Gather the Facts Before You Jump Into Your First Mortgage

May 6th, 2008 Categories: Buying real estate, Mortgage, Real estate investment

There was recently it was reported that many young women buying their 744307_amy_leefirst home alone.  It is no longer love, marriage and a house with a baby carriage.  More single, young women are opting for the home first.

I am all for the forced saving, nest-egg growing opportunity that home-buying offers.  I wouldn’t be in real estate otherwise.  I would like to present a little bit of the devil’s advocate position to caution young people before they jump in with both feet.  Make sure you have all the information that you need.

Here is some helpful information:

  1. Two-thirds of all buyers are taking mortgages of up to 40 years amortization.  This means that without pre-payment options or accelerated payments, young first time buyers may be paying their mortgage when they hit retirement age.

    Mortgage summaryA 40–year amortization means that you are paying over $736,000 for a $300,000 house.  That is $436,000 in interest payments.

  2. An increasing number of buyers are putting little or no-money down.  Increasing your mortgage principle increases your monthly payments, or your amortization.  Either way, you are paying the bank more money to borrow theirs.
  3. Canadian Mortgage and Housing Corporation introduced an interest-only mortgage option echoing the US mortgage market trouble where house prices stopped increasing and people have ended up owing more than the house is worth. 

Canada has taken some precautions to ensure that our housing market does not follow the US down.  Higher risk mortgages are only available to buyers with good credit.  However, buyers who are stretching themselves into buying a home make themselves susceptible to financial difficulties if the housing or job markets soften or if interest rates climb again.

Do you have questions about what mortgages are right for you, or when to buy into the market?  I can help.

 

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This entry was posted on Tuesday, May 6th, 2008 at 7:35 am and is filed under Buying real estate, Mortgage, Real estate investment. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

4 Comments »

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  1. As much as I want to sell as many houses as I possibly can, I still feel it is my responsibility to do some guidance with home buyers to hopefully keep them from over extending. I’ve been in the real estate business since 1982 so I’ve seen the bad, the good and the ugly again…..

    Comment by Susan Hilton - Texas Aggie Realtor in College Station Home Sales — May 6, 2008 #

  2. Are you for or against the 40 year amortization? Interesting to note that, in Honolulu, we have not seen much play in 40 year am’ed loans.
    Aloha,
    Keahi
    RE/MAX 808 Realty
    877-737-2093
    808-737-2093

    Comment by Keahi Pelayo — May 10, 2008 #

  3. I think that mortgages should be paid down as much as possible as fast as possible. We don’t get any tax breaks in Ontario for having a mortgage. It is debt that costs us more money the longer we keep it.

    Thanks for you comments.
    Frank

    Comment by Steinhausen — May 13, 2008 #

  4. […] It is nice to get confirmation  of your opinion from the press.  The National Post published an article on long-term mortgages that echoes the post where I urged first time buyers to be cautious. […]

    Pingback by Real Estate Information: Pickering, Ajax, Pickering Village, and Durham Region » Is A Long Term Mortgage the Best Option for First Time Home Buyers? — May 18, 2008 #

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