Financing Your Condo Purchase

The purchase of a Toronto condo is one of the biggest decisions and significant financial investments a consumer makes. It is extremely important that you do your research and educate yourself on key mortgage terms in order to make an informed decision about what mortgage product is best for you.

Different consumers are at different stages in their lives. They have different mortgage financing needs and there are literally hundreds of mortgage products to choose from.

The best result will occur when you work with a mortgage professional who can offer sound, professional advice and a mortgage solution that matches your needs and circumstances. Above all, you need to be comfortable with your mortgage choice.

WHAT IS A MORTGAGE?

Few people can come up with the entire amount of money required to pay for the cost of a home. A mortgage is a loan of the money most people require for financing the purchase their home.

A mortgage allows individuals to buy property without paying the full value all at once.

Step 1. Pre-arranging your mortgage

It is important to obtain a pre-approval for the amount of money you can borrow from a lender and avoid looking at homes that may be out of your price range. The pre-approval process is usually guaranteed for a period of 90 days. If interest rates increase in this period you get the preapproval rate, if they go down you get the lower rate.

There's more to mortgage than the interest rate

Step 2. Down Payment Options

When negotiating the amount of your mortgage, you should be aware that you will most likely be required to provide a down payment which is the money you put towards the purchase price of your home

The down payment is a lump sum you are required to contribute toward a condo's purchase price. Depending on the amount, your mortgage will be classified as either "conventional" (a down payment of 25% or more) or "low downpayment" (a loan of less than 25%)

A high ratio mortgage must be insured to protect the lender. This insurance is called mortgage default insurance. It protects the lender in case the borrower isn’t able to repay the loan.

The more money you can put down, the less you will have to borrow, and the less interest you will have to pay over the length of the mortgage.

For more information on Zero Down and Other Sources for Downpayments

The amount of your mortgage is determined by the purchase price of the home less the amount of your down payment. As with all loans, a mortgage must be repaid to the borrower with interest. There are different types of repayment methods which make up the different kinds of mortgages available.

Like all loans, regular payments made over time go towards paying down the mortgage. These payments are made up of two parts – one part goes towards paying the principal (the amount of money borrowed) and other part goes towards paying the interest (the fee charged for borrowing the money.)

Step 3. Choose Features and Options that fit your needs.

A mortgage should be customized to fit your individual priorities, whether that means security, flexiblity or a combination of both. You can get terms from 6 months o 18 years.

. Pick a shorter term if you believe interest rates will drop.

. Longer terms are preferable if stability of mortgage payment amounts is important to your budget and will give you peace of mind.

Want to Save Money?

May is District Manager of Mortgage Alliance Primal Financial as well as a real estate broker owner of Realty Executives. You can reach her at 416-410-1080. Don't be shy, no question is a dumb question when thousands of dollars are at stake!

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