Procuring a mortgage is a lesson in simple mathematics and economics. Unfortunately, a host of borrowers in Canada learn these lessons the hard way. Certain borrowers choose to take out a five-year fixed-rate mortgage. These mortgages are not bad provided the borrower chooses to remain in a property for the full five years and beyond. Choosing to move to a new home before the end of the first five years, well, that can create some problems.
The news in the Durham Region of Ontario has even reported on the troubles five-year fixed-rate borrowers find themselves. Perhaps borrowers really should think about whether or not five years is the right term for them.
Address Rates and Terms
Anyone who feels he or she will be in a stable position for five full years — at a minimum — should find the repayment process to be smooth. Unfortunately, those who move before the term ends could face penalties. Anyone who could possibly move before the five years are up may wish to look into variable mortgage rates.
Anyone who chooses to take out a five-year fixed-rate mortgage might find it wise to take a pause. During the pause, the borrower really has to think about what the next five years are going to look like. Stability might not be in the future for someone who is not entirely thrilled about his or her job situation. The borrower might be making a fine salary, but is not happy with the job. After work activities might keep a person pleased for a while, but an eventual decision to leave the job may be made. A new job, however, might be 100 miles away. Moving to a new residence becomes a must in this type of situation. The five-year term has not ended, which could create a major problem. Or it may not.
Buying a New Home
If a new home is being purchased, the portable nature of the five-year mortgage is exploitable. As noted in an article in the Los Angeles Times, the original mortgage may be directed towards a new home purchase. Penalties won’t be an issue. Those who might not be able to afford a new home purchase, however, would find themselves in trouble. Obviously, a mortgage cannot be applied to a rental property.
Think Things Through
People in Canada — and throughout the world — might find themselves in a bit of trouble when they opt for a mortgage without really thinking their home purchase through. Anyone who is not completely settled into their professional and personal lives might wish to put off purchasing a home. There are additional resources available at WFCU Credit Union.