The Basics of Buying a House on Mortgage in Toronto
Homes in Toronto can get very expensive, and even in the mid-range of homes, the prices are generally too high for most people to buy them outright with cash. Because of this, buyers typically need to turn to buying a house on mortgage in Toronto when trying to attain their dream home. A mortgage is a loan that is given to borrowers, such as homebuyers, so that they can come up with the financing to purchase a home. The mortgage is broken down into small payments, and a number of factors play into what those payments will consist of.
When buying a house on mortgage in Toronto, you will be required to make some sort of a down payment that is, a certain amount of money to be used towards the home purchase. Because you’re paying this money upfront, it will not be included in the total amount of your mortgage; and because of that, the more you pay in the form of a down payment, the lower your overall mortgage will be, saving you both in interest and in principal. The total amount required for down payment in Toronto is usually 20%, with certain individuals qualifying with a lower down payment.
The principal portion of your mortgage payment will be the total amount that you borrowed when buying a house on mortgage in Toronto. So if a home was to be purchased for $300,000 and the buyer made a $10,000 down payment, the principal amount of the mortgage would be $290,000. This principal amount will be broken down over a certain period of time, known as the amortization period, when the loan will expire and the money will typically already have been repaid. In order to calculate the total amount of monthly mortgage payments the homeowner needs to make, the principal will be divided among the total months on the mortgage.
Along with a portion of the principal, the homeowner will also need to make interest payments on the principal. The interest is what the lender will charge you for borrowing the money, and it will be a total percentage of the principal amount. Interest rates can be chosen as either a fixed rate, which remains constant over the term of the loan; or a variable rate, which will fluctuate with the Bank of Canada’s overnight lending rate.
Unlike the amortization period, the term of the mortgage is how long your current mortgage agreement stands. These are usually much shorter than the amortization period, sometimes as little as three years, sometimes going as long as ten years. Once the term has ended, a new agreement will need to be renegotiated, in which a new term will be outlined. This is known as mortgage renewal and is a great opportunity for homeowners to look over their mortgage papers and decide if their current contract is working for them.
When you’re buying a house on mortgage in Toronto, there is definitely a lot to know and it can be confusing. Always speak to a mortgage broker to help you sort it all out.
Bryan J is the author of this article. For more information about mortgage broker in Toronto or mortgage company Toronto please visit canadianmortgagesinc.ca.
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