Of Prime Interest: Mortgage decisions require thought about the future

In making a home buying decision today, think about a property not beyond your means.

  • Oct. 19, 2016 6:00 a.m.

So often the decision we make today can have unforeseen ramifications in our future.

The is especially true when looking for that property we have our eyes on and the mortgage interest rate on  that home.

Our needs today will be different from our needs down the road. If you are a young couple without children, you don’t necessarily need that larger three-bedroom home.

So in making a buying decision today, think about a property not beyond your means.

Think about what you can afford today, within your budget, knowing as you get older, you will hopefully increase the equity in your current home to enable you to upgrade to a larger home when children start increasing the family.

Also, your income should increase allowing you to maintain a mortgage and other debts within your new budget.

Always keep in mind there will be unexpected expenses such as vehicle maintenance, clothing, entertainment, etc.

Always plan to put funds aside to alleviate the stress of having to put those expenses on credit cards.

The same goes for the type of mortgage an interest rate you choose today. There are several things you must think about when choosing a variable or guaranteed rate and whether to opt for an open or closed mortgage.

What will you be doing in the next one to 10 years? Do you wish to pay down your mortgage quickly? Stay in your home for a few years? Will you be selling and moving into a larger home? Will you come into extra money to be able to pay down your mortgage? Do you have a low interest rate right now and want to keep that rate? If you sell your home and want to pay off your mortgage, how much will your penalty be?

These are some of the things you should know when choosing that mortgage.

And a reminder here about what those mortgage options are.

Closed variable rate mortgages will have a three-month penalty if paid off prior to maturity. You can opt out of the mortgage if the interest rate should start fluctuating up, and into a closed, guaranteed mortgage with the same institution without penalty.

Closed guaranteed rate mortgage is “portable” to another property should you sell and the interest rate is good on the existing mortgage.

You may pay off up to a certain percentage per annum without penalty and increase your payments once annually up to a certain percentage.

If you pay off your mortgage prior to maturity there will be a penalty of either three months interest or an  interest rate differential.

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