Homebuying is admittedly one of the costly expenses every Canadian faces at some point in their lives. Despite Canada’s reputable reward programs and impressive discounts, home owning remains a slippery slope for most of us. Between bills, student loans, and retirement plans, buying your dream home will likely fall short on your top priority list.
Furthermore, the economy has interest rates creeping up so fast, which probably has you thinking taking out a mortgage isn’t the best financial move for you this year. What if there is a way to hunt down the best mortgage deal– rates, terms, and interest included? Buying a home is a huge step, and prepping yourself with the right tools and tips will save you a pretty penny. So, before you get that mortgage application, here’s what you should straighten out to score the best rates.
Pick up your Credit Score.
That 3-digit credit score is quite telling of your mortgage rate- lenders are known to use credit reports to assess the mortgagors’ ability to settle their loan on time. Ideally, having an excellent credit score factors out default risk for your financier, amounting to low mortgage rates.
The mortgage company is looking for a balance that doesn’t exceed 30% of your credit limit. Nevertheless, having debt doesn’t disqualify you as an eligible applicant. So, if you have been toying with the idea of getting a mortgage, make a point of checking your credit score and reports more often.
Build an Income Record
Consistent cash flow turns the wheels in your favor. Moneylenders need a guarantee that you will keep up with payments, evident through a steady paycheck, preferably from the same employer. Another way to woo your mortgage company is through increased income- when you boost your money stream, you subsequently minimize your debt, thus improving your debt-to-income stats. With your DTI lower than 36%, your creditor is more confident about your mortgage payments, qualifying you for lower rates.
Tapper off the Debts
According to the recent Equifax polls, 73.21% of the Canadian population is in debt; credit is, therefore, nothing odd. Although, if you are planning to visit your mortgage broker, you might want to lessen your credit load. Not only will cutting down your debt polish up your credit score, but it will also improve your debt-to-income ratio. Taking steps to cover your debt could be anything from cutting down your monthly expenditure to sacrificing that summer vacation. Cutting back on your credit makes you appear like an excellent financial manager to your financier.
Comparison is Key
The mortgage business is a lucrative one, and there are thousands of lenders dying to make you an offer, so don’t just settle for one! Spread out your deal hunting to two or more lenders, compare the rates, and most importantly, do your research. Browse the best-priced Canadian mortgage rates and narrow them down to the best deal in your pocket range.
Eye a Substantial Down Payment
By now, you probably see a correlation in risks and rates when it comes to mortgaging- the lower the risk, the lower the rates charged. Similarly, when you put down a modest down payment, you pose as a high-risk borrower to the lenders. Any amount that ranges below 20% of the conventional loan has to be accounted for through private mortgage insurance, which means you’ll pay more. A substantial deposit means you get to pay less in monthly installments and an early walk away from PMI premiums.
Go for a Shorter Loan Term.
While a 30-year fixed mortgage may seem like a safer bet, you will naturally pay more in the long run. Penciling in your mortgage payment to 15 years earns you a lower interest rate than a 30-year fixed mortgage rate.
Shopping for your dream home can be an emotional rollercoaster, not to mention a pinch to your pockets, so if you think you have found the right property go for it! Stalling your payments to 30 years rather than the benchmark 15 isn’t a smart financial move.
Skipping out on the homeowning frenzy is close to impossible. Statistically, 9 out of 10 Canadians have mortgages; this accounts for 88% of the population. While having liquid cash lying around enough to buy your home would be convenient, most people can only afford to take out loans and mortgages. Therefore, equipping oneself with the necessary skills and tools to scoop the best mortgage deals in the market is essential. Don’t just take out a home loan; stay in the loop with measures to lock in a great mortgage rate.