Okanagan Mortgage Broker Offers Mortgage Tips for First-time Home Buyers

Have you just decided to buy a house in Vernon? It’s an exciting time, but there’s also a big learning curve, especially for first-time home buyers. As an independent mortgage broker in Kelowna and Vernon, I always suggest taking time to understand mortgages before you even begin looking at houses in the Okanagan so you can quickly find the home that’s right for you.

Let’s talk a little about the basics and some insider knowledge that’ll give you a leg up.

Mortgage tips for first-time home buyers:

1.      Put down as much of a down payment as you can. Try to nail down the minimum amount you can put down towards the purchase of your home. It should be at least 5% of the purchase price: For a $200,000 home, the minimum down payment is $10,000. But it’s a good idea to put down more so you can save on interest charges. If you have RRSPs, you might qualify under the Home Buyer’s Plan to use those funds toward your down payment. 

 

As a first-time home buyer, arm yourself with these tips so you can secure the mortgage rate and term that's best for you.
As a first-time home buyer, arm yourself with these tips so you can secure the mortgage rate and term that’s best for you.

2.      Go with the lowest amortization period possible. The ‘amortization period’ is how long it takes you to fully pay off your mortgage. Right now in Canada, the longest period allowed is 25 years. Longer periods mean lower monthly payments, but over those 25 years, you could actually save thousands of dollars in interest. Check out this great chart that demonstrates how much you can save with a lower amortization period.

3.      Investigate mortgage terms and types. When you get a mortgage with a mortgage broker in Vernon, you choose a term—typically five years. When that time is up, you can renegotiate your mortgage (the interest rate, the payments, the amortization period, etc. You can decide on the term (length) of your mortgage, and whether it’s open or closed.

 Open mortgages offer the option to make prepayments and/or fully pay off your mortgage before the term is up. Usually, the interest rate is higher.

 Closed mortgages have lower interest rates, but you may or may not have to be able to pay more of your mortgage off and you usually have to pay a penalty to break your mortgage term (if you choose to sell your house and end the mortgage before the five-year term is up). If you want a little flexibility, Vernon mortgage brokers can give you details about prepayment options because they vary from lender to lender.

 4.      If you find a really low fixed interest rate, go for it. Choosing a fixed or variable interest rate mortgage is one of the biggest decisions you’ll make about your mortgage because it will determine how much you’ll pay in interest during your mortgage term.

Fixed interest rate mortgages mean the interest rate and your payments are set. Homeowners risk paying a bit more in interest, but many like the stability of knowing how much their monthly payments will be and how

much will go towards interest.

Variable interest rate mortgages mean when interest rates go up, your payments go up. When interest rates go down, your payments go down. Unfortunately, we never know which way they’ll go, so it’s hard to predict how much your payments could end up being and if you’ll still be able to meet your amortization period.

Here’s a great example from someone debating between a fixed or variable interest rate mortgage.

Need more help understand how mortgages work so you can start looking for your first house in Salmon Arm, Penticton, Kelowna or Vernon? Talk to a trusted mortgage broker in the Okanagan who can give you the attention you deserve. Contact Kal-Mor Mortgages and Investments today.