7 Mistakes Canadians Make with Their Mortgage
Many people are currently looking to buy a new home. With the market so competitive it is crucial you do everything to ensure you get the best mortgage you can. Learn from these seven common mistakes to ensure you don’t fall victim to any of them.
1. Not taking your time. Rushing into a mortgage is rarely a good idea. In his article for the Financial Post, Clayton Jarvis from MoneyWise explains that, “Your mortgage will dictate the strength of your personal finances for decades.” Consequently, overlooking a small detail when getting your mortgage could have implications for many years to come. Therefore, it is crucial that you go into a mortgage agreement knowing all the details of the documents you are signing. Make sure that by signing those documents you are not signing away your financial future.
2. Not weighing up all your options. In Canada there are over 400 lenders to choose from when it comes to getting a mortgage. It’s easy to simply focus on lenders with household names, but by doing this you could be making a mistake. Even a small difference in the interest rate of a mortgage could make a big difference over the years. As Robert McLister points out in his article for BorrowWell.com, an additional 0.1% costs you $472 over five years for every $100,000 of mortgage. This is why it is so crucial that you search through every option available to you to find the best rate.
3. Choose overpayment privileges over a lower interest rate. While the ability to pay off your mortgage faster seems an appealing prospect, sometimes this comes at a cost of a higher interest rate. In those cases, often it is wiser to choose the option with the lower interest rate, as this will save you money in the long-term.
4. Not getting pre-approved. Pre-approval for a mortgage can give you a big advantage over other buyers. It shows the seller that you are a serious buyer with the means to cover the cost of the house. Currently competition between buyers is high, so getting pre-approval can be very advantageous. Ultimately it could give you the advantage you need to secure your dream home.
5. Not checking your credit score. It is essential that you are aware of your credit score at least three months before you apply for a mortgage. This gives you time to get your finances in order so a mortgage lender will be more likely to approve your application. An easy way to improve your credit score is making sure you pay off your credit cards on time.
6. Compromising your financial stability. What mortgage lenders look for in an application is stability. This gives them the reassurance that you will be able to make repayments on time. In the months leading up to your application, keep your bank statements looking as straightforward as possible. Avoiding gambling or other risky spending that could reflect badly on you.
7. Not using a mortgage calculator. A really simple way to prepare yourself for what your mortgage might look like is to use an online mortgage calculator. You can use these Canadian mortgage calculator tools to work out what your monthly payments might look like. Simply input the price of your desired house to find out what you can expect to pay each month. You can easily vary the deposit amount to see what effect this would have on your monthly payments. They can also help you to decide what price-range of properties you should be considering given your budget. Using a tool like this will put you in the best shape possible for speaking with mortgage providers. For example, it can give you an idea of what effect different interest rates could have on your monthly payments.