A mortgage is a loan to finance the purchase of your home. Most likely the largest debt you will ever take out.Over the next 15 to 30 years, your home is collateral for the loan and it is a legal contract you sign that you will pay debt.
If the debt is not paid for some reason, the lender has the right to take back the property and sell to cover the debt. You make monthly payments that usually include the principal , interest, taxes and insurance also know as PITI.
Payments Include Principal, Interest, Taxes.
PRINCIPAL: is simply the sum of money you borrowed to buy your home. You usually give a lender a sum of cash called down payment to reduce the amount of loan you borrowed.
INTEREST: also called called interest rate, is usually expressed in percentage the lender charges you to use the money you borrowed. The lender could also charge you any additional loan coasts. Principal and interest make up the bulk of your monthly payments in a process known as amortization, which reduces your debt over a fixed period of time. With amortization your payments are largely interest during the early years and principal comes later. In addition to your principal and interest, your payment could include money that’s deposited in an escrow or trust account to pay certain taxes and insurance.
TAXES: this is a property taxes your community levies based on a percentage of the value of your home. The tax is generally used to help finance the cost of running your community, which include building of schools, roads, infrastructure and any other needs. You must pay property taxes even if you don’t need an escrow account and even after your mortgage is paid off.
INSURANCE: If you don’t have home insurance than lenders will not close the deal on your home, insurance covers your home and also personal property against losses from fire, theft, bad weather and any other causes. Even if you pay cash for you home, you should still buy home insurance.
If you are new to Canada, first time buyer, refinancing or having hard time to get a mortgage, get in touch with me so I can help you with any of these loans.
There is a mortgage, that is right for YOU and I can find it. Helping you with your dream home one mortgage at a time.