Get a pre-approval. The first step in purchasing a home should be to meet with us, your mortgage broker, and determine the feasibility of a purchase. Next, determine what you can afford and get a pre-approval or a “rate hold” to hold the current interest rate for 120 days and protect you from any market fluctuations.
A good lender will pre-approve you at a certain rate for 120 days. If rates drop during that timeframe and you decide to close on your mortgage, you should qualify for the lower rate. If rates increase, you still have the benefit of the lower rate. This varies from lender to lender.
While a lender may pre-approve you at a certain rate up to a certain purchase amount, you won’t know if you’re fully approved for a mortgage until you have a specific home in your sights. Lenders need to know the total cost of the home – property taxes, maintenance fees, condo fees and actual price, etc. – before agreeing to lend you the money. Changes in your situation – such as your credit score or employment status – can also affect your approval status.
Many lenders and banks renew existing clients at the posted rate, rather than the discounted rate. Our team will ensure that you’re notified of your mortgage’s upcoming renewal – and the best mortgage rates and products available – so that you have ample time to choose the mortgage best for you. We try to contact all clients 4 months prior to renewal to have plenty of time to shop for the best mortgage for you.
If you’re planning on moving before your mortgage term is up, you want to make sure your mortgage is portable – meaning you can take it, along with your existing interest rate, to your new home without incurring any fees. You also want to make sure that you don’t have to pay additional CMHC/Genworth premiums if your down payment is under 20% of the total purchase price.
This is an important question to ask any mortgage representative. At BestRate Financial, we have extensive relationships with a wide array of lenders to secure the best mortgage options specific to you. We want to ensure you have the best mortgage experience possible – and find the best mortgage for your needs – so that you can’t help but tell your friends and relatives about us!
Many ‘no frills’ mortgage products come with low rates but zero prepayment privileges. While it’s true that the majority of homeowners don’t use their prepayment privileges, if you secure a standard mortgage, prepayment privileges of 15-20% apply as standard options. Many lenders also allow an increase in regular payments and this can range from 15% to double up.
If the Bank of Canada’s prime interest rate starts to increase and you choose to lock in your variable rate mortgage, your rate isn’t frozen at its current state – you’ll be bumped to the current fixed rate (if you are in a five-year term, it will be the current five-year fixed rate). Make sure ahead of time that you’re locking into the discounted rate.
If you want to refinance your mortgage before your term is up, you’ll typically have to pay a penalty of approximately three months’ interest or a ‘interest rate differential’ (the difference between the rate of your current mortgage and the new, lower rate) – whichever is greater. Sometimes, banks will base the rate differential on the posted rate at the time you signed your first mortgage, and the discounted rate of the new mortgage – thus making the rate differential much larger. Be sure to read the fine print.
It can be difficult to be approved for a mortgage at a bank if you fall into these two categories. Because mortgage brokers have access to more lenders than your local bank – and extensive expertise – we can typically find a lender that will accommodate you, if you can adequately prove your income and if you’ve been self-employed for at least two years.
At BestRate Financial we’ll offer our recommendations, explain the pros and cons to you, and encourage your questions. At the end of the day, it’s your mortgage – shouldn’t it fit your needs?