74 - Friday, December 4, 1987 - North Shore News FOR MANY pcople, the two most important decisions in their lives are buying a home and choosing a mortgage. Purchasers, especially if they are first-time homebuyers, may require some explanation as to the workings of a mortgage. Virtually all lenders re- quire the buyer to contribute a cash down payment toward the purchase of a home. The remaining sum becomes the mortgage, which is broken down into the principal (the amount borrowed) and interest pay- ments. Your monthly payment is normally calculated by amortizing the principal and interest over a 20 or 25-year period. The term of your mortgage, which is the period of time the ‘interest remains the same, normally ranges from one to five years. pd “A MOST DESIRABLE CUL-DE-SA MONTHLY PAYMENTS When the term matures, you can renegotiate the mor- tgage at the interest rate that prevails at that time. Conventional lenders, like banks and trust companies, usually offer similar mor- tgage interest rates. Howev- er, depending on the current market, those rates will vary slightly. Private mortgage funds (available from individual investors) and vendor-take- back mortgages are also available, often at a lower Tate. You can also arrange a mortgage with a fixed or variable interest rate. With a fixed mortgage, your monthly principal and interest (PI) payment remain the same over the term of the loan. The monthly pay- “WAYNE CLELAND RES: 929-5484. o% Cc” ments with a variable mor- tgage fluctuate with changes in the bank interest rate. In addition, you have the option to choose either an open or closed mortgage. The majority of lenders of- fer closed mortgages, while someé conventional and private lenders will arrange an open mortgage. TERM MATURES In past years, closed mor- tgages have meant the homeowner could not change either the monthly payments or make any addi- tiona! payments on the prin- cipal amount. Fortunately, many banks and trust com- panies are. now offering prepayment privileges on closed mortgages. In effect, you can either CLIFFORD STONE RES: 985-0200 Bs ABSOLUTELY IMMACULATE 3 bedroom (master ensuite) family home. PROFESSIONALLY finished & basement includes rec room (wet bar), den, deluxe taundry/sewing room and 3rd bathroom. EXTRAS include kitchen skylight, solarium, new carpeting, stained glass entry and the list goes on COME SEE 4689 McNAIR PLACE. “PREFER PRIVACY?” Try this 10 yr. old 3 bdrm. (master enste.) home. CUL-DE-SAC location. LARGE LEVEL lot with TWO garages. EXTRA accommodation in the PHONE WAYNE to view. : “HEY, BARGAIN HUNTERS!” Check out this three bedroom rancher on a LARGE LEVEL lot. Woodburning fireplace PLUS a family room off the kitchen. Separate GARAGE off the lane plus off-streat |. INVESTORS! “HERE’S A DEAL’ Good quality 4 bdrm. house with | extra accommodations basement. Here's the BONUS — the lot is a designated garden apt. in the site. Excellent value at $121,500. “COME TO NORGATE...!” $ And check out this TASTEFULLY DECORATED § ‘two bedroom rancher. NICELY UPDATED with & a family room addition off the kitchen. j make additional lump-sum payments once a year to reduce the principal amount of the mortgage, or you can increase the amount of your monthly payment to pay off the mortgage faster. To be released from a closed mortgage, most lenders require you to pay either a three-month bonus of interest or an interest rate differential. However, some financial institutions request both a three-month bonus of interest and the interest rate differential especially if nei- ther the buyer nor the ven- dor want to deal with that particular lender. Fully open mortgages are available in six-month to one-year terms from some institutional lenders. Long- term open mortgages are usually obtainable from private ienders, although an. additional charge is often involved. 55 LOT CONTROLLED SUBDIVISION The open mortgage may be advantageous if you ex- pect to pay off a large por- tion of your mortgage in a short time, or you believe there will be a drop in inter- est rates. MORTGAGES CHANGE In recent years, second and third mortgages have become less popular because most institutions now offer high-ratio loans which allow borrowers to mortgage up to 90 per cent of the estimated value of their home. A small charge is levied on owners who have mortgaged over 75 per cent of their homes to insure their loans. To determine how much a homebuyer can afford to borrow, lending institutions use a formula called the Gross Debt Service Ratio (GDSR). The percentage of combined monthly income SANDRA MELVILLE MARY 922-5864 the average family causes to repay mortgage principal and interest plus the taxes on the home (PIT) are included in the GDSR. : The policy of most lenders is that 30 per cent of gross income can be spent on housing. For a borrower’s Total Debt Service Ratio (TDSR), which includes not only PIT payments but also other fix- ed monthly payments for things like car loans and credit cards, fenders normal- Iv don’t allow borrowers to exceed 40 per cent of their income. Many lenders today allow 100 per cent of the salaries of both husband and wife to be used when calculating family income. Courtesy of Royal LePage Residential Real Estate Ser- vice) Oe LIN TOWARD 926-5890” AFFORDABLE QUALITY HOMES IN A BEAUTIFUL SETTING TIMBERAINGE MOUNTAIN HWY. * 3 bedrooms © 2 & 2% bathrooms * Basements * Double garage * Family rm * High quality & craftmanship © Energy efficient ¢ S yr. New Home Warranty © Located on quiet cul-de-sac © Surrounded by greenbelt PROJECT BY CALIFORNIA HOMES NEW HOME WARRANTY PROGRASL OF ANO THE TUK — i N24 3