Difference Between Your Downpayment and Your Deposit

General Yogita Raniga 18 Aug

Difference Between Your Downpayment and Your Deposit
A deposit is like a promise ring in the world of real estate. It’s a sum of money you put down to show your commitment to purchasing a property. Think of it as a way to secure the deal and take the property off the market. The deposit is typically a smaller amount compared to the down payment and is submitted shortly after your offer is accepted. It shows the seller that you’re serious about the purchase and gives you some time to finalize the necessary paperwork.
💸 Down Payment: The down payment, on the other hand, is a more significant financial commitment that you make when closing the deal. It’s a percentage of the property’s total price and is paid upfront. The down payment plays a crucial role in determining your mortgage terms – including interest rates and monthly payments. The more you put down upfront, the lower your monthly payments may be. Most lenders require a minimum down payment, which can vary depending on factors like your credit score and the type of mortgage you’re applying for.
💡 Quick Recap:
Deposit: Smaller amount, paid early to secure the property.
Down Payment: Larger amount, paid at closing, affects your mortgage terms.
Remember, understanding the difference between a deposit and a down payment is essential for a smooth home buying experience. Each step in the process brings you closer to that moment when you unlock the door to your new home sweet home.

Understanding Mortgage Rates

General Yogita Raniga 15 Aug

Understanding Mortgage Rates.

While not the only factor to look at when choosing a mortgage, interest rates continue to be one of the more prominent decision criteria with any mortgage product. Understanding how mortgage rates are determined and the differences between your typical fixed-rate and variable-rate options can help you make the best decision to suit your needs.

HOW RATES ARE DETERMINED

The  chartered  banks  set  the  prime-lending  rate  (the  rate  they  offer  their best customers). They base their decisions on the Bank of Canada’s overnight rate, because that’s the rate that influences their own borrowing. Approximately  eight  times  per  year,  the  Bank  of  Canada  makes  rate announcements that could affect your mortgage as variable  mortgage  rates  and  lines  of  credit  move  in  conjunction with the prime-lending rate. When it comes to fixed-rate mortgages, banks  use  Government  of  Canada  bonds. In the bond market, interest rates can fluctuate more often and can provide clues on where fixed mortgage rates will go next.

To put it simply: a variable-rate is based off of the current Prime Rate, and can fluctuate depending on the markets. A fixed-rate is typically tied to the world economy where the variable rate is linked to the Canadian economy. When the economy is stable, variable rates will remain low to stimulate buying.

FIXED-RATE VS. VARIABLE-RATE

Fixed-Rate Mortgage

First-time homebuyers and experienced homebuyers typically love the stability of a fixed rate when just entering the mortgage space.

The pros of this type of mortgage are that your payments don’t change throughout the life of the term. However, should the Prime Rate drop, you won’t be able to take advantage of potential interest savings.

Variable-Rate Mortgage

As mentioned, variable-rate mortgages are based on the Prime Rate in Canada. This means that the amount of interest you pay on your mortgage could go up or down, depending on the Prime. When considering a variable-rate mortgage, some individuals will set standard payments (based on the same mortgage at a fixed-rate). This means that, should Prime drop and interest rates lower, they would end up paying more to the principal as opposed to paying interest.

If the rates go up, they simply pay more interest instead of direct to the principal loan.

Other variable-rate mortgage holders will simply allow their payments to drop with Prime Rate decreases, or increase should the rate go up. Depending on your income and financial stability, this could be a great option to take advantage of market fluctuations.

Want to learn more about rates or need mortgage advice? Contact today 604-355-7187!

Written by My DLC team