Arranging Your Mortgage: A Simple Guide for Homebuyers
Buying a home today is an attractive opportunity. Interest rates remain historically low, and the housing market offers a variety of homes to suit nearly every budget and lifestyle. But navigating the mortgage process can feel overwhelming, especially with ever-changing rules and industry jargon.
The good news? Understanding the basics and having the right guidance makes arranging a mortgage far less intimidating. Your REALTOR® and your bank’s mortgage specialist are your best resources, ready to help you every step of the way.
Who Can Lend You Money?
Banks and trust companies are the most common lenders, but credit unions and private lenders are also options. Mortgage brokers provide another route—they can access a wide variety of lending sources, from domestic banks to pension funds, real estate syndicates, and even foreign banks.
In some cases, you may have the opportunity to assume an existing mortgage from the seller. This can simplify the buying process by reducing paperwork and saving on legal and closing costs. The trade-off is that the interest rate on the existing mortgage may not be as favourable as current rates.
Types of Mortgages
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Conventional Mortgages: Lenders typically offer up to 75% of the property’s appraised value or purchase price. Buyers provide the remaining 25% as a down payment.
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High-Ratio Mortgages: If you don’t have the full down payment, these allow borrowing up to 95% of the property value, but require mortgage insurance, typically costing 1–3% of the mortgage amount.
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Variable-Rate Mortgages: Payments remain fixed for a term, but interest rates fluctuate with the market, affecting how quickly your principal is paid down.
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Fixed-Rate Mortgages: Interest rates remain constant for the negotiated term, providing predictable monthly payments.
Understanding Key Mortgage Terms
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Amortization: The total time over which your mortgage is scheduled to be paid, commonly 25 years. Shorter periods reduce the total interest paid.
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Prepayment Privileges: Options to pay extra toward your principal, saving interest over the life of your mortgage.
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Open vs. Closed Mortgages: Open mortgages offer flexible prepayment options, while closed mortgages generally restrict early payments.
Tips for a Smooth Mortgage Process
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Get pre-approved before house hunting—this helps you understand your budget and strengthens your offer.
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Compare multiple lenders and mortgage options to find the best rate and terms for your situation.
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Work closely with professionals who understand your local market and financing options.
Arranging a mortgage doesn’t have to be confusing. With a little preparation, knowledge of the options available, and guidance from experienced professionals, you can secure the right financing for your dream home with confidence.
Ready to explore your mortgage options? Schedule a consultation with the MovingSimcoe.com team today and take the stress out of home financing as we can refer you to experts we know!
