Many Canadians feel that owning a home is a top priority and to get there, youโll need a mortgage. Thatโs why finding both the right mortgage and the right lender are very important.
If youโve never been through the process of getting a mortgage before, itโs really not that complicated, as long as you understand these 6 essential steps:
Simples tips to get approve
Step 1: Find the right lender
Choosing the right lender is important โ as thereโs more to a lender than the interest rates theyโre offering. Chances are youโve had some experience with financial institutions that offer mortgages. You should look back on how these companies have helped you in the past before adding a mortgage to your relationship.
Step 2: Find the right interest rate
Finding a low interest rate is one of the most important steps in getting a mortgage. Typically, banks, brokers and credit unions offer similar rates. On the surface, the differences between these rates might not seem all that significant; in many cases, they can be within a percentage point of each other. But over the course of a mortgage term, such as 5 years, that difference can really add up.
Example:
For example, for a $500,000 mortgage paid over 20 years, with a fixed interest rate of 3%, the monthly payment would be $2,768.34. Keep everything else the same but drop the interest rate to 2.5% and the monthly payment goes down to $2,646.37. In the end, thatโs roughly $122 more in your pocket every month (or more than $1,400 per year). Clearly, getting a lower interest rate can pay off.
That said, remember that a lender may only hold your rate for a set period, such as 120 days. So, while you may have secured a great interest rate in April, if you havenโt bought a home by July you may be looking at a completely different rate.
Step 3: Get pre-approved
Getting pre-approved for a mortgage is a key step towards making a home purchase. It can also make a significant difference if youโre competing against other buyers. By showing a seller that youโve already been financially approved โ in other words, that you can afford to buy the home โ you may have an advantage over competitors who havenโt gone through this process. But remember, a pre-approval is still subject to certain conditions, such as the home qualifying for financing.1Footnote 1
READ: Canada Mortgage basics & Questions/Answers
Put simply, getting pre-approved allows you to move faster towards completing a sale when you find a home that you love. Itโs also at this stage that youโll need to think about your down payment, or the amount of money you can put towards the purchase at the time of sale.
Canadians How To get approved for a mortgage
Step 4: Find your home
This is the fun part โ find the home thatโs right for you. Here, the most important thing to determine is how much you can afford. Remember to factor in your down payment and the other costs that go with buying a home, from legal and land transfer fees to moving and home inspection expenses. You should also keep in mind that you wonโt have a landlord to perform routine maintenance, so the cost of fixing anything that breaks down will be left to you.
Ultimately, the final purchase price of your home should be comfortably below the number provided by your lender during the pre-approval process.
Step 5: Work out the details
Once youโve reached an agreement with the seller, itโs time to work out the final details of your mortgage. This means youโll need to meet with your lender to determine the following:
- Down paymentโฏโ how much money you can put down at the time of sale
- Mortgage typeโฏโ will you be getting a fixed- or variable-rate mortgage? Will it be closed, open or convertible?
- Amortization period โ how long you will take to pay for your home
- Mortgage term โ how long youโll be making payments at your interest rate
- Payment scheduleโฏโ will you make payments every week, biweekly or monthly? If youโd like to pay your mortgage off sooner, you may want to consider accelerated weekly or biweekly payments.
Step 6: Keep in touch
Completing your mortgage and moving into your new home are just the first steps. In the future, you may have questions about your mortgage, particularly when it comes time to renew . Thatโs why itโs crucial to find a mortgage provider that has a dedicated support team you can access on a regular basis โ at the very least, once each year โ to address your concerns and help you make adjustments as your life changes.
An advisor can help you understand your financial situation and put you in touch with a Canada LifeTM credit planning consultant who can guide you through the mortgage process and help you choose the right mortgage for you.