In the previous post, we shared with you some of the most frequently asked questions we get from Ucluelet homebuyers, and we're not done yet. There's still more helpful information on the way, so let's get to it:
These are the additional expenses that you will have to pay once the purchase of your home is complete. Typically, these fees will include lawyer's and notary's fees for the title search that makes sure that there are no outstanding liens against the property, and that the vendor actually owns the property, as well as for completing all the documentation for the sale has been accurately completed. These fees also pay for the registration of your mortgage and register you as the now owner of the property. There might also be a fee charged for any prepayments on property taxes or utilities that may have been paid by the previous tenants.
The amount of these costs will certainly vary, depending on the house that you are buying, but you can estimate that the closing costs will be about 2.5% of the purchase price of your home.
When it comes time to choose your mortgage, you will need to decide between variable and fixed rate mortgages. The interest on a variable rate mortgage fluctuates based on the bank's prime lending rate. In times of declining interest rates, or stable low rates, the variable mortgage payment will often cost less than the fixed rate mortgage, however, if the interest rates rise, more of your payment will go towards paying the interest on your mortgage. If interest rates decrease, more of the money will go toward paying off the principle.
With a fixed rate mortgage, the interest rate is locked in the the term of your mortgage contract, which protects you if the interest rates go up.
The length of time that it takes to pay off a mortgage in its entirety is called the amortization. Many first-time home buyers will choose the 25-year amortization option, but your amortization can be either shorter or longer, depending on what works for you.
Opting for a long amortization will require that you have at least a 20% down payment of the purchase price of the property you are purchasing. Choosing a long amortization will lower the amount of your payments, but you will be paying more in interest with this option. A shorter amortization, however, will increase your regular payments, and decrease the amount that you will be paying over the life of your mortgage, and you will be mortgage-free sooner.
A simple way to shorten your amortization, thus decreasing the amount of interest you will pay, is to choose an accelerated bi-weekly payment schedule rather than making monthly payments. If you do this, you will remaking the equivalent of an extra month's payment over the course of a year.
We hope we have helped you get a better handle on what it is that home buyers really need to know with these frequently asked questions. But if you still have questions about buying a home in Ucluelet, please do not hesitate to contact us!