Christian finance and consumer credit counseling & debt management
Do's and Don'ts
Before you apply for a mortgage
There are a number of things you should take into consideration if you are looking for a mortgage, or if you already have a mortgage. The following table summarizes the most important do’s and don’ts you should consider before, during and after you apply for a mortgage.
Do's
Do remember that the shorter your amortization period is, the more you will save in interest charges.
Do remember that adding a few dollars to your regular payment may save you thousands of dollars in interest charges and reduce your amortization period.
Do keep in mind that the pre-approved loan may overestimate what you can actually afford to pay.
Do keep in mind that changes in interest rates may substantially increase your housing costs when you renegotiate your next term.
Do request a copy of your credit file before starting to shop around for a mortgage.
Don'ts
Don’t underestimate the extra costs that you must pay when you buy a house. These represent 1.5 to 4 per cent of the price of the home and should be budgeted.
Don’t underestimate a small interest-rate difference between offers. A small difference may have a major impact on the interest you pay in the long run.
Don’t compare offers made to you based on the interest rate only. Compare offers using the Annual Percentage Rate (APR) which – in addition to the interest rate – includes all other fees related to your mortgage.
Don’t forget that the financial institution may guarantee you an interest rate 60 to 120 days before you actually take out your mortgage. This may protect you from any increases that may occur during this period.
Your responsibilities
Do's
Do know your financial situation and how much you can afford to pay before starting to shop around for a house and a mortgage.
Do shop around to obtain the product that best suits your needs.
Do read and make sure you understand the terms and conditions of your mortgage contract.
Do ask questions to help you better understand your contract.
Don'ts
Don’t accept the first offer made to you. Although it can, in the end, represent the best choice, make sure you have explored other offerings in order to make an informed decision.
Don’t limit your shopping to one single financial institution or mortgage broker. To find the best product, you should visit many financial institutions and mortgage brokers.
Don’t skip a payment. This may affect your credit rating and put you in a bad position, as you will have to keep up in the future and absorb higher interest charges.
Your rights
Do's
Do know your rights.
Do keep in mind that all federally regulated financial institutions must specify in your mortgage contract the nature and the amount of all interest and non-interest charges.
Don'ts
Don’t forget that federally regulated financial institutions must provide you with specific information before you sign a mortgage contract.
Don’t forget that a federally regulated institution cannot apply undue pressure on you to buy another product as a condition for accepting your mortgage application.
After you have applied for a mortgage
Do's
Do take advantage of the different options available to you to pay your mortgage off faster without any penalty, if you can afford it.
Do remember that your contract may enable you to minimize the penalty charges (lump-sum payment or blend-and-extend option) if you want to break your mortgage before the maturity date.
Don'ts
Don’t wait until you want to break your closed mortgage contract to find out that penalties may be imposed by your financial institution for doing so. You should know, from the beginning, that such penalties exist and how they are calculated.
Don’t wait for your financial institution to contact you at the time of renewal. Keep an eye on the interest-rate fluctuations over the term of your mortgage and start shopping for a new mortgage about four months prior to your renewal date.
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