When you buy your first home, the last thing you’re probably thinking about your options as it concerns your loan repayment. The Canadalend loan repayment team is here to help, with options to suit your needs when assessing your payment options on your first mortgage.
What are some of the mortgage basics for first-time buyers?
- A mortgage loan is a sum of money borrowed from a financial institution or a bank to enable you to purchase a house. Canadalend works with all major banks and mortgaging institutions, as well as unlimited private funds.
- Mortgage loan repayments are made up of the principal (the amount borrowed), and the interest (the cost to borrow the money). The goal is to minimize the amount of interest you have to pay.
What are some more technical mortgage terms I should know about?
Mortgage Interest Rate
Mortgage rates are determined by the lender, in most cases, and can either be fixed or variable. Fixed interest rates stay the same for the term of the mortgage. Variable interest rates fluctuate with a benchmark interest rate. Your monthly loan repayment will be the same each month for the term of the loan, but the percentage of each payment that goes towards the interest and the percentage that pays down the principal will change.
Mortgage Term
The mortgage term is the length of time you commit to the mortgage rate, the lender and all associated mortgage terms and conditions. At the end of the term, you either pay off the mortgage or renew the mortgage, possibly renegotiating the terms and conditions.
Amortization
The amortization period is the amount of time over which the entire loan repayment will be made. Most mortgages are amortized over 25 or 30 year periods. A longer amortization period means that scheduled mortgage payments will be lower, but you will pay more interest in the long-term.
Open Mortgage
Open term mortgages may be appealing if you are planning to pay off your mortgage in the near future. Loan repayment can be made in part or in full at any time without penalty. Interest rates are typically higher on this type of loan.
Closed Mortgage
Closed mortgages are usually the better choice if you are not planning to pay off your mortgage in the short term. A closed mortgage usually offers the lowest interest rate available. This type of mortgage is not as flexible as an open mortgage and there are often penalties and conditions attached to pre-payments.
A Canadalend Loan Repayment schedule is based around the following:
- Putting down the largest down payment possible; A larger down payment means that your home ultimately costs less. A smaller mortgage means you will be paying less interest.
- Minimizing the long-term interest by choosing a shorter loan repayment period or amortization period. Choosing a weekly or bi-weekly repayment schedule will save you money by making more payments per year
- Making additional lump sum payments when possible to reduce principal and interest payments
Canadalend offers practical, sensible, and prosperous options for people looking to cut down on the amount of money they pay on their mortgage — specifically, the amount they pay due to interest rates. A Canadalend loan repayment strategy can benefit first-time homebuyers, or buyers embarking on any form of lender-based relationship.