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Searching for the right mortgage lender and terms can be an arduous process filled with questions and options. Most people aren’t inherently equipped with the knowledge required to navigate the road to mortgage approval. Applicants need to ask the right questions to an experienced mortgage professional.

Some of the common questions borrowers ask revolve around credit profiles, types of mortgages and what are some of the hidden costs and fees.

Credit Profiles

Most applicants focus on their credit score, thinking it will help determine the loan amount. In fact, an entire credit profile could impact an application, which includes payment history, debt load, and unpaid debts.  This profile helps paint a clear portrait of the applicant’s financial history and situation. If the profile is strong it can reassure the lender that a borrower can handle the loan.

Credit scores do matter to lenders but it is not the only aspect that can determine a mortgage approval or rejection. 

Different Types of Mortgages

There are a lot of different types of mortgages and it can get a bit confusing for first-time borrowers or even the seasoned pros.

Mortgage types include but are not limited to:

• Traditional mortgages (20% down payment, loan-to-value ratio)
• High-ratio mortgages
• Fixed rate mortgages
• Variable rate mortgages
• Convertible mortgages
• Open mortgages

Each mortgage has its own stipulations and terms so sit down with a mortgage specialist to determine which is best for your situation.

Costs and Fees

Mortgages contain a lot of fine print which can balloon the cost of your home. One of the costs is insurance that the borrower must purchase if their down payment is less than 20%. Other costs include taxes, processing fees (usually $200-300), lawyer fees and interest adjustment.

Borrowers need to be aware of all the costs and fees and make sure they are covered in their budget.

The best way to approach a mortgage application is carefully, thoroughly and with knowledge. Contact us to learn more about your mortgage options. We can walk you through the entire process and answer all your questions.

Making the leap from lifelong renter to homeowner is exciting but it can also be stressful and time-consuming.  Homeownership comes with a ton of responsibility but it results in finally having a place to call your own. A place where you can settle, make all the choices and plant roots.

Here are some tips to help make the transition from renter to owner as smooth as possible.

Create a Detailed Budget

Entering homeownership for the first time is expensive and a big financial change for most. You need to know where your money is going every month. Create a detailed budget where you outline every monthly cost and be sure to leave some room for those pesky costs that pop up every month.

Your budget will guide most of your monthly spending. The more detail you include, the less chance you have of being surprised. If you come under budget some months you can consider making a larger mortgage payment, which will go towards the principal.

Learn to be Handy

Renting can be nice and breezy. When your faucet breaks, you call your landlord and they call the plumber. When you have an electrical problem, you call your landlord and they call the electrician.

Owning a home means being responsible for every broken appliance, leaky faucet and every part of a home that requires maintenance. Learning to be handy and being able to make small repairs can save an owner a lot of money and get your home running at optimal capacity quicker.

There are a ton of DIY classes people can take to improve their skills and knowledge. Home Depot and community centres tend to offer these classes in the GTA.

Do not Overlook…

An important tip for homeowners is to stay organized. If you are upgrading the size of your home, you will have more space so use it wisely. This doesn’t mean acquiring more stuff, but instead, make sure you keep your storage spaces organized and don’t let your garage devolve into a room full of tools and boxes of old clothes.

There might not be a bigger lifestyle change than the one that comes with becoming a homeowner for the first time. Go into the situation with a plan and do your best to execute that plan every month to ensure the transition works and to minimize stress.

Life changes and your personal finances tend to change with it. So much of your life is tied to your finances so when either a positive or negative shift occurs you need to re-evaluate your entire budget.

For borrowers who experience a change in their financial situation—new job, promotion, unemployed, come into money—they need to understand how they can adjust their home equity loans and mortgages or what strategies they can adopt to ensure their loan terms match their financial situation.

Redo your Budget

Once a change in your personal finances is a distinct possibility, sit down with your budget and review each expense against your new monthly income. This will give you an idea as to whether you need to pay less towards your loans per month or if you can pay more towards the principal amount of the loan.

Notify your Lenders

As soon as you know the details of your new financial situation, make an appointment to speak with your lender to discuss options and determine if you need to negotiate different terms. Depending on the lender (traditional or non-traditional) you could have options as a borrower. Nothing can change unless you initiate the conversation with your lender. In most cases, they are happy to work with you to ensure you can pay your loan or loans.

Your Mortgage and Loans

If you find yourself with more disposable income per month, then you could endeavor to pay off your loan faster. If you lose your job or find yourself in a situation where you need to support a dependent or pay for post-secondary education, then you might be able to negotiate new loan terms which will improve your cash flow. This applies for mortgages, home equity loans or a home equity line of credit. The goal should always be to pay the most towards principal but every situation is unique.

Lenders want you to be able to pay your loans so most will work with you to determine a course of action if your financial situation changes.

Buying a home in the GTA is a stressful process that can be rife with challenges and obstacles. From start to finish, the process can include saving for a down payment, reviewing lenders, filling out the extensive application, awaiting approval, dealing with insurance providers and then shopping for your dream house.

The Federal Government has added a stress test to the mix, complicating matters somewhat for already nervous borrowers.

Should the stress test be causing you stress? Or will it prove to be beneficial for borrowers, lenders and the GTA housing market?

The Stress Test

A stress test means that applicants now must prove they could withstand a substantially higher interest rate if this occurs. It’s a simple formula designed to protect borrowers and lenders form loan defaults and to stabilize the housing market.

Unfortunately, this has slowed or stopped the dream of homeownership for many Canadians. People must not only be pre-approved for a mortgage, their application must overcome an additional challenge in the form of a stress test.

The stress test isn’t all negative, though. There should be a lot of positive outcomes for homeowners.   

Benefit to Canadians

This regulation will help ensure that more Canadians are financially prepared for the responsibility of homeownership. The real benefit will come from a housing market with more pricing options and less bidding wars because the pool of buyers will be smaller and more qualified.

A healthier housing market with more entry points for Canadians will be invaluable to the economy and the financial wellbeing of homeowners. 

Protection for Borrowers and Lenders

The stress test should protect borrowers and lenders from defaults and situations that could financially harm either side. This was a necessary step to make sure that borrowers are vetted prior to approval and that lenders can provide a loan with some reassurance that market volatility will not be a hindrance.

Don’t let the stress test stress you out. Try viewing it through a positive lens as it can help all parties. Contact us to learn more or to start the mortgage pre-approval process.