What Type of Mortgage Should I Get?
After yet another Bank of Canada announcement regarding interest rates, and watching the cost of getting a mortgage tumble down into the valley of opportunity, you’ve made the wise decision to buy your very first home. You could not have picked a better time. This juncture of 2021 may go down as the one moment in history when buyers in BC truly had all of the power. That said, you’ve still got some questions, namely “What type of mortgage should I get?”. There are significant options and variables to consider. To help, our Okanagan mortgage brokerage has provided clarity below.
First Time Buyers’ Guide to Deciding Which Type of Mortgage to Get When Buying a Home in the BC Southern Interior
Which Type of Mortgage Rate Option to Choose
Fixed, or a variable rate mortgage? This is the foremost question.
For the uninitiated, a fixed rate mortgage is a home loan where the interest rate remains the same through the term. It’s best suited to the risk averse, those who want to know in advance exactly what they will have to pay each month, and know exactly where they stand in regards to the amount they have paid towards the principal.
By contrast, a variable rate mortgage is a home loan with an interest rate that will fluctuate with the economy and the Bank of Canada’s prime rate throughout the mortgage term. That correlation is why the variable rate has been behaving much like a fixed rate of late, as the prime rate has not budged in about 2 years. That said, this type of loan is tailored to those who don’t mind some risk, and who may be rewarded in the form of a quick turnaround on paying off the principal.
Definitions aside, deciding between a fixed or variable/adjustable rate mortgage depends a variety of household factors that we are more than happy discuss with you. Give us a ring at 250.493.9111 to chat about options.
What Mortgage Term Length to Choose
The mortgage term is the length of time your mortgage contract is in effect. It can range from just 6-months to 5-years or longer, depending upon the type of rate (as per above) you choose. At the end of each term, a mortgage renewal is required until you have paid off the home loan in its entirety.
The length of your mortgage term has an impact on your interest rate (fixed or variable/adjustable), along with the penalties you may have to pay if you default on your contract, in addition to how soon you have to renew your mortgage agreement. For added insight, we recommend reading the Government of Canada’s guide to mortgage terms and amortization. If you’re not up for digesting fairly bland reading material, you can save yourself the hassle by calling us at 250.493.9111 for a customized look at your options. And as always, the consultation and service is FREE to you.
Which Type of Lenders to Approach
Should you go to one of the banks that you pass by on your daily commute? Are BMO, CIBC,, RBC, Scotia Bank, or TD your best options? These traditional channels can most certainly work for those who have their financial affairs in order. The big banks, don’t like risk. They will look closely at your existing assets, income over the last two years, and dig deep into your credit history. If you have all of your financial ducks in row, these lenders will look favorably upon you as an investment. That said, it’s still very important to partner with a mortgage broker as they can get you access to lower unadvertised rates through the big banks, rates that are lower than the ones they themselves are advertising. This is made possible due to the longstanding relationships that a broker will have established with the financial institutions. A reputable broker has access to “bulk discount” rates that an individual would not be able to access, much less know about.
However, you may not find a bank (or credit union) option to be a good match for your borrower status, especially if you don’t have a well-established credit history to back your financials. In this case you may instead consider private lenders. View more on alternative mortgage lenders, or simply contact us at 250.493.9111 to discuss this alternative means to securing a home loan.
Which First Time Buyer Incentive Program to Choose
There are very lucrative incentive programs available to you as a first time buyer. However, this just adds to your growing list of questions, as you want to make sure you choose the program best suited to your needs. You may even find that it’s better to forgo them altogether (albeit rarely). It all depends on finding a match to your financial situation. These programs include the following:
- First-Time Home Buyer Incentive
- RRSP Home Buyer’s Plan
- First-Time Home Buyer Tax Credit
- GST/HST New Housing Rebate
- Green House Program
For more information on incentive programs currently available to first time buyers in the BC Southern Interior, call us at 250.493.9111.
The market is primed for new buyers, and there is no better place to buy a home in BC than right here in the Okanagan Valley. So what type of mortgage should you get? Let’s answer that question together.