A Big Down Payment Means Big Savings Over The Life Of Your Mortgage

Big Down payment Saves You Money

Did you know that conventional mortgages require a 20 per cent down payment? With the national average home price pushing $400,000 that would mean a down payment of $80,000. Here’s why acquiring some patience and saving up for that home purchase might help:

The more down payment you put down, the less your mortgage payments will be. This makes your day-to-day living and budgeting that much easier. Think of all the interest you will save.

Chances are that you may not pay as much in interest as your neighbour. A lower loan-to-value ratio means the lender views you as a more favourable risk. This, of course, saves you money over the span of your mortgage.

If your down payment is substantial, you won’t be required to obtain mortgage insurance, which is an added expense over and above the cost of your mortgage. Mortgage default insurance protects the lender should you not be able to pay your mortgage. It is expensive, though, and gets pricier the lower the down payment.

Let’s compare a five per cent down payment with a 20 per cent one on a $365,000 home: Based on a four per cent mortgage rate and a 25-year amortization, you will pay $37,000 more in interest payments by putting down five per cent instead of 20. Your bi-weekly payments will be $156 more adding up to over $4,000 more each year.

Dreams of living mortgage free will come sooner if you eat away at your mortgage thanks to the different payment options available these days at banks and credits unions. Take advantage of bumping up the amount of your mortgage payments (usually in the range of 10 to 20 per cent) , making lump-sum payments against your principal annually without being charged, or switch to an accelerated weekly or bi-weekly payment schedule. All of these options will help you achieve financial freedom and have you living mortgage-free a little sooner.

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Tips For The Self-Employed To Get Approved For A Mortgage

Self Employed getting a mortgage or loan

Lenders and the self-employed go together a bit like oil and vinegar. It’s not that entrepreneurs, small business owners and freelance professionals can’t qualify for a mortgage. It’s just that they are deemed more risky and scrutinized more rigorously thanks to their lack of a regular pay cheque.

When the federal government tightened up mortgage rules last year, that made it even tougher for the self -employed, the numbers of which have been growing in Canada due to a shaky economy. According to Statistics Canada, in 2011 there were more than 2.6 million Canadians or about 15 per cent of the workforce working for themselves.

Lenders commonly look at average incomes for the field the self-employed applicant is in, comparing it to their earnings and income history. Banks also study tax documents and take a close look at tax write-offs in an attempt to reconcile true income from reported income.

Typically, financial institutions will want the last two or three years of your Notices of Assessment. These spell out your reported income, what you’ve written off and how much you owe in taxes.

Make sure your credit is up to snuff. Check your credit status to find out if you have any negative marks against you that you can correct or improve upon before applying for a mortgage. Pay outstanding income and property taxes and try to pay your bills on time so your credit history stays strong.

Try to have a sizable down payment for your new house. It will likely improve your odds of getting approved and it could help you get a better interest rate. Because your income usually fluctuates from one month to the next, try to build an emergency fund that will also help you qualify for a mortgage.

See what’s for sale in your neighbourhood – Do a quick search

Do a Quick Home Market Evaluation and see how much your home is worth.

Thank-you for reading our article about the self-employed getting approved for a mortgage, contact us if you need anything or leave us a comment below.

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