Know what you can afford – get a mortgage pre-approval.
When it pertains to securing a mortgage, people would like to be aware of the amount of money they are able to borrow. The following are a few quick formulas to assist you to determine exactly what you are able to afford.
Loan to Value (LTV)
Lenders will only allow you to borrow a certain amount of the property value. This borrowing amount is known as the Loan to Value or LTV. LTV (%) = (the amount of mortgage loan) / (the value of the property).
You may borrow as much as 80 % of your property value (80 % LTV) without fretting about low mortgage rate default insurance fees, or as much as 95 % with default insurance fees. Whether you are obligated to pay CMHC or not, your mortgage rate loan insurance depends on your LTV.
Total Debt Service (TDS) Number
Your TDS number is the percentage of your gross annual income that is required to cover payments associated with your new home, plus costs linked with your other debts.
TDS = (Home expenses + Car Loans + Credit Card Debts + Other Loans) / Gross Income.
Your total debt service number (TDS) should not exceed 40 %. This provides you with a cushion in the event of a financial emergency.
Gross Debt Service (GDS) Number
Your GDS number is the percentage of gross annual income necessitated to cover payments connected with housing, including best mortgage rate payments, interest, property taxes, and heating.
GDS =(Annual Mortgage Payments + Property Taxes + Interest + Condo Fees + Heating) / Gross Annual Income.
Your gross debt service number (GDS) should not surpass 32 %.
Are calculations not your forte? Contact a mortgage broker today for personalized help.
Find the best mortgage rate today!
Did you know, homebuyers who hunt for a mortgage rate are most likely to secure a competitive financing option than those who don’t? Studies have shown that consumers who compare mortgage rates and ask questions during the pre-approval process are most likely to save more money.
How Can I Find a Great Mortgage Rate?
As mentioned by the Bank of Canada Discounting in Mortgage Markets study, homebuyers can increase their chances of securing a low mortgage rate:.
- By collaborating with a qualified mortgage broker.
- Asking lenders about preferential rates based upon loyalty, age, and finances.
- People who purchase a house in a nearby city are often offered better deals.
Be Cautious of Bank Postings
When it pertains to finding the best mortgage rate, do not automatically assume that the bank’s rate is the best option. As mentioned by the Discounting in Mortgage Markets study, posted bank rates tend to be the same. It is the negotiating that occurs behind the scenes that often allows mortgage brokers to offer their clients lower rates.
Comparing rates online and exploring the market gives you the power you will need to make an informed decision. Get in touch with a mortgage broker today to begin your rate comparison and enhance your chances of finding a reasonably-priced mortgage product.
It’s time to start bargaining!
It goes without saying that you would like to secure the lowest possible mortgage rate. With that being said, negotiating your best mortgage rate will entail some homework. This way, you’ll be able to work out a fair request. Here are a few tips on how to negotiate the best Canadian mortgage rate.
1. Be Honest
Your mortgage agent will ask you a number of questions to see what best suit your needs. Tell the truth.
2. Ask Questions
If you’re confused about something, don’t hesitate to ask. Only a small group of people actually understand the ins and outs of mortgages, so don’t be shy!
3. Pay Attention to the Details
Don’t just look at the low mortgage rate your agent is offering. What prepayment options are available? Is the mortgage portable? What happens if you need to move or break the mortgage contract? Are there any transfer fees?
4. Challenge the Mortgage Rate
Ask your mortgage broker to compare mortgage rates at banks, local credit unions, and non-traditional lenders. It’s his or her job to find the rate that best suits your needs.
5. Don’t Lie
Chances are your mortgage specialist will know and you’ll ruin the relationship you’re trying to build.
6. You Can’t Get What You Don’t Ask For
Ask your mortgage broker about additional offers and bonuses.
7. Be Realistic
It’s important to note that your mortgage broker isn’t a miracle worker. Sometimes he or she won’t be able to find a lower rate. With that being said, just because you’ve had some financial hardships in the past doesn’t mean you can’t try to get a good deal! Work with your mortgage broker in order to review all available options.
Understanding the housing market
Have you ever wondered who decides how much a house is worth and how they do it? The market is influenced by a variety of factors, all adding to the final asking price. A few of the factors include:
- Tempo of the market– the speed at which homes are currently selling
- Confidence in the economy– prices have the tendency to go up when confidence is high
- Competition within the market– a packed market tends to result in lower prices
- Financial Institutions– a professional appraiser will determine the property’s lending value
- Insurance Companies– a broker will calculate the property’s replacement value
- The buyer and the seller– ultimately, buyers and sellers decide the final purchase price, which in turn influences the market
Seller’s Market vs. Buyer’s Market
Instability in the market scares people– sometimes right out of moving. A better understanding of the market will help you choose the best time to sell.
Cycles in the market are strongly influenced by the economy. The economy can produce both a shortage and a surplus of housing. In a seller’s market many buyers are competing for a limited number of houses. Prices on houses tend to be higher in a seller’s market. Conversely, in a buyer’s market there are plenty of houses to choose from. This surplus of housing can slow rising prices, as well as cause price reductions, which can ultimately impact your low mortgage rate.
Knowing the market is an important factor when selling or buying a home. Be sure to research the current market and best mortgage rate, or hire a real estate professional who is aware of the complexities.
Canadians take, on average, 11 months to plan their Canadian mortgage rate home purchase and 88 percent indicate that they have a good sense of how much they can afford. (Source: CAAMP).
Buy First, or Sell First
This is one of the biggest concerns for sellers. Unless you time both the purchase and sale perfectly, you could end up in one of two scenarios: living in a motel temporarily, or paying two mortgages at the same time. Neither sounds very appealing. Here are a few things you can do to avoid this dilemma:
Make it ‘conditional’ that your offer to purchase stands only if your current home sells. However, in a hot market (i.e. seller’s market), the seller could reject your offer for a more suitable one.
If you receive an offer, negotiate the closing date until the sale of your home is complete. Again, this could lead to a withdrawal of the offer if it does not work with the potential buyer’s schedule.