Dreaming to own a house is one of the most exciting things in any person’s life. But buying one is a whole different ball game. It is pretty expensive and you might not be able to afford to pay the whole amount immediately. This calls for a mortgage to help finance the purchase. Many people are caught up in debt and there are ways to avoid getting caught up in the web of paying high interest rates.
Paying above the minimum down payment
A down payment is the amount of money that you contribute towards buying your own home. This amount is either from savings or from other sources. It is however advisable to save the money to reduce on overall debt. A mortgage extends to even 30 years and it has to be serviced monthly. In Canada, the minimum down payment has been 5% of the total cost of the home. This is bound to change soon to 10% of the total worth of a home that costs above $500,000. Make sure you save an amount that is more than the minimum if possible.
Avoid unnecessary debt if possible
The low down payments rates have pushed many Canadians into debt. Raising the down payment rate pushes the mortgage amount to be serviced downwards. Once a down payment has been made, a loan backed by federal mortgage insurance covers the rest of the amount. Low interest rates have pushed a lot of people into debt. This leaves you very vulnerable to any changes in the economy, especially inflation. It’s almost impossible to save and buy a home without getting into debt. Saving the amount you save for the down payment makes it considerably easier on you in the long run. Don’t take out a loan to make a down payment. It makes more sense to save and pay the deposit, rather than get tied down servicing two loans.
Too much borrowing hurts the economy
It is actually a proven fact that too much borrowing is dangerous to an economy. When the interest rates go down, everyone scrambles to get mortgages. This makes families vulnerable in case of an economic shock, meaning they cut back on their spending too. The economy naturally depends on the spending of its citizens and it can cripple the economy when people have no money to spend. When the down payment rate goes up, it would then imply that more people would have to raise more money for a deposit. Raising the deposit also means that there would then be less borrowing.
Opt for mortgage refinancing down the road
Remortgaging, means getting a new loan to finance an older loan. If you had gotten your loan at a time when interest rates were higher, it is easier to get a refinance company to pay off the original loan and you get to pay off the new loan at cheaper rates than before. Life is already hard as it is, and any way you can find to make it easier on the pocket is always welcome. Mortgaging refinancing in Mississauga is a surefire way to get lower rates on your loan, and it’s always a wise choice. Do thorough checks before you settle on any company.
Before you buy a house, it is important to be very careful before committing. You should make sure that you have saved enough money to put a down payment. There is a minimum you can pay for a down payment, but there is no maximum. A young couple can find it increasingly difficult to buy a home and raise a family at the same time. This could result in the pre-mature need of a second mortgage lender that needs to be carefully considered if and when it is a necessity. It is possible that they would probably save for a few years and then buy a home. The recent government directive to increase the down payment rate will make more homeowners restructure their borrowing plans.