Applying for a Mortgage Isn’t Always Easy

Mortgages, by their very nature, are complicated. Many homeowners and prospective homeowners might not have the strongest foundation of knowledge on which to base decisions, and even those who do might have wrong information. When it comes to applying for a mortgage, there’s a ton of differing opinion.

Bad Advice Might Steer you in the Wrong Direction 

A quick Google search for anything to do with mortgages will quickly reveal contradicting opinions. How does someone looking for a mortgage approval sift through the bad advice and come to a solid conclusion? Remember, you don’t need a license or accreditation to share an opinion on the web.

Let’s look at some common mortgage advice that you might want to ignore:

#1: Getting a Mortgage Pre-approval Offers No Advantages

This tends to be a popular one and is simply not true. Some claim that you’re too early in the process or that it’s not official so why bother. The truth is, a pre-approval can make you more attractive to a seller if there are multiple bids. In addition, it gives you a framework on what you can spend.

#2: The Fine Print is Just Legal Mumbo Jumbo

Once you’re approved for a mortgage, there’s a lot of legalese that you’ll have to sort through. While it might feel daunting, there’s important information in there, and it shouldn’t be dismissed. Don’t think of it as fine print, instead, think of it important clauses that could make or break your deal.

#3: Avoid Being “House Poor” by Paying the Least Amount Every Month

Another common one is to avoid bi-weekly payments or accelerated payments or try to amortize over 30 years instead of 25 years. All of this can drag your mortgage out whereas fewer years and accelerated payments can chop months if not years off of your regular payments.

#4: Take Every Penny Offered by the Bank

This might be a tough one to ignore since it sounds so enticing, but it’s not sound advice. You need to stay within your budget and shop accordingly. You can enjoy life and find your dream home for a bit below your means, and this way, you can continue to save or top up your emergency fund.

This list could be a lot longer, but the point is, you need to consider all of the advice given to you and to choose what is best for you and your finances. The best piece of advice might be to do your research, be diligent and trust the experts.

Speaking of experts, if you want sound mortgage advice, contact Canadalend today.

Selling your home is a big decision. It also means moving, which can take a serious toll on your finances and be a real hassle. It’s not something that most people take lightly and there’s other factors at play. What effect will it have on your kids? Will you be able to profit from the experience? Will a new home meet your needs? And most importantly, does the need outweigh the cost and stress?

When asking yourself if it’s time to sell your home, you will want to consider the following.

Is it a Seller’s Market?

Have you noticed a lot of your neighbours are selling? Does it feel like a lot of homes in your neighbourhood or building are going for above asking?

One of the best reasons to sell is to turn a profit. This will allow you to upgrade your home and lifestyle. In most cases, one’s home is their greatest investment.

Does your Current Home Not Fit your Needs?

While it might not check off every box, your house or condo should enhance and not detract from your life. If your space feels cramped it might be time to consider selling and upgrading. This isn’t to say you should upgrade just so you can fit a second car but if you need a bigger garage and an extra bedroom then your current home just might not fit your life.

Your Finances have Changed

Life changes and it changes fast. If you lose your job or want to take a chance on a new business venture, then selling your home might make sense. You never want to take a loss but downgrading is a proven way to balance your finances if challenges arise.

On the flipside, if you come into some money or a fortuitous promotion then it might be a good idea to sell and upgrade into something closer than your dream home.

The best advice is to give thought to moving if you find yourself with multiple reasons, such as, improved finances and the value of your home has increased. That’s a good benchmark to accept that it is time to sell.

Life happens and when it does it can be costly. Lots of people seek out additional funds for business ventures, cash flow shortage, medical expenses, travel, home renovations, to name a few.

Once you’ve decided to take advantage of your home equity, the next decision will be about what loan offers you the most. Two options will most likely be available: a second mortgage or a home equity loan (which can also come in the form of a line of credit).

To avoid any further confusion between the two, let’s break down their similarities and their differences.  

What are the Similarities Between a Second Mortgage and a Home Equity Loan?

At first glance and to the untrained eye, these two types of loans probably appear very similar. They both borrow against the equity in your home. The criteria for approval is nearly identical. They seem to have more in common than they do separating them.

How do Second Mortgages and Home Equity Loans Differ?

A home equity loan acts more like a traditional loan in the sense that money is made available to you and you repay a set amount based on the agreed upon terms. Repayment usually takes less time than a second mortgage. While it does involving using your home as collateral it is independent of your mortgage.

A second mortgage provides a fixed amount of money that must be repaid on a fixed schedule. Staring with the application process (based on credit history, interest rate and price of home) and including your repayment terms, it should look and feel like your first mortgage.

Second mortgages are typically 15 to 30 year loans with a fixed rate. The catch is that the rates can be a touch higher but the fees can be lower.

Your Financial Needs are the Biggest Differentiator

If you need money for a singular reason, such as a one-time expense like a home renovation than a second mortgage might make more sense. If you require access to a pool of money to pay for tuition or several home repairs than a home equity loan or line of credit is probably more suitable.

This can get murky so the best advice is to sit down with an expert and allow them to guide you through the pros and cons of each with your specific situation in mind.

Owning a home is quite certainly on most people’s minds. But given the current situation of the growing real estate prices in the GTA, this may seem like a pipe dream to many. Purchasing a house for the first time, finding a bigger property, or even simply moving to a more desirable location could be out of reach financially.

Budgeting a large amount for something as significant as a home can be daunting, but here are some tips to help you save up.

Determine how much money you need

Take into account what you can afford to spend on mortgage payments, including potential maintenance fees and various other expenses. If you currently own a property that you will sell before moving, there will be equity from which to take. However, you also need to figure out where to live and the size of the home you need. Where you choose to lay your hat will be a major factor in the cost of your new house and what you need to budget.

Set aside some monthly funds

Tuck away a portion of every pay cheque you receive into a savings account from which you purposefully do not withdraw. Your income (as well as your spouse’s or significant other’s income if the home will be a co-purchase) also plays a significant role in the size of the mortgage you will be able to obtain.

Adjust your lifestyle

Cut back on unnecessary purchases and make some frugal adjustments to your lifestyle, if needed, such as packing lunches and dining at home, and skipping outside entertainment activities for now. This will help you sustain more of the money you earn each month to put towards a new home.

Mortgages are obviously in place because only the illusive one percent can possibly afford buying a home outright. That means the rest of people need to save up for at least the down payment, with enough left over and a steady stream of income to manage monthly payments and other regular bills, such as hydro and utilities. Simply set realistic goals and give yourself some time to make it happen.