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Loan and mortgage options

As a rule of thumb you should be paying no more than one third of your income in mortgage payments. The mortgage calculators set out below assist you with calculating how much your mortgage will cost.

We recommend that you pre qualify for a loan before you start looking for properties. This will save you time when you are ready to make an offer for a property. This can be an advantage in a competitive market.

It is sometimes difficult to work out the mortgage option that best suits you.

There are floating, fixed and capped mortgages where interest and principal are usually paid. Interest only mortgages are often used for commercial loans though residential packages often allow for these too.

If you think that interest rates will rise then a fixed rate mortgage might be best. You will know precisely what your installment payments will be and you can budget around this.

If you think that interest rates might fall, but you're not sure when, then a capped rate may suit. This will probably have a slightly higher rate of interest than the fixed option.

Capped rate mortgage have an upper interest rate limit but no lower rate. When interest rates fall this directly benefits your loan. Many people elect to leave their repayments the same if this happens thus reducing the overall interest bill and the term of the mortgage.

A floating rate mortgage means that rates float with the market - up and down. Lending institutions lend different percentages of the purchase price. They also have restrictions based on your net income.

How do I choose the best loan for me?

Your personal situation will determine the best kind of loan for you. By asking yourself a few questions, you can help narrow your search among the many options available and discover which loan suits you best.

Do you expect your finances to changeover the next few years?

Are you planning to live in this home for a long period of time?

Are you comfortable with the idea of a changing mortgage payment amount?

Do you wish to be free of mortgage debt as your children approach college age or as you prepare for retirement?

Your mortgage broker or lender can help you use your answers to questions such as these to decide which loan best fits your needs.

What is the best way to compare between lenders?

Either engage a mortgage broker to assist you with this complex task or devise a checklist for the information from each lending institution. You should include the company's name and basic information, the type of mortgage, minimum down payment required, interest rate and points, closing costs, loan processing time, and whether prepayment is allowed.

What is a mortgage?

Generally speaking, a mortgage is a loan obtained to purchase real estate. The "mortgage" itself is a lien (a legal claim) on the home or property that secures the promise to pay the debt. All mortgages have two features in common: principal and interest.


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