Agent and client shaking hands after signing contract for house purchase.
Credit: jcomp Via Freepik
Understanding the mortgage process can enable many first-time buyers or current homeowners to make an informed decision while entering the booming housing market. But where should you start?
Canadians continue to witness record-high sales across the country as the global pandemic continues to push the housing market to its pinnacle, and these sales are having an undeniable impact on today’s mortgage rates. But what can home buyers do?
The market isn’t showing any signs of slowing down, and the proof is in the numbers. Some recent statistics from the Canadian Real Estate Association (CREA) reveal that national home sales remained historically high in January 2022. With these changes, new homebuyers need to on the pulse of changing regulations, demand and data to set themselves up for success.
In this market, looking at the hard data and planning accordingly is the best way to obtain a desirable mortgage rate. Consider the factors and tools that can help your process:
Observe Mortgage Rates
Mortgage rates constantly fluctuate in the fast-paced world of housing and finance, and taking advantage of a rate drop is simpler when you observe the rates daily. Although the short-time changes may be minor, locking in your rate at a level you deem affordable can help you in the long term.
Knowing how much your new loan might cost will help you make an educated decision about your next steps as a borrower. Leverage tools and resources online to watch the fluctuating mortgage rates, like an online mortgage calculator
A mortgage calculator allows you to estimate your monthly payment and amortization schedule for the life of your mortgage and compare variable and fixed mortgage rates. Look for the most user-friendly mortgage calculator Canada has to offer to help you obtain accurate rates and plan.
Improve Your Credit Score
You are likely to receive a better mortgage rate if you have a higher credit score. A lender uses your credit score to assess the level of risk associated with providing you with a loan, with the higher the score indicating the lower their risk. When a lender trusts that you’re more likely to make timely payments, they may offer you a lower interest rate.
You can work on your credit score by paying off any loans you currently have and continuing to make all your payments on time, such as your credit card bills. Having excellent credit can also help you become eligible for lower mortgage interest rates.
Make a Larger Down Payment
If you can save up to invest a more significant sum initially, the sum of your loan will be lower. Your interest rate will also be lower as lenders calculate interest on the principal amount owing. Some lenders may even offer you lower interest rates because they see you as a lower-risk borrower when you make a larger down payment.
Get Pre-Approved
A mortgage pre-approval is a statement from a lender indicating that you are qualified to borrow up to a certain amount to fund your new property. Getting pre-approval helps you lock favourable interest rates and also makes you a more attractive buyer in the market. It also allows for room for negotiation with sellers as they know that a pre-approved buyer is serious about the investment. In addition, having a pre-approved mortgage will also help you to narrow down your budget and properties of interest.
Explore Multiple Lenders
One of the best ways to lock in an affordable mortgage rate is to explore multiple lenders. This will allow you to compare the loan amounts and interest rates that each lender offers. You can apply with a few lenders to see which offers you the lowest rate.
When a lender gives you a loan estimate, the document will include key details about how much the loan will cost you in the first five years. Use this document to plan ahead, and make some financial projections.
Getting an affordable mortgage rate in Canada’s current housing market can seem challenging, but following these steps can simplify the process and help you identify the best mortgage rate for your new home.
This content is a joint venture between our publication and our partner. We do not endorse any product or service in the article.
