Mortgage 101: Before You Sign — Mortgage Options for First Time Buyers

As your life changes, your needs, goals and priorities change too. Buying your first home is not only a major milestone that brings its own changes, but it’s also a major financial investment.

Many first-time home buyers aren’t aware that mortgages may provide options that give you financial flexibility and opportunities for when life changes.

Here are a few options to consider when choosing the right mortgage for you.

Option 1: Prepayments*

Many mortgages come with prepayment options — ways to pay your mortgage down sooner than your mortgage term. Prepayment reduces the amount of time you’re paying off your mortgage, which can help you save on interest.

For example, if you come into some money, receive a raise or have the opportunity to free up room in your budget, you may want to put more money against your mortgage to pay it down faster. Some prepayment options include:

• Making a Double-Up payment. With this option, you can prepay between $100 and the equivalent of your regular monthly mortgage payment (of principal and interest) on any payment date.

• Making a principal prepayment. If you have a closed mortgage, you can prepay up to 10% of your original principal amount once every twelve months. If you have an open mortgage, you can make a $500 principal prepayment as often as you like. You can also make principal prepayments of any amount when you renew your mortgage.

• Increasing your payment amount. Once every 12 months, you can increase your mortgage payment by as much as 10% without any prepayment charge. The increased amount goes directly to your principal.

Option 2: Mortgage Add-Ons

With a mortgage add-on option (home equity loan) you can take advantage of the equity you’ve built in your home to access additional funds*. Using the equity in your home may be a lower cost way to borrow money than taking out a traditional loan. You can borrow up to 80 per cent of the appraised value of your home, less your mortgage balance. This can help you finance large expenses — like a home renovation or education costs — or even consolidate debt. The additional funds are added to your existing mortgage.

Option 3: Moving your mortgage

Life doesn’t always stay in sync with your mortgage term. While buying a home is on your mind right now, if your family grows, for instance, you want more space. If you have a great rate, you probably want to take that with you to your new home. Moving your mortgage lets you transfer your existing interest rate and terms or increase the amount of your mortgage and blend your current rate into a new one.

Option 4: Protecting your mortgage

Another option to consider is protecting your investment, as well as your family and your lifestyle from the unexpected. Even if you’re buying a home with a partner, you might want the option of having a financial safety net for your mortgage if something happens and one of you can’t work. Your home is likely to be the largest single purchase you ever make — and your most valuable asset — so make sure your mortgage has the option to protect your investment (and your family) in case the unexpected occurs.

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