The 5 Financial Principles of Mortgage Payments

October 19, 2017 0

Canada’s real estate market has been surging since the end of the Great Recession. Despite a couple of hiccups and a recent slump (if you can call it that), the housing market in the Great White North, particularly in Toronto, Ottawa, Montreal and Vancouver, is a lucrative one.

With home values becoming way too much for the average person to handle, it can be extremely difficult to obtain a mortgage. Whether it’s because we don’t earn enough or because we have a less-than-stellar credit rating, a financial institution may not want to lend you a $600,000 mortgage.

That said, your odds can be considerably improved when you take advantage of a mortgage broker. These are professionals who can ensure you get the right mortgage for your needs. Although they have become in great demand in recent years, there are many things that mortgage brokers have witnessed and experienced first-hand that have hurt deals and relationships.

Here are five things every mortgage wants clients to know:

1. Never Change Your Financial Situation on a Whim

For years, potential homeowners have put together a commendable down payment, worked at the same job for a decade and remained careful about their budgets. This has helped the individuals be pre-approved for a mortgage, but then out of nowhere something changes: their monetary situation.

When you’re in the middle of applying for a mortgage, you should never change your financial situation on a whim. Whether it is purchasing a new car or quitting your job to start a business, you must avoid being cavalier about your pecuniary account when trying to get a mortgage.

2. Be Honest About Your Finances

During the application process, you need to be honest at all times.

It is true that many consumers are sometimes desperate to buy a house, condominium or townhome. But that doesn’t mean you need to begin fibbing when working with a mortgage broker. Should a lender discover that you’re lying about certain elements of your life, you’ll be rejected for the loan.

3. Know the Rules About Down Payments

Over the last couple of years, the rules pertaining to down payments have been adjusted to reflect today’s overwhelming real estate market.

Today, you need a five percent down payment for a home that is valued at $500,000 or less. For homes that are worth $500,000 to $1 million, you need a down payment of five percent for the first $500,000, plus another 10 percent of the remaining balance.

Mortgage brokers are increasingly frustrated when they sit down with clients and find out that they have just one or two percent of the home’s value for the down payment.

4. Refrain from Skipping Over Mortgage Details

Despite mortgage brokers attempting to go through the find details of a contract or loan, they are surprised when clients don’t try to comprehend the finer points and immediately sign the dotted line. This is dangerous, and mortgage brokers will do their best to get you to read the details.

5. Don’t Request a Mortgage Outside Comfort Zone

Again, oftentimes it’s all about desperation for potential homeowners. Their dream is to own a home, and they must have it now, otherwise they won’t feel complete.

This means that they will request a mortgage that is outside of their comfort zone, one that they may not be able to manage in the coming years.

In other words, you should never try to purchase a $500,000 home on a $50,000 salary, with an auto loan and two children. You’ll be unable to keep your head above water in this case.

When you’re unsure what to do, ask your mortgage broker for advice. Toronto, Vancouver, Montreal. In the end, if you want to buy a home but not drown yourself in debt, you may need to avoid some of these Canadian metropolitan cities. You may have to move to the suburbs. Of course, that is entirely up to you. That said, when a mortgage broker comes across numerous clients on a daily basis for several years, they find out that future homeowners don’t know much about the homebuying process.

Before you request a meeting with a mortgage broker, do your homework!