6 Interesting Facts About Mortgages to Consider & 4 Random, Fun Facts
1. MORTGAGE RATES WERE ONCE 7X HIGHER THAN THEY ARE TODAY
After being spoiled with rates in the low 2%’s (or lower), rates today seem so high. However, back in the 1980s (1981 to be exact), rates were as high as 21%! Albeit, the cost of houses was much lower but can you imagine??? On a $300,000 mortgage loan at today’s standard 5-year fixed rate of 3.34%, you might be looking at about $1,473/month. At a rate of 21%, you’d be paying $5,069/month for the same mortgage!
2. PAYING AS LITTLE AS $100 EXTRA PER MONTH ON YOUR MORTGAGE COULD SHAVE 5 YEARS OFF YOUR MORTGAGE
It might not seem like much but if you were to increase and keep your mortgage payment higher than the set payment by even $100/month, for an average mortgage, you could shorten your 25 year amortized loan down to 20 years or less!
3. LENDERS CAN SOMETIMES OVERESTIMATE THE AMOUNT OF HOME YOU CAN AFFORD
When you are pre-approved, the debts that are calculated into your application include loans, credit card balances, and child support BUT what isn’t factored in are things like utility bills, insurance premiums, etc. I once came across someone who had to pay almost $1000/month for his car insurance. The Stress Test you always hear about is supposed to protect you from future increases in interest rate when your mortgage term is up for renewal. That might help provide a little cushioning with the mortgage payments but
Crunch your own numbers, make sure you can definitely afford the mortgage you’re applying for, and remember to leave a bit of a buffer to compensate for unforeseen circumstances (ie. job loss, heath issues, home repair).
4. YOUR ASSETS ARE LESS VALUABLE THAN YOU THINK
It’s great that you might have a nice sized savings account but Lenders want to make sure you can still make all your monthly mortgage payments. No matter how odd it might seem, there’s never a guarantee that you won’t randomly go spend all your savings. You need to show that you still have enough incoming cash to keep paying your bills.
5. A GOOD CREDIT SCORE CAN SAVE YOU THOUSANDS OF DOLLARS!
In the not so distant past (ie. last year), although the chances of getting a mortgage application approved might have been a bit different and although you might have been able to qualify for a slightly higher mortgage, whether you had a credit beacon of 620 or 820 the rates you got were still the same. Things are changing. Now, with many Lenders, minimum requirements for lower rate promos require a minimum credit beacon of 680 to 720!
Just another reason to keep making payments on time and don’t forget, those cell phone payments show up on your credit bureau now!
6. HAVING NO CREDIT SCORE CAN HURT YOU!
It makes sense and seems like a good idea to save up and pay cash for everything but when it comes times to apply for any kind of large loan, now you hit a speed bump. If there is no record of you repaying back debts, Lenders don’t know if you’re a great bill payor or if you’re the type who might be late once in a while but always pays back or if you’re the type that doesnt pay bills back. News flash, they prefer the occasional late payor.
That being said, there are still options for you using “Alternative Credit” (ie. rent and utility payment history) with a couple Lenders. Worst case, I’d be happy to provide advice on how to build up the acceptable amount of credit as quickly as possible!
Enough of the useful facts. Ready for some random fun ones? Here are my favourite 4!
1. THE WORD “MORTGAGE” IS RELATED TO DEATH
Did you know: If you currently have or are applying to have a mortgage, you’re signing on for a death pledge? Tthe word “mortgage” comes from two Old French terms (and Latin before that) of “mort” and “gage”, which translate into “death” and “pledge”. Basically, your mortgage dies once you pay it off or fail to keep making payments. Eerie!
Side Note: To “amortize” means to “kill the debt”!
2. A RED DOOR MEANS MORTGAGE-FREE:
Did you know: In Scotland, people paint the front door of their house red once they’ve finally paid off their mortgage!
3. THE FIRST USE OF THE WORD “MORTGAGE” HAD NOTHING TO DO WITH HOUSING
Did you know: Way back in the 1300s, the earliest use of the word mortgage (spelt “mortgage” back then) was in a poem by Confessio Amatis. The word was used to describe marriage not a home loan!
4. IN SOME COUNTRIES, YOU CAN HAVE A MORTGAGE LOAN THAT IS LARGER THAN THE HOME’S VALUE
Did you know: In Canada, you need to purchase with a minimum of 5% down so even after CMHC fees, the highest loan amount you can get is still lower than your purchase price. However, in the Netherlands, people can borrow up to as much as 115% of the home’s value and in the UK, people can borrow up to 110% of a home’s value!
If you have questions about mortgages or are interested in a pre-approval to lock in a great rate today, please do not hesitate in contacting me at 780-863-0700.
Remember, call Minn for MINN-imum Stress, Maximum Service.