Buying a home, which is the dream of many, can be a complicated process. In large Canadian real estate markets such as Toronto, it pays to do your homework before taking the big property plunge.What Can Potential Home Buyers Expect?
Toronto, which is both Canada's most populous city and the capital of Ontario
, is now experiencing a jump in the housing market. Analysts predict that the housing market will be stronger than ever throughout 2014. In December 2013, despite the cold weather, sales were already up by 18% and are continuing to look good for the future in the Greater Toronto Area. What this means for potential and first-time homebuyers is that finding houses and an affordable mortgage
should be easier than ever. Buyers looking for condos should have excellent opportunities for ownership since Toronto has more condo developments underway than any place in North America.
The Greater Toronto Area REALTORS reported a jump in the housing market as of January 2014. They stated that, while home prices increased 9% over the previous year, houses continue to be very affordable and there are still many potential homebuyers looking for houses. This is good news for the many banks looking to offer the lowest mortgage rates in Toronto
. The wide variety of banks in this city, along with a booming housing market, makes it easy to find the best Toronto mortgage rates. What Type of Mortgages Are Available in Toronto?
When you're buying a home in Toronto and looking for a mortgage, you'll want to find the lowest Toronto mortgages. The best way to do that is to compare mortgage rates at the many banks in Toronto. However, almost as important as finding an affordable mortgage is knowing about the different types of mortgages available so you can make an educated choice.
- Fixed Rate Mortgage - A fixed rate mortgage is where the interest rate and monthly payment stays the same for the term of the loan regardless of how the interest rates fluctuate in the prime market. While Toronto banks may offer this loan in 1-year, 2-year, 3-year, 4-year and even 10-year terms, the most popular is the 5-year term mortgage. Fixed rate mortgages are not only the most popular mortgage loans in Toronto but may also be the lowest Toronto mortgages.
- Variable Rate Mortgage - A variable rate mortgage is one where your interest rate and monthly payments can go up or down depending on what the interest rates are doing in the market. If interest rates are declining, a borrower can save a lot of money; however, variable rate mortgages can be risky if interest rates are fluctuating. Some banks may let the borrower switch to a fixed rate as long as the term length is not compromised.
- Zero Down Mortgage - The Canadian Mortgage and Housing Corporation mandates that all home purchase mortgages in Ontario must have at least a 5% down payment. A zero down mortgage allows qualified borrowers to not put down the required down payment. However, the interest is higher and the term of the loan must be more than five years so the bank can get their money.
- High Ratio Mortgage - A high ratio mortgage is one where the borrower has less than a 20% down payment. Although a 5% down payment is required in Toronto, borrowers can put down any amount they want. Anything less than 20% and the mortgage must be a high ratio mortgage, as opposed to conventional mortgages that require 20% for the down payment. If you have a high ratio mortgage, mortgage insurance will need to be purchased.
- Open Mortgage - Open mortgages have higher-than-normal interest rates, but allow you to pay the loan off at any time you wish and allow you to make lump sum payments without penalties.
- Closed Mortgage - Closed mortgages have lower interest rates but will charge high penalties if you try to make large payments or pay the loan offer prior to the term of the loan.
One of the favourable aspects of living in a city as large as Toronto is that borrowers and first time homebuyers have a wide selection of banks from which to choose. What this means is that they can shop around and compare mortgage rates until they find the bank that offers what best meets their needs. Tips on Finding The Best Mortgage in Toronto
Sometimes even knowing what's available for banks and the various interest rates offered is not enough to guarantee you're going to get the best Toronto mortgage. Rates may play a large part in how much you'll pay for interest, but that's only a small part of getting a mortgage. When choosing a mortgage, look at the various types of mortgages
the bank offers and choose the one that best meets your needs and your budget.
For instance, if you're not a risk taker and your budget can't withstand risks, you probably don't want a variable rate mortgage. Most importantly, find a bank and lender that you know you can trust to explain the mortgages to you and suggest the one that will best fit your budget and your situation.