For most of us purchasing a home today, a mortgage is a necessity unless you are fortunate enough to be able to buy your house outright. Calgary mortgage broker Candice Light will work with you to make sure you completely understand your mortgage payment so that your future of home ownership is clear.
Today’s mortgages actually came about as a result of the Great Depression. Before that particular financial crisis struck, most lenders required buyers to put down half the price of the home. Compare that to the current standard of 20 per cent (lower under some programs), and you can’t help but appreciate just how far we have come.
The Parts of a Payment
Your monthly mortgage payment is usually divided into four parts: principal, interest, taxes, and mortgage loan insurance (if necessary).
- Principal is the total amount of your original mortgage, not including interest. A portion of every payment goes toward repaying the principal you owe on your mortgage. Early in the life of a loan, most of your payment will go to interest, but as the balance owed decreases, the amount of principal you pay each month will increase. Near the end of the loan, your payment will go almost entirely toward the principal. If you can afford it, you can accelerate this process by paying an additional amount toward the principal each month.
- Interest is how lenders profit from mortgages. Higher interest rates mean higher payments, which reduces the amount a homebuyer can afford to borrow. Calgary mortgage brokers have access to a wide variety of lenders and can help you get the best of today’s available mortgage rates. Interest charged is based on the current outstanding balance, so at the beginning of your loan, a larger percentage of your payment will be going to interest. Over time, as the principal decreases, the amount you pay toward interest each month will also decrease.
- Taxes on your property are often included in a mortgage to make it easier to manage payments. Property taxes are used by local governments to pay for public services like schools, roads, infrastructure, fire and police services. Because they can be a large amount and are usually assessed yearly, paying a smaller amount as a portion of your bill each month means you don’t have to worry about saving up enough to cover them annually. Your lender will hold taxes collected in an escrow account and pay them when they are due.
- If you purchase a home with a down payment less than 20 per cent of the purchase price, you will be required to take out mortgage loan insurance (also loan as loan default insurance) until you have earned the required 20 per cent equity in your home. This insurance protects the lender in case you become unable to repay, and is provided through the Canadian Mortgage and Housing Corporation (CMHC) and Genworth. It is not at all unusual to have an insurable mortgage…in fact, it’s the norm! The services provided by Calgary mortgage broker Candice Light can assist all kinds of clients through the pre-approval process.
Your Calgary Mortgage Broker is Here to Help!
Mortgages By Candice offers a range of services for current homeowners and those thinking about entering the market. Most people know a broker can help them find a great rate, provide expert guidance and answer questions throughout the lending process, but Candice can also help you select from many options to help you meet your financial goals throughout the ownership of your home, including:
- Debt consolidation
- Home equity loans
- Purchase plus improvements
- Renewals and refinancing
- Reverse mortgages
- Rental purchasing
- Commercial mortgages
- Construction loans
- and more!
Candice Light believes all homeowners should know what to expect from their mortgage payment. When you understand the parts of your payment and how it works, you will be better prepared to make informed decisions for your future. To learn more about how Candice can help you realize your financial goals, contact us today!