Questions to Ask Before Getting a Mortgage

Getting a mortgage is probably one of the most important financial decisions that you will make in your life. First, a mortgage involves some legality. Second, and more importantly, it involves a lot of money. Therefore, it is just rational for anyone planning to get a mortgage to exercise prudence especially in the earlier stage of the game.

It is indeed a worthy effort to shop around for products that would offer the best mortgage rate - Toronto or elsewhere. After all, since you will be "stuck" with this financial responsibility for long, might as well get the best one that you can obtain.

Before getting a mortgage, make sure that you have asked yourself the following questions. More importantly, make sure that you have answers to the questions below:

1. How much amortization can you comfortably pay?

Knowing how much money you are comfortable giving out on a monthly/yearly basis will help you in choosing your mortgage. Remember, this amount should not be too heavy for you - this should not take on a very large chunk of your budget as you will be paying for this loan for years.

If on the first year you're already crippled with your payables, then you probably have not shopped for the best mortgage product available for you.

2. How much money can you set aside for down payment?

Usually, a mortgage would require a down payment. Therefore, this should be one of your considerations in choosing a product. How much money do you have on hand that you can spare as down payment?

The usual case is, the bigger your down payment, the lesser would be your interest rate. So when you can, make a bigger down payment.

3. Do you want a long-term or a short-term loan?

Short-term loans impose lesser interest rates but require larger amortizations. On the other hand, long-term loans impose larger interest rates but require smaller amortizations. Which of the two scenarios are you more comfortable with?

Experts recommend that in any mortgage or refinancing - Vaughan or elsewhere - a short-term loan is always better. So if you can afford to buy a house and pay if off right away, do it. Don't prolong as you have a price to pay for that, literally.

4. Do you expect your income to increase over the next few years?

Mortgages can either be fixed-rate or adjustable. The former is one where the interest rate remains constant throughout the term. The latter, on the other hand, means that the rate changes over the years, as determined by a few economic indicators. In addition, the term of an adjustable rate mortgage is usually shorter compared to fixed-rate.

If you expect your income to increase within the next five years or so, then getting an adjustable rate mortgage is more preferable. Your amortization may increase but since you have an increasing salary to pay for that, then you will always do fine. Once again, a short-term loan is almost always better than a long-term loan.

If you were able to satisfactorily answer the questions posed above, then you are ready to shop for mortgage products. Most importantly, if you have answered the questions above with conviction and determination, then you are ready to get a mortgage.

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