Arrange A Mortgage / Preapproval
"A mortgage gives you the power to buy a home. This isn't the most fun step in buying a home, but it's vital." It is important to qualify for a mortgage required on a property. A benefit of a pre-approval is that it allows you to reserve a mortgage interest rate for 90 days depending on the lenders. As you know rates do fluctuate and if the rate goes up you reserve the lower of the two rates. You also would want to know before you spend a lot of time researching and pre-viewing homes that you are qualified to purchase a home. A pre-approval makes your offer on a home stronger and solid, as it would ease the sellers concerns about your financing.
Who do you talk to?
"There are hundreds of banks, credit unions and other lenders out there who would love your monthly mortgage payments. So talk to everybody", but be careful you do not want too many pre-approvals, as your credit score will go down which can affect your chances of obtaining a mortgage. "Now is not the time to be money-shy! Talk to your bank". "Ask people you know. REALTORS® are very knowledgeable about Mortgages and have lots of good advice."
Call a mortgage broker
"Mortgage brokers are another great resource. They find low rates for a living, and they usually don't get paid unless you sign a mortgage through them, so they're highly motivated to get you the best deal."
Mortgage term - Typically from six months to five years, the ‘term' refers to how long the bank has agreed to lend you the money. At the end of the term, you usually renegotiate a new term.
Amortization - The length of time it will take you to pay off the whole mortgage. Often as long as 25 years, if you don't accelerate your payments. The longer your amortization, the lower your monthly payments, but the more you pay in interest over time.
Interest rates - Interest is the cost of borrowing money, and the interest rate tells you exactly how much. Using this mortgage calculator, check the difference between borrowing $100 000 at 6% and at 9% at the same amortization. Surprising, no? That interest rate not only affects how much you pay, it also affects how much you can borrow. So remember to keep searching for the best rate!
How big a down payment?
You want as small a mortgage as possible, which means making the biggest down payment possible. Just remember to set money aside for all the fees associated with buying a home. Not to mention moving, repairs, renovations, new furniture... think ahead.
THE RRSP HOME BUYERS' PLAN - A little sweet relief.
If you're a first-time homebuyer with money in an RRSP, you can withdraw up to $20,000 without paying any income tax. If your spouse is also eligible, that's $40 000. Ask your REALTOR® how to best take advantage of this plan.
Lock into an interest rate; for how long?
It's a tough question. What if you ‘lock in' for five years and rates go into a period of decline? That could mean you're stuck paying more than you had to for a long time. But if rates were to steadily climb over the next five years, locking in for five years now would be a great move. For many, a long-term mortgage offers peace of mind in knowing that their mortgage payments will stay the same for several years. Your REALTOR® will have a lot of good advice.
What you need to apply for a mortgage
- Letter of employment confirmation - Ask your employer for a letter that confirms your position, your pay and how many years you've been with the company.
- List your assets - Your car, stocks, bonds, GICs. Show which assets will be used for your down payment.
- List your liabilities - Car payments, student loans, and credit card debt. List all the money you owe, and note how you're paying it off.
- Social Insurance Number - And your chequing account number, and your lawyer's contact information
- Information about the house you want to buy. The home is your security on the mortgage, so the lender wants to know all about it.
Content: The Canadian Real Estate Association, howrealtorshelp.ca