RBC has recently announced a cut in their 5-year fixed term mortgage rate, and with other banks expected to follow suit, now may be a better time than ever to look at locking in that mortgage on a new home.
A mortgage is a loan that is primarily used to buy a home. Lenders will loan you a large sum of money to cover the purchase of a property, using the home as collateral until repayment of the mortgage has been made. Finding the right mortgage to suit your needs may seem daunting at first but with these simple steps you’ll be on your way to home ownership in no time.
Step One: Find a Lender
Apart from the comfort factor, going to a bank where you’re already a customer can make the mortgage application process easier. You can always compare rates from a few different institutions and as long as your own bank is competitive, start there. Everyone looking to obtain a mortgage needs to meet certain factors of eligibility, including down payment amount, credit score and income. You will need to prove your income over the past three years and a lender will need to pull up your credit report. Going with your current bank can streamline the process, with most of your information already on file.
Going through a Mortgage Broker is also an option. Brokers are independent professionals who work as liaisons between the borrower (you) and the lender (the bank) to negotiate mortgage loans. Brokers deal with many different financial institutions, often allowing them to offer more choice and competitive options.
Step Two: Getting Pre-Approved
Once you’ve decided on a lender it’s time to get pre-approved. This is a free process that helps potential home buyers determine what they can and cannot afford. During the pre-approval process the bank or broker will secure an interest rate for you that can be held for up to 120 days depending on the lender. It’s important to stick to the budget your lender has set for the best chance of full mortgage approval once you find the property that best suits your needs.
Step Three: Determining Your Budget
Keep in mind that most people are pre-approved for more than they actually want to spend on a home. Crunch the numbers and consider the lifestyle you want to be living - there are many online mortgage calculators that can help you determine the right mortgage amount for you.
Step Four: Choose Your Loan Type
There are many different mortgage types; from open to closed, with fixed or variable rates. Mortgages come in all different shapes and sizes. Rely on your broker or lender to walk you through all of the options before you decide on a loan type that will impact your bottom line.
Step Five: Completing the Transaction
Find the right property for you. If you haven’t already, get in touch with a realtor and begin the search for the perfect property to suit your needs, your budget and your lifestyle.
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Happy house and mortgage shopping!