Mortgage Loans for Grads
What you need to know
First thing’s first: you need to know what a mortgage is all about. A mortgage is a loan given to you by a bank or another financial institution that’s amortized over a specific period (i.e. 15 years or 25 years). This loan is secured by the equity of the home that you purchase (click here to learn more about mortgages).
Your qualification will depend on your income to expense ratio, your down payment, and your credit score and credit history.
What happens if you do not have a credit history? We believe that in this situation you should start establishing a good credit history before applying for your mortgage, however a cosigner can help you obtain the loan you want if your credit history is lacking.
Usually you will need at least 5% to make your first purchase. There are many sources from which you can get this amount. Usually it comes from one’s savings, but programs such as the Home Buyer’s Plan exist to help Canadians make their first home purchases.
The Canadian Home Buyer’s Plan (HBP)
The Canadian government established the Home Buyer’s Plan to encourage first time home buyers to purchase their dream homes. One can withdraw up to $25,000 from their RRSPs, tax free, with a repayment of 1/15th of the total withdrawal amount after a 2 year grace period. This money can be used for your down payment or to purchase furniture. This is a great tool for recently graduated students.
The next thing you will want to consider is how mortgage payments will influence your monthly budget. You can use the mortgage calculator below to make an estimate.
Format: 12m, 36m, 3y, 7y
A mortgage broker
Your mortgage rate and your mortgage amount will determine how much you pay every month. We recommend that you see a mortgage broker so you can benefit from lower interest rates and access to more products and unpublished banking promotions.
As a recent graduate you will find that speaking with a knowledgeable mortgage specialist will open the door to more options for you. They can leverage their experience and volume in your favor and negotiate a better loan with a better rate for you.
Of course, for the
lazy busy college senior turned college grad, having a mortgage broker do all of your work definitely sounds attractive 😉