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Tips for First-Time Home Buyers

Mortgage Brokers in Ottawa Offer Advice to Make First-Time Home Buying Less Overwhelming

With a seemingly endless amount of mortgages to choose from these days, choosing the right mortgage can be overwhelming, especially for first-time home buyers. You need to find a mortgage that will suit your current financial situation while also taking into consideration your plans for the future.

Although future plans don’t always work out the way we intended, you can still prepare for the future with a good mortgage. But how do you go about finding this perfect mortgage? First, consult with mortgage brokers in Ottawa so they can help you choose a mortgage suited to your financial situation and prepare for any unexpected changes life may throw your way.

Choosing Your First Mortgage

The first step to choosing a mortgage is figuring out how much you will be approved for—as in, the value of the home you can buy. Your mortgage broker will calculate your income, your partner’s income (if buying a home with another person), your down payment, your debts, and anything else that affects your financial situation.

New Canadian mortgage regulations require federally-regulated financial institutions to complete mortgage stress tests for potential borrowers. These stress tests determine whether or not you can afford to pay for your mortgage if interest rates rise.

These regulations are in place to make sure you don’t buy a home you may not be able to afford in the future. But, as a result, it’s now more difficult to qualify for a large enough mortgage to buy your dream home. So, to make sure you find a mortgage that suits your financial situation and covers a home you’re happy with, consider your options with your mortgage broker.

Porting Options

How long do you plan to live in your new home? This will determine whether or not you will need a mortgage with portability—moving your mortgage to a new property without penalty. If you only plan to live in your new home long enough to renovate and flip it, then you should choose a mortgage with good porting options.

Low-Interest Rates and Prepayments

Ideally, you will find a mortgage with the lowest interest rates. But some of these come with no-frills, as in, less leniency when it comes to porting, refinancing, or paying off your mortgage faster with prepayments.

So, if you don’t plan to move and port your mortgage, or refinance your mortgage, in the near future—say, the next five years—then you can find the lowest but most restrictive mortgages. These tend to offer a cheaper rate but for smaller prepayment privileges, larger penalties for prepayments, and restrictions on breaking your contract to refinance with another lender.

Terms and Rates

Since fluctuating interest rates may seem risky for first-time buyers, many will choose a five-year fixed rate to avoid any surprises. But if you have a steady income, good credit, and manage to save money every month—about five percent of your income—then you may want to choose a variable-rate mortgage with a shorter term. These mortgages tend to have lower rates, allowing you to save more.

For peace of mind and staying within budget, you can also choose variable mortgages that will keep your monthly payments the same despite any changes in mortgage rates. And if you’re still unsure, talk to your mortgage broker about hybrid mortgages. These are split into a fixed rate and a variable rate, providing lower rates while preventing an increase in your monthly payments when interest rates go up.

Buying Your First Home

When you’re ready to buy your first home, enlist the help of professionals to make your dream a reality, and without all the stress of doing this work on your own.

Accountants

Using a cash-flow analysis of your income against current and forecasted expenses, an accountant can give you a realistic budget for how much you can actually afford for monthly mortgage payments.

Mortgage Brokers

With your realistic mortgage payments in mind, a mortgage broker will search for the best mortgage for your current and future goals by negotiating with various lenders. Mortgage brokers are able to negotiate competitive interest rates, handle the paperwork, and guide you through the contract once you are approved for a mortgage.

Realtors

Upon securing a mortgage, you can now start searching for your new home. A real estate agent can provide valuable advice when shopping around. Realtors will also negotiate with sellers and help you find the right home for the right price. And since you’re a buyer and not a seller, their services are free. Realtors only receive a commission when selling a home.

Lawyers/Notaries

You may also wish to hire a real estate lawyer or notary to review your contract before finalizing the sale of the home. They will look for any legal issues in the contract, as well as issues regarding the property. These issues can be addressed with the seller prior to finalizing the sale.

Buying a first home is both an exciting and scary time in life. Since life is rarely predictable, this unpredictability can make choosing a mortgage and buying a home even more daunting. But with the help of Ottawa mortgage brokers, you can prepare for your current and future lifestyle, goals, and financial situations, including the unexpected, such as a job loss or illness.

Mortgage brokers work with a number of different lenders to find the best mortgage for you—which will have enough predictability and flexibility to make your first-time home-buying experience less overwhelming.

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Chris Allard’s experience in the field means he can get you offers with over 50 financial institutions lending in Ottawa. Every lender has many mortgage products they offer, which means Chris and his team will make sure a mortgage caters to your needs while also ensuring you get a competitive rate. Chris Allard is a proud mortgage broker of Dominion Lending Centres, independently owned and operated. Smart Debt broker #12236.