First-Time Home Buyers: Mortgage Basics

2 minute read

Are you thinking of buying your first home? This kind of decision can be stressful, especially in today’s uncertain economy. However, the more information you have, the better equipped you are to make the best decision for yourself and your family. Here are a few things to consider when deciding to buy your first home.

You probably already know that house prices in Ontario are very high. In fact, house prices soared in Ontario over the last 5 years. In some neighbourhoods, house prices more than doubled! The good news for those thinking of getting into the housing market is that house prices have actually started to come down in some places. However, if you are like the vast majority of people, you don’t have hundreds of thousands of dollars sitting around and you will need to get a mortgage to purchase a home.

  • A mortgage is a loan that helps you buy a home. The home itself acts as collateral for the mortgage. Like any loan, you pay interest on the amount you borrow. Your mortgage payment (the regular payment you make back the lender) depends on the size of the mortgage (how much you borrowed), the interest rate, and how long you take to pay it back (the amortization period). A mortgage term is the length of time that you are committed to a mortgage rate and lender (usually somewhere between 1-5 years).

  • Mortgage calculators can be very helpful in allowing you to play with the numbers to see what you can afford, how big your down payment should be, and what amortization period you should consider.

  • There are two types of mortgages to choose from in terms of interest rates. Fixed rate mortgages commit you to a fixed interest rate that will not change for the duration of the mortgage term (somewhere between one and five years). A variable rate mortgage has an interest rate that changes along with the Bank of Canada’s prime lending rate.

  • There are also a variety of payment options when it comes to mortgages. You can pay your mortgage weekly, bi-weekly, semi-monthly, or monthly. Generally-speaking, the more often you make a payment, the faster you will pay off your mortgage. If your cash flow allows it, try to make accelerated mortgage payments. With an accelerated mortgage, you make an extra monthly mortgage payment each year, spread over your regular payments. The “extra” payment is applied directly against the principal of the mortgage. Over the long term, you could save yourself a lot of money!

  • Make sure you get pre-approved before you start looking at homes. This will prepare you with the right information so that you can make the best decision in terms of house prices. Kindred Mortgage Experts will walk you through all of the options available to you so that you can make peace with your money, and get into your first home faster!

Keep your money closer to home with a mortgage from Kindred Credit Union. Find out about the new First Home Savings Accounts (FHSA) with Kindred.

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At Kindred, we believe you have a better choice for banking. We believe values and faith are central to life, and financial decisions are not values-neutral. In fact, we think financial decisions can impact the world in amazing ways—so our values are integrated into everything we do. We call this Banking with Purpose.

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