After more than two years, the Bank of Canda (BoC) decided to cut its policy rate by .25 of a point to bring it to 4.75%. For those shopping the real estate market, this comes as welcome news, as their financing capabilities have strengthened in the process. Though, even with this rate cut, does this mean you should jump in right away; are you prepared?
Here are some things to consider:
1. What type of mortgage do you want?
When it comes to financing the purchase of a new, or new-to-you, home there are plenty of options available for you to choose from; and given the high rate of interest that characterizes the Canadian real estate market, you could potentially lose thousands of dollars if you do not choose the right one. For example, you can get a 5-year fixed, or a 5-year variable, term mortgage; what is the difference? On a 5-year-fixed mortgage, you are locked into a given interest rate for the duration of the loan period. This has its benefits as if there are any interest rate increases during your term, you are protected against them; but if there are any cuts, you are “out of luck.” “Variables”, on the other hand, will offer you an opportunity to potentially secure a lower rate than you started with during the course of your loan, given the movement of the prevailing rate at a given time; but that same flexibility can also see you receive an unexpected increase. Additionally, each option offers slightly differing terms, and conditions that will affect their overall costs, both short and long-term. Which one is right for you, right now?
2. Early-Payment Fees
Being diligent in the repayment of your mortgage is something any creditor desires; but what you may not know is that you could be penalized if you are “too diligent.” In some loan agreements there are conditions that discourage the early repayment of a loan, over a given amount: this is considered a penalty. The reason for this is that when this happens creditors effectively earn less from interest payments, which in turn diminishes their revenue. So be sure to find out how “diligent” your loan will allow you to be.
3. Required Documents
The best way to submit an offer for a home is to have your finances in order beforehand: this shows buyers you are serious about your offer. When applying for a loan you will need things such as a government issued ID; proof of income; and a list of your assets and liabilities. This is just a partial list, though; but you can download a more complete version here. AppGear Capital has you covered.
4. Mortgage Brokers
If you are interested in securing a mortgage, not only are there multiple products to meet the numerous needs of those shopping the real estate market; there are also various sources you can get funding from — you are not chained to the approval of the “big” banks in Canada. There are various brokers across the country who can also serve your needs; and in fact, this could prove to be advantageous to you. Brokers, like AppGear Capital, for example, do not deal with one lender specifically. Instead, they shop around for you to find the best lending product to meet your needs; and this may offer you an opportunity to get a cheaper rate than dealing with a direct lender.
But these are just four simple things to be aware of; there are others; and here at AppGear Capital, we welcome the opportunity to help you explore what your mortgage options are. It is our goal to help you get the lowest rate possible on a mortgage that suits your financial position best. Contact one of our licensed specialists today to explore the things discussed here, and more; and also see why we are steadily becoming the benchmark for mortgage acquisition in Canada.
