Tips of the day:
"Toronto's York University Finance Professor Moshe Milevsky
did a study of five-year rolling interest rate during the previous 50 years, and
showed that 88.6 per cent of the time, homeowners would have saved money having floating
interest rate mortgage, which is tied to the rise and fall of bond yields, rather
than fixed-rate mortgage, which are usually locked-in over a period of one to five
years. The average saving was $22,000 on a $100,000 mortgage paid out over 15 years"
Getting a mortgage is not a big deal anymore. There is no need to wait for a
couple of days for the bank mortgage officer to be available to see you.
Nowadays the mortgage officer will be at your door the moment you give him or her a call.
It is like a buyer's market in real estate term and you are the buyer.
If you have good credit and a good job, you are on top of the world. You should be able
to get the lowest and best mortgage deal possible.
If your credit status is less than desirable, do not despair. You are still on top of
the world because there are many lenders who are still willing and desperate to
get your mortgage. You might pay a slightly higher mortgage interest rate though.
Have you heard of subprime mortgage lenders in the States. Subprime mortgage lenders are
mortgage lenders that will lend money to bad credit borrowers. With the recent downturn in
real estate market in the U.S. these subprime mortgage lenders have lost billion.
But this is not your problem.
Banks in Canada are a bit more cautious lending out mortgage money. However they still
do if you meet some basic criterias.
The basic criterias that mortgage lenders look at are:
- Credit History. Have you been a good boy or girl. Have you fulfilled your financial
obligations promptly and consistently. In other words have you made your monthly payments to the
bank on a timely manner, before due date, for your credit card debt, your car loan,
or your mortgage payment.
Some mortgage lenders will try to understand the reason for your bad credit record and work
with you to improve your credit standing.
- Do you have a good steady job. This is important because without a job it is unlikely
that you will be able to make the monthly mortgage payments.
- Is your income steady and enough to pay for all your normal living expenses as well
as your monthly mortgage payments.
It used to be that about one third of your gross
income is earmarked for your mortgage payments. Nowadays many mortgage lenders
are prepared to accept 50 percent of your gross income in the mortgage loan
approval process.
- Do you have a downpayment saved. Mortgage lenders do not want you to have to
borrow your downpayment from family and friends. Because this will add burden to your
monthly financial obligations. Gifts from parents are acceptable. If you have RRSP
you may borrow from your own RRSP for the downpayment.
Mortgage interest rate is pretty much standard across the mortgage industry for borrowers
with strong credit and a good job. Mortgage rate for bad credit borrowers will vary from one
lender to another. You need to bargain more aggressively here.
Mortgage broker is getting more popular each day in Canada. In the U.S. it is widely
accepted. If you are hesitant please check it out
here.
Your local newspaper publishes daily mortgage "Posted Rate" of the main financial institutions
in Canada. Beware that the posted rate is rarely applied nowadays. Anticipate a big
mortgage rate reduction of one to one and a half percent.
Hope you are now ready to look for a house.
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