Gather the Facts Before You Jump Into Your First Mortgage

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.