Borrowing Mortgages For The First And Next Homes

Borrowing the first mortgage is not easy. There are so many things that you have to do right to ensure your home loan application is not rejected. Being a first time home buyer can be a disadvantage. However, you can easily overcome the obstacles if you have the mortgages checklist ready before approaching a lender.

Do Your Homework

In case you are borrowing a home loan for the first time, you should first take stock of your budget. How much can you borrow for a home? You must have a good understanding of all costs related to the homeownership. It will help you avoid borrowing beyond your limit.

If you are looking for refinancing, check your current mortgage lending documents. It may be lying at the bottom of your filing cabinet. Find it and read it carefully. Check what the term of the contract says. Identify the current lender. What is the interest rate your lender is charging you? What type of home loan did you borrow? How many months or years are left to repay your mortgages? What types of penalties are applicable to you if you break the agreement terms? You need all this information to determine your next steps.

Contact Your Current Lender or Find another Lender

Is your current lender offering a better rate to its new customers? You can request the same rate if you have always paid your mortgage repayments on time. The lender is sure to consider your request if you have been loyal to it.

Contact your lender’s customer service team and inform it you are looking for a better deal from other mortgage lending companies. Most lenders are eager to retain old customers. They are ready to offer attractive deals to loyal customers who have paid their loan repayments on time. Dealing with the same lender is in your interest because it helps you avoid extra paperwork. You receive many other benefits if you borrow from the same lender once again.

Contact Professional Mortgage Consultants

It is not easy to understand the advantages and disadvantages of each mortgage offer available in the loan market. Should you go for a variable or fixed rate? Which one is better – monthly or rapid bi-weekly repayment? You cannot find the right answers without consulting the mortgage professionals who have experience in this industry.

Contact a Community Lending Centre mortgage broker to receive guidance on these matters. You will learn which mortgage product is most suitable for your borrowing needs. The broker will evaluate your documents, your borrowing requirements, incomes, and other information to determine if you should refinance at the current rate. The broker will help you find the lowest mortgage rate.

Research by the Canadian Mortgage Professionals shows most Canadian mortgage borrowers received a lower interest rate when they borrowed their mortgage through a mortgage broker. Their interest rate was reduced up to 125 points while it was 114 points for people who borrowed it directly from a credit union or bank.

Locking at the Low Rate

Should you dump your existing lender and move to a new lender? What are the advantages and risks if you go ahead with this plan? It is better to get the approval and ask the lender to lock the loan rate. It solves the dangers of mortgage rate increases after you have left the current lender and started negotiating with a new lender. You can hold the pre-approved rate for 120 days without paying any charge.

This option works well when you are looking for a home but have not found it as yet. By locking the rate, you are under no pressure to buy the new home immediately.

The Importance of Renewal Date

Start looking for a new mortgage rate at least 120 days before the renewal due date of your existing mortgage. Research more information and find the best deal after comparing mortgages offered by different lenders. This way, you will have sufficient time to compare the rates, terms, and conditions of different lenders.

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Considerations For Choosing A Mortgage

When the thought of a mortgage comes up, the first thing people tend to consider is the interest rate charged on the mortgage. However, when choosing a mortgage lender, there are more factors to think about than the interest rate. For instance, the length of the loan can mean different things for different people. While a short-term mortgage is suitable for some, others may need to choose a loan with a longer-term.

What You Need to Know About Terms in Mortgages

You might be surprised to learn that the amortization period is not the same as the term of the mortgage. The amortization period is the length from start to finish. The majority of mortgages have an amortization period of 25 years. This means that if you play as the original guidelines show, it will take 25 years to pay off your loan. But did you know that there can be differences throughout your mortgage? In between, you may need to negotiate different payments for set periods of time.

A mortgage term (not amortization period) is usually set for five years. This means that you pay on the principal plus interest at a specific rate for those five years before negotiating another five-year term of payment. The actual amount of time for a mortgage term can vary from months to decades. RBC offers as long as a 25-year term on mortgages.

Is a long term mortgage for you?

The 10 years fixed term mortgage is popularly offered by banks. The interest rate on these mortgages ranges from around 4 to 7 percent. The interest rate is a little higher than you might find with a five-year term. but there is a sense of security in knowing that your rate will stay the same for ten years.

Shorter Term Mortgages Offer Lower Rates

A short term mortgage has lower interest rates, but over time, the rates can change, and the amounts you pay can change when it is time to renegotiate your mortgage. Still, your monthly premiums will be lower, and it could save money in the long haul.

To Break or Not to Break Your Mortgage

If you are watching the interest rates drop and stay low while your current mortgage stays the same, you might be considering breaking the mortgage and obtaining a new one for the lower interest.

You should understand that breaking a mortgage comes with a penalty. The penalty entails paying for three month’s worth of interest payments or using the IRD formula to calculate your penalty. An IRD is the interest rate differential or the difference between the initial rate of your mortgage and which mortgage is available at the current time. The penalty will be chosen according to which comes out at the highest cost, and you will have to pay the highest cost.

Will the penalty be worth it?

You need to know how much interest you will pay over the cost of your current mortgage if you continue with it versus how much you would end up paying with a lower rate. If you find that you save more by paying the penalty and switching to the lower rate mortgage, then the change maybe your best option. Still, before you make that decision, make sure there aren’t other fees that are associated with the potential to cause more financial harm than good.

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About Mortgage Lending Expert

Michael Chulak is president of and is also a real estate, mortgage lending, and homeowner association attorney.

Born in Los Angeles, he obtained a Bachelor of Science degree in Business Administration from California State University at Los Angeles and a Juris Doctor from Ventura – Santa Barbara College of Law. In addition to being an attorney, Michael Chulak is a licensed general building contractor and a California real estate broker. In 1979, he earned the Certified Property ManagerŪ (CPMŪ) designation.  He has been an instructor at six California colleges including UCLA. Course topics have included homeowner association law, real estate finance, property management and leasing, legal aspects of real estate, and the foreclosure and loan modification process.

Michael Chulak has provided legal advice to hundreds of corporations, LLCs and partnerships and has provided consulting services to over one hundred law firms. He has testified as an expert witness more than 125 times over the last twenty five years.

Michael Chulak formerly served as President and CEO of Union America Mortgage and Equity Trust (UMET), a New York Stock Exchange listed Real Estate Investment Trust (REIT) doing business in nineteen states. Michael Chulak also served as Senior Vice President of Long Beach Savings where he was responsible for loan originations, loan underwriting, real estate appraisals, loan closings-escrows, construction lending, joint ventures, and the apartment construction division. A complete resume outlining his experience in real estate lending is available at your request.

There will be no charge for the initial consultation.

• Income Property Lending         • Construction Loans

• Residential Real Estate Loans

• California Homeowner Bill of Rights

Michael Chulak is available as a mortgage lending litigation consultant and expert witness in any of the following areas:

•Standard of Care
•Secondary Market
•Loan Sales
•Construction Lending
•Loan Broker Relationships
•Loan Repurchase Agreements
•Loss Mitigation
•Loan Modifications
•Loan Servicing
•Risk Analysis
•Homeowner Association Loans
•Hard Money Loans
•Private Money Loans
•Mortgage Banking
•Wrongful Foreclosures
•Lender Liability
•Residential Loan Underwriting
•Income Property Loan Underwriting
•Sub Prime Loans
•Loan Documentation
•Funds Control
•Construction Inspections
•Disclosure Requirements
•Lending Procedures
•Loan Participations
•Loan Escrows
•Construction Loan Disbursements
•Loan Processing
•Predatory Lending
•Private Trust Deeds
•Mortgage Brokerage
•Negligent Foreclosures
•California Homeowner Bill of Rights

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