4 Common Mistakes First Time Homebuyers Make

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1. Thinking you won’t qualify for a mortgage

You’ve always dreamt of owning your own home, but you aren’t sure if the qualifications are insight. Even with less than perfect credit history and an unsure job market outlook, tomorrow’s generation-you can get a mortgage!

2. Not knowing all the down payment choices

Fortunately, there are different options for down payments depending on how much you can afford:

  • Conventional mortgage (20% down payment)
  • Low-down payment mortgage (minimum 5% down payment)

For low down payment mortgages, homeowners are required to have mortgage default insurance. You have the option of paying the premium upfront or adding it to the amount you borrow

The federal government has created a program to help Canadians save for their down payments. The Home Buyer’s Plan allows first-time homebuyers the opportunity to use up $25,000 in RRSP savings per person ($50k if married) which they can withdraw without taxation as long you repay it within a 15-year period. To qualify, the RRSP funds you intend to use must have existed in your RRSP for at least 90 days.

3. Focusing too much on the interest rate, rather than the overall solution

First-time homebuyers often overlook the importance of considering what type and how much interest rates will cost when they purchase a new mortgage. Even though this is an important factor, it’s not all that matters in determining if purchasing homes makes sense for you as well financially. The different types of mortgages, their payment structures, terms and flexibility will bear more on the overall cost of homeownership.

Fixed-Rate Mortgage
Fixed-rate mortgages are a great way to ensure that your interest rate stays the same during the term of your mortgage and you know exactly how much is applied towards the principal. The main advantage? You can plan ahead with certainty, knowing what lies ahead in terms of finances.

Variable Rate Mortgage
There’s a lot to love about variable-rate mortgages. When interest rates go up, you’ll enjoy paying off your mortgage sooner and saving money in the process. But don’t worry if they drop again because with this type of loan there won’t be any change on how much each month pays towards principle versus interest – so when things get extra-special expensive around town, we’re still able to keep our heads above water thanks largely due to low inflationary pressure at present time period.

Many Experts believe variable-rate mortgages offer the most long-term savings on interest costs.

Combined Fixed and Variable Mortgages
Mortgage plans offer you the advantages of both variable and fixed rates by diversifying your mortgage. The variable portion allows the advantage of potential long-term savings, while the fixed portion protects when rates rise. Based on your budget and future plans, we can help you decide which mortgage solution works best for you.

4. Being unrealistic about how much you can afford

Homeowners make the common mistake of under or over-estimating how much you can afford to pay for your home. Using our mortgage calculator will make it easy for you to find the maximum mortgage payment amount you can afford each month. If you are unsure about what you can afford, you can contact our mortgage experts Dave Fullerton and Warren Schultz.

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