Being familiar with how mortgages work is equivalent to knowing how much your purchasing power is. Owning your own house shows that you are financially independent but you can also be “house poor” because you are able to pay your mortgages without being able to pay anything else. One of the most important factors that you should consider when buying your home is your mortgages. A mortgage loan is a long-term commitment where you have to spend at least 15 to 30 years or more just to finish paying it. Because of this, you have to understand that while buying a home seems to be a very good idea, having a mortgage plan at hand will help you know the risks involved and avoid them even before they arise.

Two Types of Mortgage Rates

Basically, there are two popular types of mortgages available in the market: the adjustable rate mortgage and the fixed rate mortgage. 

Adjustable or variable rate mortgages are risky because of the ever-changing interest rates. It's fairly true that adjustable rate mortgages have lower initial monthly payments although you may have to pay for higher fees once the interest rates increased.

Fixed rate mortgages on the other hand remains popular because it doesn't change whether there is a change in property values within the housing market. It's also easier to pay your mortgages because the total cost that you have to pay are equally divided into smaller chunks. Since fixed mortgages are easily predicted, you have an instant overview of how it will impact your income as well as the total expenses you have to pay with your house.

 Now that we have settled on the two types of mortgages, let's now proceed with the different factors that affects your mortgages

Outstanding Credit – applying for a mortgage loan can be quite difficult if you still have a large outstanding debt to settle. Improve your credit report by paying off your credits as soon as possible. Remember that banks are not likely to grant you a sizeable mortgage loan unless you show them that you are responsible enough in paying your credit and earning up points on your credit score.

Available Funds – it's not always a good thing to rely on mortgage loans to be able to purchase your dream house. An underway mortgage loan application still needs approval and you need all available funds that you can get to make sure that you will be able to afford the house. Hold off spending in the meantime and keep other costs like down payments and other fees factored in. If you have a stable source of income and you have enough funds, then you will be more comfortable to buy your home. 

Fees – depending on the type of mortgage rates you have applied for, make sure that you protect yourself against lock-in fees or any other rates that might affect your mortgage payments especially with the ever changing property values of homes. If you want to have lower interest rates on your mortgage loans, then making a bigger down payment will be your best choice.

Feel free to contact Kirby Cox & Associates if you are interested in buying a house in Calgary. Check out our list of Northwest Calgary homes for sale to find the best homes for you and your family.


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