4 Loan Options For First Time Home Buyers

Purchasing your first home involves several strategic decisions. Obtaining a property mortgage happens to be one of these crucial stages. Since you would be making a long-term investment, it’s imperative to choose the one that suits your needs. Presently, you would stumble on a plethora of financing options. The situation might seem to be overwhelming, but you need to make an intelligent decision.

After all, this stage would determine the monthly payments you would be shelling out over the next few decades. Mortgage Maestro are experts with the different financing options. This is important to understand fully, since with the most appropriate choice you can ease up your finances.            

What Are The Different Types Of Home Loans?

A home loan serves as a financial reinforcement that you can obtain for funding the construction or purchase of your home. Presently, the leading lenders offer financial support for refinancing an ongoing home loan. Besides, you can simply obtain financing to reimburse the expenses of purchasing a second-hand property.

Here are the different types of home loans that you can choose from.

Home Purchase Loans

This is by far the most popular category of home loans across the world. In this case, a property buyer needs to avail of a loan for purchasing a new apartment or an existing property. In Canada, almost every financial institution or bank would offer you home purchase loans. However, the rate of interest would vary from one bank to the next. The better the credit score you have, the lower the interest rate you would have to pay.

Land Purchase Loans

The name is suggestive enough to explain the purpose of this type of loan. In case you are willing to purchase a piece of land and then build your home on it, you should opt for land purchase loans. Most creditors would offer you 85% to 90% of the property cost when you apply for such loans. You need to arrange the remaining amount from other sources or your savings. In Canada, every major NBFC or bank offers land purchase loans.

Home Construction Loans

Some property owners do not wish to purchase apartments directly from the builders. Instead, they want to build their own homes. In this case, you need to opt for home construction loans in Canada. However, the process of application and approval of these loans turns out to be slightly challenging. In case you want both the cost of land and the building to be included in the loan, you must have purchased the property in the last year. Most of the reputed lenders in Canada offer home construction loans.

Home Improvement Loans

You may need funds for remodelling or renovating your home. In case you do not have enough economic mobility, you may apply for a home improvement loan. In this case, the lender will evaluate your financial strength and debt-to-income ratio while calculating the amount you are eligible for.

What Are The Different Types Of Mortgage Rates For Homes?

When you go for a home mortgage, you can choose from three types of mortgage rates.

Fixed-Rate Mortgage

While considering your home financing options, fixed-rate mortgages prove to be the simplest way out. The bank or lender will specify the rate of interest at which you need to make the payments at the outset. Since this rate would be fixed, you would know the liability right at the beginning for the entire tenure of the loan.

The predictability and simplicity of fixed-rate mortgage loans make them popular. People who are cautious about their monthly budget can know the payment amount upfront. This won’t change even if the market rates fluctuate over time. Therefore, you would benefit even if the rates increase in the coming months.

Variable Rate Mortgage

Under a variable-rate mortgage, the interest rate would change as per the market rates over the loan tenure. The market interest rates keep changing every two to five years. In case the market rates drop, you would benefit from the lower rates. Every month, you would be shelling out a lower amount than calculated at the beginning of the mortgage process. However, if the rates keep rising, you would be paying more than what you expect.

The original rate of interest would be applicable for approximately the initial three years. However, you need to pay as per the variation of the rate from thereon. If you get into the mortgage deal when the rates are high, you would be saving money in the future. Historical averages reveal that variable-rate mortgages are more beneficial to property owners. However, the uncertainty factor in such loans remains a concern.

Endnote

You might need professional support from experts in this pursuit. It would be a wise decision to consult a professional specialist or a mortgage expert to weigh your options. This way, you can benefit from the lowest rates of interest. Besides, professional advice would ensure that you remain on the right track during the mortgage application process.

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