Mortgage options can be rather overwhelming, especially if you are a first time home buyer. The vast array of choices at your disposal, coupled with many legal terms that you are unfamiliar with, can make the entire process extremely daunting. Here are a few tips that will help you make the right decisions regarding your first mortgage. These tips should help you get a low deposit mortgage.
What is Being Offered?
If you are a first time buyer who is looking to buy a home in the next few months, it is important to explore the market for low deposit loans. The truth is that most lenders will not advertise these loans, because there is plenty of demand already. They may not even have details of low deposit mortgages on their website, which means that you will have to go into local lender branches to speak with them.
While you may be eager to get a low deposit mortgage, you should recognize that this can be one of the most expensive types of mortgages around. Putting in a deposit that is only five percent of the total price means that you will be dealing with high monthly payments on the loan. For example, someone who puts down 10% instead of 5% on their first mortgage would save about £65 a month on a £110,000 mortgage loan.
Stretch out your initial deposit as much as you can. If you feel as though you may have a significantly greater amount of capital in a few months, perhaps you can hold off on your home purchase for a little while. Waiting a little right now and getting a good deal would save you a lot of money in the long run.
A recently introduced
Deposits required in the NewBuy Mortgage Scheme are set between five to ten percent. That means if you are looking at a property valued at £125,000, you will have to put in a deposit of between £6,250 to £12,500.
If you look into the various offers that lenders have for
As I mentioned in my last update, there was potential for a windfall this month. Well, it happened and it put quite a dent into our virtual mortgage balance. We gave some money away years ago, for the right reasons and didn't ever expect to see it back. This month it came back. Karma was on our side. This money went directly into our TFSAs.
The balance in our combined TFSAs is now $43,023. Our current mortgage balance is $63,773. This gives us a virtual mortgage balance of $20,750.
We do find ourselves in a bit of a dilemma, though. We will not be able to pay out the mortgage with the money in the TFSAs without paying a penalty. The penalty would be low, around $80 on $10,000 but I wanted to minimize that. Consequently, the remainder of the year our bi-weekly payments have been increased to $1,500, and if things work out as they should our bi-weekly payments in 2014 will be further increased to just over $2,500.
With school tuition, taxes and a RRSP contribution in the next few months we may run short some months with the increased mortgage payments. The plan is to withdraw money from the TFSAs as we need it. The big day will come in June when we fully pay off the mortgage and don't owe a penny to anyone, anywhere!
We were able to put $7,116 into our TFSAs this month. This will be the first month I have started to include the balance of our TFSAs rather than just the contributions. We have just over $800 in earned interest. Although not huge, it is significant. We were able to put $7,116 into the TFSA's this month which was more than was planned and we ended up in the red in our main bank account. This should be rectified over the next couple of weeks.
With the TFSA balance now at $28, 942 and our mortgage balance of $65,667 we have a virtual mortgage balance of $36,725.
As October comes to an end I find that we are making great progress and we are looking forward to having our mortgage fully paid in mid to late 2014. This leaves me thinking, "then what?" Paying off the mortgage is definitely not a bad thing, but I find I always need something financial to focus on.
I am also bouncing back and forth between, paying the mortgage in full, meaning there will be a tiny penalty or keep the money in the TFSAs and pay as we can without penalty. Mathematically it makes sense to not pay a penalty especially because we are earning a higher interest rate on our TFSAs than we are paying on our mortgage. With under a $500 difference either way though it may be psychologically better to just get it paid. This is a decision we will make together when the balance in the TFSAs catches up to the mortgage balance.
There may be a small windfall in November that I will write about next time. that in addition to a little more we should have to put into the TFSAs could make a pretty big dent in the virtual mortgage balance.
Thanks for reading!
September has come and gone and we did not add to our TFSAs. This leaves our current mortgage balance at $67,547 and the virtual balance at $46,547. Normally we have extra funds to put into the TFSA's but this month we had to finish paying off the vacation, tuition and books, a new laptop and topped it off by purchasing the amazing Dyson vacuum. Yes, we know how to live it up. We also sent the CRA some cash to offset the hefty tax bill I will be experiencing next April. A family member had an emergency they were not prepared for and money was also given to them.
We just looked at the numbers for October and we should be able to put an additional $3,500 into the TFSAs. This will bring our virtual mortgage balance down to the neighborhood of $41,700 by the end of October.
As a $0.00 balance gets closer we contemplate what the next goal will be. Right now we are in a good spot and we may just automate funds going to investments / savings and open up with wallet a bit. Time will tell!
Both August and my vacation are almost over. Having a month off was nice, but I am ready to go back to work.
This month our mortgage was reduced more than I expected. Last month I talked about the lack of service at my bank. What happened is near the end of June I emailed my rep and asked him to make a lump sum payment to the mortgage in the amount of $6,000. Well, after a month there was no reply to my email and the payment was not made. My assumption was that this was overlooked and would not be done. I was wrong. Five weeks after sending the email the funds were taken out of our account and applied to the mortgage. Definitely not ideal, but my bad, I should have followed up.
Anyhow, with the lump sum and the regular payments our mortgage balance is now. $69,418. With an additional $4000 contributed to our TFSAs this makes a total of $21,000 which gives us a virtual mortgage balance of $48,418.
My wife and I had a conversation about this earlier in the month and she is amazed that we basically owe what a new car is worth. It is almost hard to believe that in 10 - 14 months I should be writing about being totally mortgage and debt free.
Then what? It will be time for some new goals. My wife and I will have to have some discussions on how we want to structure our finances when we are totally debt free. Personally I don't want to borrow a dime for anything ever again, but that may not be practical.
There may not be any TFSA contributions in September as our credit cards will be recovering from our vacation. October, November and December should be be good for additional contributions to the TFSAs though.
Before the next Mortgage Reduction Report I want to explore why so many people are retiring in debt. I look forward to writing that post.