Hello, how are you? Welcome back, in this Episode we are going to talk about the million-dollar question: What is your best Rate?
You may wonder why this is the number one question that people look for in a mortgage, we talked about this topic until Episode 7th., but it was very important to have analyzed all the previous information before to understand that these are the main fundamentals of a mortgage, and in this episode, we will see it.
It is evident that we all seek to be able to have or find the cheapest product on the market that meets our needs. In Canada, there are banks, credit unions, trusts, first-tier banks, private investment lenders, and many other financial institutions authorized to lend money in Canada, all of them compete with different mortgage products, and what stands out most of these products is the Mortgage Rate or Mortgage Rate, which fortunately compete between 1% to 3.5% or 4% in conventional products.
Some points up or down make the difference in a real estate mortgage that today in Canada has very high prices.
But this is where everything we have discussed in these ABC of Mortgage Podcasts in Canada takes practical and timely effect: Accessing the best mortgage rate does not depend precisely on the Financial Institution, they are in the market and place different products with different rates each, depending in each case on different criteria, criteria that are matched with the needs of each of the clients or with their borrowing capacity.
Let me explain better, the Financial Institutions do their job of placing and competing by developing the best mortgage products to be able to place them on the market, but it depends on the needs of each client that each of these products fits like a tailored suit.
In other words, it is up to us that one product or another conforms to:
What each person is looking for;
What each person needs in terms of a financial project; and
What each person can borrow, in terms of ability to repay or borrow.
Do not lose sight that we have already spoken:
Job stability and amount of income,
Credit reliability;
To have all our information in order, up to date, and in available folders;
Of how much we can offer in the initial payment or dawn payment,
How we check the origin of the money for that payment, and
How financial institutions think.
Well, it is time to put everything in a single bag, which in sum will show us what is the financial product that will match or that will be adjusted as a tailored suit when we cross all that with the criteria of financial institutions.
In this sense, if you ask me what is the best rate that we offer as Mortgages Brokers, well I tell you very simply that it is 1.45 or 1.6%, depending on what is in the market at that time, which is governed by factors common to all, that is, by macroeconomic indicators from the Central Bank of Canada or National Consumer Indicators, which quickly leads us to conclude that WE ALL HAVE ACCESS TO THE SAME MORTGAGE RATES THAT EXIST IN THE MARKET.
Of course, as we saw before, that this access to the multiplicity of rates and criteria of banking institutions, and comparing which is the one that best suits each person, you get it with the services of a mortgage broker, because if you approach a bank, this will only offer you the products of that bank, and for example, you will not be able to see or buy the products to which a Mortgage Broker has access, which as in cases of Brokerages such as Mortgages Architects, you can have access to more than 57 financial institutions with a single application, that is, your Mortgage Adviser will do this search for you, and I insist on what we have already said on other occasions, these services are free because the financial institutions themselves pay the fees of a said mortgage advisor, all of which is regulated by the Laws of Canada.
In this way, you can equate that accessing the best mortgage rate that suits your needs will be equivalent to making a tailor-made suit with which you and your mortgage advisor will dress the purchase of your house or any other need for a home equity loan.
Now let me talk about the pieces, threads, and fabrics that will be required to make that suit to measure, that is, let me list a series of questions that you should keep in mind to determine the best rate and the best mortgage that fits your Personal needings:
After reading these questions, you will realize that asking for the best rate is not the first question that we must necessarily ask, because the answer to these questions will undoubtedly modify that first answer:
1. Let's keep as the first question:
What is your best rate?
And as a first answer:
Between 1.45 or 1.6%,
Now, let's move on with the other questions
2. Would you like to make early payments to pay less interest to finish paying the mortgage earlier?
3. Can you live with prepayment restrictions?
4. What is the calculation of the prepayment penalty penalties?
5. Do you want a Variable or Fixed Rate?
6. How many years? 1, 2, 3, 4 or 5
7. Do you want good rates when you renew and/or refinance early?
8. Do you think you need a collateral loan?
9. Can you live with refinancing restrictions?
10. A secured line of credit?
11. An Unsecured Line of Credit?
12. What type of property are you about to buy?
13. Where is the property located?
14. Is it recreational property (hotel/condominium)?
15. Mortgage for a primary residence, a second home, or a rental you won't be living in?
16. Can you adequately prove your income?
17. How is your credit bureau report, what is your score?
18. Do you have credit failures like bankruptcy, consumer proposal, or unpaid debt?
19. How big is the mortgage, as a percentage of your home's value?
20. What is/was the purchase price of the property?
21. When is the closing date?
22. Can you pass the government's "stress test"? Approximately 4.79%
23. Are you buying, refinancing, or just changing lenders?
24. Is your mortgage already insured?
25. How much payback time do you need?
It is time to ask again: What is the best mortgage rate, but now with all these considerations in mind? After that, the answers can be many, everything will depend on the combination of the needs of each person and the criteria of each lender. Of course, one option is to get the first answer, but you can also change the answer and thus access a different rate. These combinations and multiplicity of answers to access one rate or another are what configures the Canadian Mortgage Market, and it is precisely here where your mortgage advisor will help you navigate to find the one that best suits each need.
The list of questions above is by no means exhaustive. And there are always exceptions.
Let's take another example. New mortgage rules in some Canadian cities have made factors such as healthy credit ratings, purchase price, or length of repayment more important. The changes in the regulations have led some Financial Institutions to announce up to 10 different rates only for a five-year fixed mortgage, in other words, the situation that happens at the local level in the real estate market leads us to also have competition in the local mortgage market where the subject property of the mortgage is located.
Today's landscape requires lenders and mortgage brokers to consider more criteria than ever when setting rates. So, if you see a red-hot deal advertised on a lender or broker's website, you're sure to have some caveats.
As we can see, by entering all this in a single bag to obtain the best mortgage rate, we have to have in a few words, the answer to the 3 fundamental pillars of your mortgage that represent "A tailor-made suit for you":
Your Financial Situation
Property Attributes
Programs and Policies of the Financial Institutions
Finding a suitable mortgage requires balance and commitment. Find the intersection and strength of the mortgage programs available, your personal financial situation, and the attributes of the property you want to buy. There are many financial institutions in Canada, each with their own unique criteria for the transactions they will consider, in addition to the minimum legal requirements that each sets to protect their interests. A mortgage broker will make it easy for you to navigate the complexities of finding the right mortgage, the tailored suit you will wear when purchasing your home. Be prepared to ask and answer many questions of your Mortgage Broker.
Finally, in the next episode of this ABC of Mortgage in Canada series, we will talk about the dos and don'ts when you are in the preapproval process and closing process.
We hope this information has been useful to you, and if you think it could be useful to someone else, share the link. Count on our mortgage advisors to guide you in this process, do not hesitate to contact us at:
Tel: 647.704.2209.
Thanks for listening and reading us. Bye!
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