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When the mortgage rate shifts even the slightest, the shockwave can reverberate throughout the housing market. There is also a potential ripple effect that can impact the job market and the provincial and national economy. Don’t treat mortgage rates as some boogeyman lurking in the closet waiting to scare you. The best advice is to understand what determines mortgage rates so you can forecast, predict and plan with greater ease and assurance.

Let’s review the factors that determine the mortgage rate to make sure you are prepared for whatever is going to happen next.

Economy

A common misconception is that The Bank of Canada sets the mortgage rates. As one of the nation’s most influential institutions, The Bank of Canada determines the overnight rate. Banks use the overnight rate to set their prime lending rate. The Bank of Canada helps stimulate the economy or deal with inflation, both of which could determine mortgage rates.

Since the Bank of Canada is tasked with safeguarding the Canadian economy and providing the overnight rate, the economy plays a distinct role in determining mortgage rates even if it’s at a very high-level.

Purchase Details

The down payment, the location of the property, the price of the property and the loan amount will all factor into determining your mortgage rate. A lender must review the details of the purchase to calculate which rate would apply to your loan. One example of this is that a higher down payment could result in a lower interest rate because a lender sees the loan as less risky.

Credit Score 

Certain factors that determine your personal mortgage rate are out of your hands. Your credit score, though, is a way for borrowers to exercise some control over how much interest they pay on their mortgage. This is based on your history of accruing and repaying debt and tells lenders how much risk is involved with a mortgage application.

A positive credit score means you could possibly receive a lower mortgage rate. A poor credit score means you might have to pay a higher rate to offset the risk.

Contact us to learn more about mortgage rates or to start your pre-approval process.

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.

A real estate lawyer works to protect his or her clients when they purchase or sell a home, helping to ensure that the transaction is completed well—regardless of which side of the deal they are on. There are many facets of a purchase or sale that real estate lawyers deal with on your behalf so you can rest assured it will go smoothly.

Agreement of Purchase / Agreement of Sale

A real estate lawyer reviews a wide range of legal documents on their clients’ behalves, including the Agreement of Purchase or Agreement of Sale. These items detail the negotiations involved and range from an irrevocability deadline and completion date to matters of Harmonized Sales Tax and a title search.

Title insurance

He or she might also arrange for the client to obtain title insurance. Although this is not required, a real estate lawyer may recommend it to better protect you, the property owner. Coverage includes title issues that affect you from having clear ownership of the home, title fraud, liens that a previous owner may have had, public record or survey errors, a structure that requires removal by interfering with a neighbouring home, and related issues that impact your ability to sell or lease down the road.

Other issues that may arise

Real estate lawyers are also responsible for ensuring that no claims are listed against the home you purchase, as well as checking that property taxes are up-to-date and that you (their client) have a valid title upon closing. Some of their other roles include calculating the land transfer tax due, drawing up the applicable mortgage documents, exchanging legal documents and keys with the seller’s real estate lawyer, plus closing the transaction while ensuring all financial and legal conditions are met.

As a seller, your real estate lawyer also handles potential title issues that occur, prepares the deed to your home, and helps you negotiate the terms and conditions with your buyer. But no matter whether you buy or sell a home, having a professional in your corner is crucial to avoid as many complications as possible.

The challenges of having a mortgage extend far beyond just obtaining one in the first place. Monthly mortgage payments are non-negotiable and missing them can quickly put you in arrears. This means you owe money you simply should have paid out already. Tax arrears are similar in that you owe money to the government. However, both situations translate to putting yourself in significant financial trouble.

Mortgage Arrears

With a mortgage, your Ontario lender can take legal action to reclaim their money, pursuing what is called ‘power of sale’. This means you would be evicted from your home and they would sell it in order to get their money. From start to finish, that process could take an approximate period of three months.

Although you would receive any additional profits from the sale, you would incur the applicable power of sale fees and still be left without a home. You may stop the power of sale before it is carried out, but this requires help from a financial expert.

Tax Arrears

With taxes, the Canada Revenue Agency has the right to redirect your tax refunds or tax credit to pay off your debt. They may alternatively take action to garnish your wages, or even seize your property if needed—including your home, which they can sell at auction. You also incur the significant interest rates associated with tax arrears, making it even more unattractive to find yourself in this position.

Avoiding Arrears

Neglecting such significant payments as taxes or mortgage can result in other serious financial issues. When it comes to obtaining any loans, you may be forced to go through only a private lender. However, you may simply be forced to sell your property and pursue major debt solutions.

Obviously, it is best to make payments on your mortgage and taxes as quickly and efficiently as possible. If you find yourself struggling to keep up with these, however, it may be necessary to seek professional assistance from a financial expert. Tax or mortgage arrears are serious and can lead to additional hardship.