The numerology of your mortgage

Pikkert looks at the numbers thatshow up in 99% of mortgages

This week I thought I would take a look at the numbers which show up in 99% of mortgages.

Down payment – You must have at least 5% to put down on a home. A little known fact is that even if you have purchased with 5% down you may do so again. Including a second home for family or a vacation home.

Closing costs – In addition you must have another 1.5% of the purchase price for the closing costs. These are things like legal fees and title insurance.

Term – Your mortgage will be broken into small pieces ranging from 6 months through 10 years. Though most Canadians choose the 5 year fixed rate mortgage, it is important to note that most mortgages are broken at the 38 month point.

Amortization – This is the term used for the total length of time of the mortgage. If you have less than 20% to put down you cannot go past 25 years. If you have more than 20% you can go up to 30 years.

Qualifying rate – The government made changes not too long ago and now all mortgages must qualify at either 5.14%, the current Bank of Canada posted rate or 2% higher than the rate you are being offered.

Interest rate – Though you have to qualify at the higher rate, you can search the market for the best possible rate for your situation.

Property taxes – With home ownership comes property taxes. You can pay them monthly through the city or have them included in the mortgage. Some banks will allow you to pay them annually but all have the right to insist on verification that they are up to date.

Insurance – There are four types of insurance.

Mortgage default – when you have less than 20% down you must have this. It is a one time amount and is based on a percentage of the mortgage. It is added to the mortgage.

Title – Title insurance is also a one time expense and is often taken in lieu of an RPR. It will cost about $309 and is collected at the lawyer’s office.

Homeowners – This is a monthly expense for all homeowners. When you have a mortgage you are legally responsible to have homeowners insurance in place.

Life/disability – It is a very good idea to have life and/or disability in place to protect your family in case of the worst case.

So there you have it!

The numerology of your mortgage involves many facets so again make sure you choose the best mortgage professional possible to help you through this process.

Pam Pikkert is a mortgage broker with Mortgage Alliance – Regional Mortgage Group in Red Deer.

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