As a first-time home buyer, you’ll want to learn as much as you can about mortgages—what they are, how they work and how they can benefit you. While you may be consulting a mortgage specialist during the home-buying process, the more knowledgeable you can become about mortgages, the more likely you’ll be able to articulate what you need—and want—in a mortgage.
Here’s a short primer on mortgages and key mortgage terms to help get you started.
A mortgage is a loan given by a bank or mortgage lender to help you buy a home. It can allow you to get into a home sooner than if you had to save up for the whole purchase price. The house acts as collateral for the money you are borrowing.
Choosing a mortgage is one of the biggest decisions you’ll make. Consult a mortgage specialist for overall guidance and support.
Some things you’ll want to consider:
A longer amortization period usually means lower monthly mortgage payments. It can also mean you’ll pay more interest overall because you’re taking longer to pay back the mortgage principal to the lender. Note that if you choose an amortization over 25 years, you must have a down payment of at least 20% of the purchase price.
If you are considering an RBC Royal Bank mortgage, read a brief overview of three RBC mortgage solutions.
Building equity is an important part of owning a home and having a mortgage. Equity is the difference between your property’s value and the amount you owe on your mortgage. There are extra things you can do to build equity:
You will also have the flexibility to choose the frequency of your mortgage payments. While monthly payments remain the default choice of many home buyers, there are a number of other options available, including: semi-monthly, bi-weekly, accelerated bi-weekly, weekly and accelerated weekly. Keep in mind that the more often you make payments the more you will save on interest over the life of the mortgage.
When you select an accelerated weekly or bi-weekly payment option, you are essentially making the equivalent of one additional monthly payment each year which will help pay down your mortgage faster.
Speak with a mortgage specialist to discuss all the mortgage options available to you.
This article offers general information and should not be regarded as a complete analysis of the subject matter discussed. It is not intended as legal, financial or other professional advice. Consult a professional advisor regarding your specific situation.
Personal lending products and residential mortgages are offered by Royal Bank of Canada and are subject to its standard lending criteria. Some conditions apply.