Buying your first home can be a little daunting - I'm here to help you find out what you can qualify for and make it all happen when you find your dream home! Let me be your guide through the approval process, help make things run as smooth as possible for you. Brokers deal with many different lenders – several schedule A banks, and all are extremely reputable lenders who have been in business for many, many years. LET THEM COMPETE FOR YOUR BUSINESS!!
Your home/investment property will be financed by one of the 2 different types of mortgage:
- Conventional mortgage (Fixed or variable rate, 1-10 year term, amortized over up to 30 years)
- HELOC (Home Equity Line of Credit) Also secured against your home just like a conventional mortgage. Interest only payments required.
Advantages of Conventional mortgages
- Lower rates than HELOC.
- Payments incorporate principal and interest forcing the owner to pay down principal.
- Rates can be locked in for up to 10 years – but usually maximum of 5 years. In the case of Variable rate mortgages, the rate fluctuates with Bank Prime rate. This can be an advantage or a disadvantage depending on the economy at the time.
- Qualifying for a fixed rate mortgage is much easier than a HELOC in most circumstances (unless Mortgage Insurance is needed, ie. CMHC), which is qualified at Benchmark rates which are much higher than actual mortgage rates. So depending on your income, this may be the only option.
- You can borrow up to 95% of the purchase price when using a regular mortgage rather than a HELOC. A HELOC can only be used for financing up to 65% of the home’s value.
Advantages of HELOCs
- Used like a typical line of credit, borrowing and paying back when desired.
- Much cheaper than an “unsecured” line of credit typically offered at your bank. Since the HELOC is secured by your home, there is less risk to the bank, meaning they will charge a much lower interest rate than an unsecured Line of Credit. Rates are typically Prime rate plus .5% (currently 3.2%).
- You can make interest only payments if you’d like, making it very favorable when funds are tight.
- You always have the limit granted to you at your disposal. The amount outstanding can vary over time.
- It’s a great source of funds during an emergency (What if you lose your job, or retire, and can’t qualify for a mortgage? This can be a lifesaver.)
- This can be a great tax reducing strategy. Borrow funds from a HELOC to invest and you can write off the interest!