process.
Types of Mortgages
You can either get a fixed rate or a variable rate mortgage. In a fixed-rate mortgage, the interest rates are fixed for the duration of the mortgage. The main advantage of fixed-rate mortgages is that they protect you from sudden and significant increases in interest rates. The disadvantage is that when the interest rates are high it's harder to afford the payments.
Variable-rate mortgages or adjustable-rate mortgages change the interest rates depending on the lender's prime rate. The interest rate on a variable-rate loan can be lower than the rate on a fixed-rate mortgage. However, as time passes, the rate can rise or decrease. While you may enjoy low interest rates in some seasons, it's uncertain how long you can enjoy the advantage before you start paying high amounts.
To qualify for a first-time home buyer loan, you have to pay a down payment. A down payment is an amount you pay upfront when buying a house before the lender provides financing for the remaining balance of the purchase. The down payment and the mortgage together represent the total value of the home you wish to purchase.
Down payments are usually a percentage of the property's value and the minimum down payment is 5% of the purchase price. For example, for a home worth $400,000, a 5% down payment is $20,000.
If you have a minimum down payment below 20% of the purchase price, you're required to have CMHC insurance. This is a mortgage default insurance that protects the lender in case you default on your mortgage.
This insurance premium is calculated as a percentage based on the size of your original down payment. This amount will be added as a lump sum onto your mortgage balance and is included in your amortized payment for your first-time home buyer loan.
Grants and Incentives
Sometimes, your first-time home buyer loan may be inadequate to cover all the costs of purchasing a home. The Canadian government has grants and incentives you can use to reduce the cost of home buying.
Apply Your First-Time Home Buyer Loan Today
Finding the right mortgage terms, dealing with paperwork, and finalizing your payments are long processes that require guidance from an experienced mortgage broker. Connect with a mortgage mentor from Dominion Lending Centres in Edmonton for more information on first-time home buyer loans. Call us today!Request Mortgage Info
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