Tips for First time buyers

I have mentioned some great web resources for mortgage information and articles, one of my daily reads is www.canadianmortgagetrends.com

Here are some great things to consider when entering the mortgage market!!

1) Allow five business days for financing in your purchase offer. Realtors sometimes ask buyers to get preapproved and write "clean" offers without conditions. But preapprovals don't guarantee a "final" approval. Preapprovals are often just glorified rate holds. Proper financing conditions give you time to arrange an iron-clad approval before you commit to buy.

2) Start with the term. The term you pick often effects the total interest you pay more than the rate itself. Consult a professional to pick the right term from the start. Have him or her run a rate simulation to show which term would save you the most money over five years.

3) Negotiate wisely.If your credit is strong, use the Globe's mortgage rate table at tgam.ca/mortgagerates as a starting point for rates. Ask your mortgage planner to find a lender who will beat the best rate for your province. Use a mortgage professional who compares all lenders; not just a handful.

4) Go short. Don't consider a long-term amortization (such as 30-35 years) unless you are confident you'll later have spare funds to make prepayments. A 35-year amortization will lower your monthly payments 16 per cent on a 4-per-cent, $250,000 mortgage. However, the total interest you'll pay increases 32 per cent versus a 25-year amortization.

5) Tap your RRSPs for a down payment. If you qualify as a first-time home buyer, you and your spouse can each use up to $25,000 from your RRSP as a down payment. CRA will not deem that money taxable income as long as you annually repay 1/15th of the amount withdrawn.

6) Don't pay for what you don't need. Paying extra for an open mortgage, a "capped" variable rate, cash back, large prepayment options, or a 10-year term is often unnecessary. Have your mortgage professional compare the estimated interest cost of the alternatives.

7) Consider a hybrid. Hybrid mortgages are part fixed and part variable. You determine how much of your mortgage goes in each part. Since no one knows how high rates will climb, hybrids nicely diversify your interest-rate exposure.