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Making the Right Decisions With Your Mortgage

When it comes to buying a house or even re-financing it you have some big decisions to make. First you have to decide on who the lender is going to be. Most likely you will want to approach one of the lending institutions for this such as your bank, or companies that are mortgage lenders. Then again you may be going after a private lender. Most that take this route do so because they are having difficulty getting approved by the mainstream lenders.

Once you have made the first decision then there are a few more to make. You have to think about things such as whether you want to go with a fixed rate mortgage or one that has a variable rate. Then how do you want to arrange for the payments. Do you want to pay weekly, biweekly or monthly? All of these decisions are important ones and can make a big difference in how your mortgage is handled over the next few years.

While these are all important factors to consider you really want to focus on the type of mortgage you are choosing in regards to fixed and variable. In helping you to make this decision you need to know what the prime rate is at the time you are obtaining your mortgage. Prime rate is always a good thing because it is the rate that major banks give to those customers who they deem to be the most creditworthy. If you can qualify for this rate then you are in a good financial position. It doesn’t mean that if you don’t qualify that you won’t get a mortgage. It just means that it will be calculated for you with the prime rate plus some extra depending on your financial situation. If you are not going after a variable rate mortgage then you won’t need to be concerned about the prime rate. 

Which mortgage is better is really going to depend on the economics. If the prime rate doesn’t change then this is good for you, but if it increases then so do your mortgage payments. A fixed mortgage rate is based on the Government of Canada Bond Yields plus extra.

If you are the type of person that likes stability and security with your finances then you will probably feel more confident with a fixed rate. This way you know exactly what you are going to be paying for x number of years. If you are one that doesn’t mind taking a gamble then the variable mortgage will be more to your liking.

 

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Sam Seidman, CPA, CA, LPA
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Toronto, Ontario
M3H 2S3

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Email: sam@torontoaccountant.ca

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