Posts Tagged mortgage purchase
Your Mortgage will Never be Paid; How much Mortgage Interest are you Paying?
Posted by Top Home Loans in General Banking, Mortgage Advice, Mortgage News on June 26, 2010
Believe it or not, you could be paying up to 368% the price of the property you purchased. This means that you are paying almost 4 times the purchase price for your house.
Paying off mortgage interest is one of the biggest expenses of your life. Even though the rates on a mortgage can appear to be quite low, the amount of interest that you pay over the course of your mortgage is quite substantial. Even if you have the best mortgage rate, you still could be paying several times more interest than principle against your mortgage.
For example, let’s say you buy a car, and instead of paying it over the usual five years, you decide to pay it over 35 years. In this case, you would end up paying $27,481 in interest on a $20,000 vehicle. That means that you would have to pay more than double to purchase the car. A car that retails for $20,000, you would be paying $47,481. That is almost 150% higher than the cars actual cost. With cars and other material goods, this is absurd; however, in home ownership, the market allows for these absurd prices.
Let’s look at an average $400,000 property in Toronto.
Here are the details of your mortgage:
- Purchase Price: $400,000
- Down Payment: $20,000 (5% down payment)
- CMHC Fees: $11,970
- Land Transfer Taxes: $8,200
- Closing Costs: $8,000
Mortgage Terms:
- Total Mortgage Amount: $392,000
- Amortization: 35 Years
- Payments: $2,216/month
- Interest paid per month: $1,936
- Principle paid per month: $280
Interest and Expense Details:
- Interest Paid after 35 years: $538,631
- Total Payments: $930,631
- Total Payments including initial expenses: $966,631
- Total Payments including initial expenses and property taxes: $1,176,631
The property costs almost 300% the initial purchase price, and this is not even taking into account mortgage refinances. The average home owner will refinance their property once every three to four years to pay off debt and renovations. When a home owner does this, they usually add on a few years to their amortization.
Let’s assume that the average home owner refinances 5 times over the course of their mortgage term. Each time they refinance, they add on an additional 3 years to their mortgage term. This means that they will be adding on approximately another 15 years to their mortgage term.
With refinancing, the home owner can expect to pay as much as $833,321 over the course of their mortgage term, and as much as $1,225,321 in total payments. This means that the home owner as much as $1,471,321 for a $400,000 property.
Do you want to pay 368% the listing price of the property you are looking to purchase?
Save your Mortgage from the Bank. Simply Mortgages can Help!
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Your Mortgage Pre-Approval may no longer Valid; Why many Mortgage Pre-Approvals are not Accurate
Posted by Top Home Loans in Mortgage Advice, Mortgage News on April 21, 2010
Pre-approvals are a great way for many home buyer’s to determine how much they can afford on a purchase. The pre-approval does not act as an approval, but it acts as an interest rate hold. The pre-approval is simply a rough estimate on what the borrower can be approved for. The pre-approval has remained fairly accurate for quite some time; however, with the changes in mortgage rules, many home buyer’s pre-approvals are now broken.
For many individuals applying for a pre-approval they meet the following details: they will have 5% down payment, 35 year amortization, and they will set the loan at the maximum borrowing capability. When the borrower purchases for this amount, they would expect to be approved based on their pre-approval; however, since the qualifying rate has changed many 4 year or less fixed rate or variable rate applicants may be out of luck. The reason for this is that when the mortgage qualifying rate changed, the qualifying rate almost doubled. This caused the maximum amount that a borrower could be approved for was reduced by 20% to 25%.
This means that if they make an offer based on the numbers they were provided with their mortgage pre-approval, they would be declined.
How can you protect yourself by making sure that you qualify for the house you are buying? Make sure to contact your mortgage broker, and have them review your pre-approval to make sure that it is up to date. Unfortunately, many brokers have so many clients that they could not dream of following up with them all.
To be certain that your mortgage is approved, make sure that your offer is subject to financing and give your broker at least 5 business days to confirm. This will also give you time to complete your appraisal and inspection on the property.
Did you get a fixed rate or a variable rate pre-approval? Have you had your pre-approval reassessed after the rule change?
Save your Mortgage from the Bank. Simply Mortgages can Help!
The Importance of the Mortgage Pre-Approval
Posted by Top Home Loans in Mortgage Advice, Mortgage News, Real Estate on January 10, 2009
Whether you are a first time home buyer or a seasoned real estate investor, it is extremely important to have a valid pre-approval at all times. A lot of house shoppers decide that they will ‘shop the market’ only after they have placed an offer in on a piece of real estate; however, this is not the best way to ensure you get the lowest rate or the best type of mortgage. With the volatility in mortgage rates, a rate that you see today may not be as good as the rates were a few months ago. In order to optimize your mortgage, you have to do a bit of work as well.
The Pre-Approval Process
When you first decide that you are going to go into the market to buy a new house, before ever going out of your house to look at properties, you should contact a lender or a mortgage broker. They will give you critical advice on the mortgage market, the real estate market, and all the details to assist you in your house shopping process. You will also be able to call on your mortgage specialist at any time if you have any questions or concerns. With the pre-approval, they will assign you the best rate, as well they will tell you what the maximum mortgage that they may be able to get approved for you.
Pre-approvals are usually good for anywhere from 60 to 120 days. With pre-approvals, the longer the pre-approval that you have, the better. This will insure that you know what your payments and interest rate is, even if the market fluctuates wildly. The pre-approval only takes a few days to have done by your mortgage broker, and it may be beneficial for you to get multiple pre-approvals for different types of products. Once you have received the pre-approval, then it is time to shop to find a house; however, this is not the end of the pre-approval process.
What to do Once you have Received the Pre-Approval.
Many people figure that once they have received a pre-approval, then that is the end of the process; however, that is only the beginning. Even though you have a guaranteed interest rate, you should still be watching the interest rates. If the interest rates go lower than the pre-approval that you have, then you should contact your lender or mortgage broker to have a new pre-approval created. This will allow you to always have the lowest pre-approval possible. Many mortgage brokers and mortgage professionals have a lot of clients; unfortunately, this means that they will not have the time to adjust your pre-approval on there own, and they will need a follow-up from you if you want an updated pre-approval. It is not very hard to check interest rates because almost every company has a website that you can visit at your own convenience to look at the interest rates. If you are able to check the interest rates once every few days, then you should be able to determine when you should get an updated pre-approval. When you do update your pre-approval as well, then this will allow you to extend the duration of the pre-approval as well.
Pre-approvals, not just for your First Purchase
Many home buyers assume that a pre-approval is only useful when making a purchase on your first house. It is also a myth that a pre-approval is for uneducated people looking to buy a home; however, this is not the case. If you are planning on buying a home, selling and purchasing a new home, or buying another property, then you should definitely get a pre-approval. The major benefits of the pre-approval is that a trained professional will look over all your details, provide you with expert advice, and protect your interest rate for a certain duration of time. If you are considering doing anything with real estate, then it is important to contact a mortgage professional.
A mortgage pre-approval is a crucial step in the mortgage process, and if you manage your pre-approval successfully, then it could be the difference in tens of thousands of dollars based on the final interest rate that you are able to obtain. Make sure that you discuss your options with your mortgage broker or lender to make sure that you work with them to try and get the best deal possible. It may seem like a bit of a hassle; however, in the long run, it will be very beneficial to manage your pre-approval.