Introducing ‘Mortgages 101 For Kids’
Here are some simple answers to the first questions your kids may ask you about buying and financing a home:
What is a Mortgage anyway?
When you buy a home and do not have enough cash to cover the entire amount, you might be able to borrow money from a company, called a Mortgage Lender, to cover the amount you don’t have. The money you borrow to pay for your property (or home) is like a loan, but it is commonly referred to as a Mortgage.
It is important for you to understand that not everyone can get a mortgage. In order to qualify (or be allowed) to borrow the money you need, you have to prove you are responsible with money. You will need to have a job and show you can pay your bills on time. If you have a job, and you pay your bills on time, you will have a better chance of being approved for (or getting) a mortgage.
When you take out a mortgage on a property, you are entering into a legal contract, and will be legally obligated to pay back the amount you borrowed, PLUS interest. Interest is an extra amount of money, or profit, that the lender asks for, on top of the original, or principal, amount you originally borrow.
Borrowing the money to pay for a home means that both you, and the lender you borrowed from, have an interest in, or legal ownership of, that property. So you do own the property, but the company you borrowed the money from also has a piece of that ownership.
When you borrow money, you are required to pay it back by making payments every month (or week) to the company you borrowed from. Usually you have about 25 years to pay the mortgage back, sometimes you can pay it off sooner, and sometimes it takes longer.
If you do not make your payments on time, or you don’t make them at all, the company you borrowed from can foreclose on the property, which means they can legally take the property away from you, sell it, and pay off the debt you owe them with the money they get from the sale.
Once you have paid back the money you borrowed plus the interest the company no longer has any rights to your property, and then you become the sole owner of your home.
Who helps you find a Mortgage?
A Mortgage Agent is a professional who is licensed by FSCO (The Financial Services Commission of Ontario) to provide mortgage advice, and is educated in the area of mortgages. A Mortgage Agent has connections with many lenders who are in the business to lend money to people who want to buy homes.
My name is Rhonda Stark, and I am a Licensed Mortgage Agent. I help people like your teachers, coaches, parents, grandparents, and aunts and uncles, make their dreams of owning a home come true! And I also teach them how to save money along the way so one day they can be mortgage free, (which means they have paid their mortgage off) and have extra money to do fun things with their families – like go on vacation!