Provided by Genworth Financial Canada
Every investment has a certain risk factor, and buying a home is no different. Economic downturn, illness, job loss or a death in the family can all lead to financial difficulties and the risk of mortgage default.
How can you minimize the risk?
Buy what you can afford
Make sure you buy a home that you can afford. Home buyers need to be realistic about their housing budgets. The size of the mortgage you obtain, the interest rate and the amortization period will directly impact your monthly mortgage payments. As a general rule, your mortgage payments and property taxes should not exceed 25 per cent to 30 per cent of your pre-tax income. When budgeting, plan for other home-related costs such as utilities, insurance, maintenance, and taxes. Mortgage planning tools are available online to help Canadians manage their loans.
As a general rule, your mortgage payments and property taxes should not exceed 25 per cent to 30 per cent of your pre-tax income.
Look for the best mortgage options
Find out who is offering the best mortgage terms and interest. If you understand the various rates and terms available you can determine the option that works best for your needs. Understand the implications of variable versus fixed interest rates.
Build a monthly housing budget
Do you know where your money goes on a monthly basis? Once you are in your home, you should develop a budget to track your expenses, including all home-related items such as utilities, property insurance, taxes and a reserve for maintenance. Make sure to leave some room for unexpected expenses.
Think about protecting your investment. In addition to basic home/fire and title insurance, there are life insurance and mortgage life insurance options available so that the loss of a loved one doesn’t create financial instability. Some organizations also offer mortgage insurance for disability, critical illness or loss of employment. The cost of these options should be included in your debt servicing calculations.
I the event you encounter financial hardship during the life of your mortgage, Genworth Financial Canada (formerly GE Mortgage Insurance Canada) has a proven default management program to help provide temporary financial assistance for qualifying borrowers. To access this program, consumers should contact their lending institution immediately and ask about Genworth’s Default Management program.
Additional information is available from Genworth Financial Canada at http://www.genworth.ca.