|
|
I need a loan in canada,
Whenever I hear the phrase “more
affordable”, I put my hand on my wallet because the attempt to empty
it will begin any moment. Almostnever is that phrase used in relation
to the total cost of financing. It isalways used in reference to
the size of the monthly payment, as in this example. Let’s see what
it really means. I did the math. A mortgage for a $100,000 home
at 6% for 30 years would have a monthly payment of about $600 for
principal and interest. You would pay about $216,000 over the life
of the loan of which $116,000 would be interest.. A mortgage on
that same home for 40 years would be at 6.25%, with a monthly payment
of $565.
The payments over the life of the loan would total about $271,200
and $171,200 of the total would be interest. The forty year mortgage
has a higher interest rate (usually between.25 and .50 percent)
because the lender has his money at risk for a longer time (Lenders
are well aware that time is money. You should be as aware). This
higher rate coupled with the extra ten years of the loan, has the
borrower paying 47% more interest, or $55,000 more over the life
of the loan.
Even with a lower payment that supposedly makes it more affordable
to purchase that home. Sounds like a pretty good deal for the lender.
Another problem the borrower faces is building equity much more
slowly in the beginning of the loan. The extra interest expense
paid for the extended length of the loan prevents equity from building
up quickly. All of this for a monthly payment that is only $35 less.
You need to think in terms of overall cost and not just monthly
payments. The total cost is what you will give back to your creditors.
The focus on the monthly payment takes attention away from the total
amount to be repaid. You need to look at this with any indebtedness,
car payments, personal loans, credit cards: figure the total cost,
not just what you pay each month.
With over three million self-employed individuals in the canada,
the attitude of many mortgage lenders towards the self-employed
population is a problem that can affect a large number of people,
even though many self-employed people often earn more than a lot
of salaried workers. The problem stems from the fact that the majority
of mainstream mortgage lenders require proof of income when assessing
a mortgage or remortgage application.
Employed people can use their payslips and P60 as proof of salary,
but there is no such straightforward equivalent if you are self-employed.
In place of payslips, self-employed workers may be asked to provide
audited accounts that show their income over the last three years.
However, in many cases, these accounts will not give an accurate
reflection of how much money a self-employed person is making. This
is because if the accountant who prepared the accounts is doing
his job properly, he will have offset as many allowable expenses
as possible against tax. This has the effect of reducing the self-employed
person's net profit, upon which the lender will base the size of
mortgage or remortgage they are prepared to offer.
|
