What is loan to value? It is the percentage ratio of the balance of your loan compared to the value of your home. The purpose, of course, of measuring loan to value is for measuring the equity you have in your home. For example, if you put twenty percent down you have an eighty percent loan to value and then, of course, a twenty percent equity position. However, if you put five percent down, remember there is mortgage insurance on top of your loan which means you may only have, say two percent equity on day one.

I think it is really important and I want to leave you with three solid tips if you are putting five percent down to protect you against the possibility of negative equity or being sort of boxed in to your home.  (Tips from your Calgary mortgage broker)

1. I want you to consider the length of time you plan to stay in this home. I know that it is often tough to do but I think it is really, really important. If I am putting five percent down I have to make sure that I am going to stay in here long enough that I can build the equity up so that when I sell down the road and have to pay my selling cost of realtor commissions, etc. that I have enough equity left to do that.
2. Second is to be very careful that you avoid competitive offer situations. I know that we emotionally get attached to the idea of buying a specific home and if there are competitive offers, often that can artificially raise the price of the home and then you may actually be starting in a negative equity position several months into your mortgage.
3. And then the final one, if you are putting five percent down then the importance of a mortgage strategy that is designed to quickly pay down the principle of your mortgage and increase the equity position is critical.

Thanks for watching.

If you would like more information on this or other mortgage related topics contact Canada Mortgage Direct in one of the following ways:

Visit our website at CanadaMorgageDirect.com.

You can phone our office: 403-250-2100

Or you can email us at Save@CanadaMortgageDirect.com

We would also like to invite you  o the Canadian home Buyers Academy and you can visit us there at the CanadianHomeBuyersAcademy.com

Thanks again!

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