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Thursday, 12 April 2018

First time home buyers...Yikes!

STEP ONE: It's happened. You have scrimped, you have saved. You are tired of paying someone else's mortgage for them. You are ready to take the leap into ownership. Where to begin? Who to call? What is your first step?

Most people immediately start looking at www.realtor.ca and scoping out what is on the market or they head for an online mortgage calculator and start punching in numbers. STOP! Taking time now to do this first step right will save you a lot of heartache later on.

Now is the time to head to your bank. Not a mortgage broker you ask? Relax, I will get to them. Your bank has quick access to all of your financials, and can sit down with you and discuss your options with them for a mortgage. They are going to throw around terms like: gross debt service ratio, total debt service ratio, stress test and amortization period. They should pull a credit check to make sure you haven't accidentally bought a 20 ft boat that you have forgotten about. This is called qualifying and lately the Government has taken it one step further with its new Stress Test.

Our interest rates have been at an all time low for several years now but they are starting to creep upwards.  Rather than qualifying using today's low rate, buyers are now having to qualify at the posted Bank of Canada rate which is about 2 points HIGHER than the bank rate. The Government wants to make sure that you as a buyer can still afford your home if the interest rates start to climb. Depending on what price point you think you might be in, 2% makes a huge difference. It can knock your price range down by $100,000 depending on your down payment and debt ratio and there is nothing worse than falling in love with a $450,000 home when the bank tells you that you can only afford a $350,000 home.

Mortgage Broker or Bank?  Tough call on this one.  It really depends on your comfort level.  Some people prefer to use their bank where their accounts and car loans and RRSPs are sitting, while others prefer to have a Mortgage Broker shop around on their behalf for the lowest rate.  Now I am not saying that banks have higher rates than Mortgage Brokers.  What I am saying is that usually the bank is looking to sell you ITS mortgage product, while a Mortgage Broker is just trying to find the cheapest rate.  You may not want the cheapest rate.  You may want a cash back mortgage that puts a few thousand dollars back in your account a few weeks after you take possession to help you change the flooring or countertops or you may want one that gives you travel points so that you can have your house and vacation too. In the end the choice is yours so explore your options, and get a proper qualification with a full credit check so that you can carry on to STEP TWO!

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