Tip #1

Co-Borrowing

Avoid falling into co-borrowing traps.

Many persons bring on a co-borrower strictly for qualification purposes to help get approval and intend to be solely responsible for the mortgage payments.

It is important to know that co-borrowers are legally responsible for the mortgage. Each of the parties is equally liable in his or her personal capacity to repay the mortgage loan.

Tip #2

Plan for Deposits and Closing Costs

• Deposits – Most instructions require a minimum of 5% down payment on housing and 10% on land. Start saving up for your deposit. There are several accounts that help with theirs; home saver or planning accounts. Consult your local bank or credit union for more information on such accounts.
  
  
• Closing costs
  

  Legal and Closing Costs

  Ensure that you have funds saved up for legal and closing costs.

  Typically fees would include; attorney fees to prepare the deed of sale and mortgage, government stamp duty, registration fees, visae/title search fees and commitment/processing fees. You can obtain an idea of the legal costs from your attorney and other closing cost from your finance provider.

Tip #3

Insurance

Insurance is used by the lender (mortgagee) as a tool to manage the risks associated with mortgage lending; thus a lender is able to make a larger loan requiring a lower down-payment (deposit) than if there were no insurance to protect the investment.

Property insurance is probably the best-known type of insurance protection and can provide cover in respect of buildings and contents or buildings alone.

The lessons of hurricane Tomas remind us of the destructive power of the elements and why it is extremely important to have property and contents insurance. Why spend hundreds of thousands of dollars on an investment and have no protection for it?

Ensure that once you have that property that there is always adequate insurance coverage on the building – the sum insured should reflect the total current cost of rebuilding regardless of the original cost or loan balance.

Life insurance and mortgage protection insurances are intended to pay-off the mortgage loan in the event of the death of the income earner, so that the loved ones can “remain safe and secure at home”. Some institutions include mortgage protection insurance or insist on life insurance as a condition of the mortgage; if your institution doesn’t make such insurance mandatory, then you should enquire of your insurance company. Mortgage Indemnity insurance is probably the least popular of the types of insurances associated with mortgages. It indemnifies the lender in the event of loss arising out of default and ‘foreclosure’. Such insurance would not be required if a substantial down-payment (deposit) is made.