Dream Condo Found? Read the Mortgage Fine Print
Are you thinking of buying a Condo? It’s a big commitment, one that shouldn’t be taken lightly. Getting your mortgage approved may well seem like the most difficult step on the road to your dream home, but amidst finding the best mortgage rates don’t forget to read the fine print in order to avoid potential pitfalls.
So you took the time to search for your dream property and fell in love with a prestigious Montreal condo in the heart of Old Montreal. You made sure you’re at a walking distance from Arts, culture, leisure and entertainment. You picked an urban chic street with quick access to trendy boutiques and restaurants. You knew what you were looking for and found it! Now however is the time to work on funding your purchase through a mortgage. While the cheapest monthly payments might seem like the easiest option, this isn’t true because an offer that seems great is probably offset by fine print. Here we will look through some hidden risks to help you identify the perfect mortgage.
- Refinancing – The turmoil that the whole globe is still trying to come to terms with gives you great options with the housing markets – high competition. This means hundreds can be taken off your monthly mortgage bill, but not without problems. First off, this choice will mean that you are basically getting a fresh loan and stretching out the problems you have – it may not save a huge amount long-term. Refinance fees are a second problem that not many people speak about but you better believe they’re there and don’t forget that the more you do it, the more risky it becomes.
- Prepayment penalty – Linked to refinancing is the cheeky little addition of a prepayment penalty. What this means is that there’s a clause which effectively stops you refinancing or paying off your full loan within the first five years in order to protect the lender’s interests.
- What about the long-term? – One of the scariest options within this highly competitive industry is how banks and lenders can deal with mortgages in the long-term. With so many banks letting people enter based solely on low initial payment, they give families the illusion of security before turning into the monsters that lead so many people to lose their homes each and every year. What tends to happen is that you get two or three years fixed before adjustable rates are imposed and because of this payments balloon as much as 70%.
- Not using the right lender – Ultimately, the fine print is always going to be there but whether you take the time to read and understand is up to you – not the bank. So, you either read up on terms and conditions or you could use experienced mortgage brokers to compare the best mortgage rates. Finding the correct lender is absolutely crucial so that you know your finances are protected and you can budget into the long-term.
- Acceleration clause and foreclosure – You may be pretty confident that you’ll be able to make each payment, but how do we know that this will still be the case in a few years? If this is hidden in the fine print then any missed payments could lead to the bank calling in the loan, and if you can’t adhere to this then a foreclosure may be requested and your home sold at auction.
- Adjustable rate mortgage – This is a big, big risk for anyone taking out a mortgage. It’s more about luck than judgement, and if the market works in your favour you can save thousands. If it doesn’t you can lose your home. What an adjustable rate means is that it changes with the market and you can be paying different amounts each month.
There are so many turns that a mortgage can take that it can get too much to know if you have the right deal. Avoid signing up for the lowest mortgage rate without knowing what that entails, mortgages can be a crazy maze. But if you keep your wits about you, you’ll come out with money in your pocket and the property of your dreams.