Things to keep in mind before applying for a Mortgage

Are you thinking of buying a new house? Prepare yourself for one of life’s most taxing experiences. Because applying for a mortgage is a tricky thing but what makes it even tougher is you knowing what to expect. Because it can help you to plan everything a step ahead and get a mortgage in your favor, this planning requires you to brush up on your mortgage knowledge by keeping the following guidelines in mind.

Maintain an Accurate Proportion of your Income and Existing Debts

You must know beforehand how much loan you can actually afford. It is important both for you and the lender. Lenders always keep in mind if you are borrowing too much. So if you want your application to be accepted the first time, you need to understand the debt-to-income ratio (DTI). It is the ratio of your income that you’re spending each month to pay your debts, among other things. For instance, if your monthly pay is Rs 10,000, your mortgage will cost Rs 2,000 monthly, and all other debts add up to Rs 1,500, your debt-to-income ratio is Rs 3,500/Rs 10,000 or 35%. This percentage is important because lenders want you to have this ratio lesser than 43%. Each lender has a different offset but is always lesser than this. Also, it’s favorable if you don’t spend more than 28% of your income on your mortgage payment.

These are the tips you need to keep in mind before filing a mortgage application. Though you can always contact your lender to know more about any pre-qualification requirements beforehand to make the entire process smoother.’

Consider all relevant Mortgage Options

Before you start applying for a mortgage, it’s always a good idea to know your all mortgage options because there is a variety of them out there, and in order to pick the best, you need to see what each one of them is offering and what suits your needs the best. Also, since your mortgage may be the biggest debt you owe, you need to choose wisely. To make this decision, there are so many things you need to get yourself familiar with first, like the type of fee, the difference between fixed and adjustable rates, loan terms, and of course, the company’s reputation.

Improve Credit Score

Having good credit is very important. It says a lot about you to a lender because he can know if you are able to pay off your mortgage debt in the future, so better monitor, or rather improve your score before applying for the loan. Not only does the decision of loan approval depends on it but also it is the deciding factor in determining the interest rate, which is so important, given the amount of loan we are talking about here. It can, for sure, make a tremendous impact on the total cost of your mortgage over time. So there are few general ways that can help you improve your credit score.

  • If you have high account balances relative to your credit limits, paying down your balances will help improve your credit score.
  • If any inaccuracy, such as an incorrect listing of payment as late or missed, exists, report to your bank as soon as you can and get it corrected.
  • Avoid opening new accounts and closing old ones.

Start saving

Saving more will allow you to deposit a considerable amount of down-payment, which will save you from paying less in the long run. If you succeed in paying 20% of the mortgage loan amount as down-payment, you will not need to pay private mortgage insurance either, thus reducing your monthly payments. Thus it’s improbable for you to end up owing more than your home is worth. Even after owning a house, you need to have funds saved to handle any unexpected repair costs.

Get Paperwork done on time.

After you have ensured everything related to interest rates and your budget, it’s wise to gather all the important documents prior to your appointment because there’s a lot of it, and you don’t want to mess up near the end. Even a single missing document can delay your application. The important documents include proof of income, bank statements, proof of assets, tax returns, income statements, etc. You should get a complete list from your lender way ahead of the actual application filing day.

So to conclude, try to avoid making any such move that can jeopardize your application approval. There is no guarantee; after all, it’s just your advanced preparations that can increase your chances of a smooth loan application.

Hire a Skillful Mortgage Broker

Are you planning to buy a house? Aiming to hire or consult a broker first? If the answer to any or both of these questions is yes, then this article is perfect for you. When and if you plan to shop for a house or have already started looking for one, it is sensible to consult a mortgage broker first, as a broker might make your goal of a dream home come effortlessly true.

A mortgage broker is the one who will help you compare rates and find a suitable finance source to get your dream to come true. This broker will function as a bridge between the lender and you. These people are trained and do all the legal work in order to get the best loan option for you. They will also assist you in completing all the necessary paperwork required for getting the loan approved. They are the ideal solution to all your real estate needs.

The brokers essentially perform the following functions:

  1. Lender research
  2. Number crunching
  3. Support you throughout loan application and settlement

It is crucial to find out the right person for the job. Below mentioned are a few characteristics of an ideal broker that could help you decide which broker is right for your situation:

  1. Responsive – Your broker needs to have established his presence in your mind that he responds timely, and these prompt responses will deliver a sense of professionalism to the people looking to hire that broker. It then enables you to be confident that your dream house will soon be yours.
  2. Knowledgeable – One of a mortgage broker’s roles is to connect you to various lenders; it is also his job to give you advice as to which is the most suitable loan product for your desires. It will be wise to get the broker to answer all of your curiosities to prevent you from regretting your decision later.
  3. Honest – You and the broker need to be honest and frank with each other. Furthermore, never hesitate in asking the broker about his fees and why he charges what he does, and how they get paid for their services. This will help you in gaining information about their hidden fees. The majority of the brokers do not charge fees from the borrower as they get the fees from the lender. These are some of the reasons why you should always hire a high-quality broker for your real estate project.
  4. Amicable – The broker must be pleasant but professional for smooth communication as this ensures you that the broker is, after all, concerned for you and your family’s future. If this is not the case, and the broker is merely rude and insensitive, it might make you feel like he is trying to get through the day and is not really passionate about helping you.
  5. Cordial – It is equally essential that the broker understands how much you know and helps you gain the knowledge you do not have about real estate. It is his job to let you know the documents you are supposed to submit, the mortgage options, which forms will have to be filled, and what you get in the end.

What Are The Factors That Influence Mortgage Rates?

Mortgage interest rates have a lasting effect on the finances of the person buying the property, since it is not something that can be paid off in only a few years. Mortgage borrowers always look for the lowest interest rates, while mortgage lenders will try to cover the risks by the interest amount, for the money they lend. Only those lenders who have established reputations charge very low interest rates.

Many economic factors as well as changing government policies can affect the mortgage interest rates. Interest rates can change and fluctuate every year, or every six months, and this is mostly out of anyone’s control. However, knowing what these factors are can help you before you make a decision regarding your mortgage. Some of these are:

  1. The price of the house and the initial loan amount.

When you search for homes to move into, you need to have a basic idea about the prices of the type of home you are looking for. Real estate agents and websites can also help you determine the right price for the kind of home you are looking for in a particular locality. The amount you would need to borrow would be equal to the price of your home and the closing costs only; this will not include the down payment. Mortgage insurance can be added to the loan as well.

  • The down payment.

As a rule of thumb, a larger rate of down payment means a lower rate of interest. This is because when you have a greater stake in the property, the lenders will have to cover less risk factors. In case your down payment is not enough, you may have t purchase mortgage insurance, since it would protect the lender even if you were to stop paying the loan amount back.

  • The term of the loan.

This is another factor that can determine the mortgage interest rate. Usually, short term loans have lower interests and lower overall costs. The monthly payments in this case are quite high. If you are looking for a long term loan, the interest amount can be quite high, but the monthly payments will be very affordable. This is why most homeowners choose the second option, even though it means they have to pay a greater rate of interest for a longer period.

  • The location of your home.

A lot of people do not consider this as a factor, but this does play a role in determining the rate of interest. This depends mainly on the different tax charges levied on home loans in different states.

  • Your credit score.

Undeniably, this is the most important factor which will affect your mortgage interest. If you have a higher credit score, you will be given a lower interest rate, and vice-versa. Your credit scores establish your credibility and reliability to the lenders, and help them consider their risks. It is a good idea to revise your credit scores before you set out to secure a mortgage loan, because lenders will most definitely make a judgment based on your payment history.

What Are The Factors That Can Affect Home Loan Eligibility?

A lot of people consider the possibility of taking a home loan as extremely daunting. While home loans are serious business, they are also quite easy to understand. If you have always wanted to have your own place and you are doing well financially, it might not be a bad idea to take out a home loan against your available assets and get the house of your dreams. Banks and other financial institutions have made it very easy for people to take out home loans. However, there are certain factors that can affect your eligibility for a home loan, since banks and other financial institutions need sufficient proof of your legitimacy before they hand over their money to you.

If you are thinking about taking out a home loan, you have come to the right place. Read on to know more about the factors that can affect your eligibility for a home loan.

  1. Your age.

This is the first factor that is taken into account by banks and other financial institutions, since it is an important factor in loan approval. If you are young and have a stable source of income, you are more likely to be sanctioned for a home loan than if you are much older and nearing retirement. This is because banks may doubt your potency to repay the loan in full.

  • Your job and income.

This is second on the list of considerations. Of course, unless you have a stable job with a steady income flow, you will simply not be sanctioned for a loan at all. Unconventional or risky jobs which do not always promise a stable future can hamper your plans to get a home loan. If you have a history of frequently changing your workplace, it might also affect your eligibility.

  • Your credit score.

This is the most important consideration when it comes to sanctioning home loans, since your credit score is basically a history of all your monetary transactions. It displays your repayment history, existing/outstanding loans, credit card dues and debt history. This is a measure of your financial credibility which the bank or lender will take into account while debating whether you are a good candidate for advancing a loan, since it will determine whether you will be able to pay the amount in due time.

  • Your property details.

A loan is always advanced against some sort of asset, and for home loans, this is usually the property that you are taking out the loan for. Your property is the security against your home loan. If you property is worth a lot, your home loan amount will automatically be more.

  • Your dependents.

The number of people who depend on you is taken into consideration before advancing a loan. This is because the more dependents you have, the more people you need to take care of and thus your ability to pay off the loan in time may get affected, as your disposable income will be lower. This can also affect your home loan eligibility.

Six Smart Tips to Qualify for a Home Loan

There was a time when buying a home was considered to be a challenging achievement. But, as real estate and financing markets underwent progression, house purchase became quite wide-spread. Average-income individuals could afford a reasonable shelter on their head and call it their own without having to pay the full price.

However, no compromise has been ever made on the formalities that a homebuyer is required to fulfil in these years.  A few components like age, income, credit score, location of the property, repayment capacity still remain the crucial parameters to evaluate your ability to apply for the loan and affect your application status.

Therefore, it is highly recommended to gain a complete understanding of them and always be considerate of these expert tips –

  1. Maintain Your Credit Score

Your credit score is the first thing that lending institutions evaluate before providing any loan to you. So, if you look forward to getting a go-ahead for your mortgage from lending institutions, you better maintain a clean history of credit bills and timely repayments of existing loans.

  • Pay Higher Down Payment

Your home loan lenders can finance anywhere between 70 to 90% of your property’s price, and the rest has to be contributed by you. However, instead of paying the bare minimum value, it is wise to make arrangements as high as you can from your pocket. That will immediately boost your eligibility status.

  • Have Clarity on Your Job and Career

Every lending institution you are ever going to contact will always be concerned about your job status and income. The loan sanction officers will consider your net salary, monthly expenses and any other EMIs on the run to assess your repayment capacity. A surplus of 50 to 60% is what they require.

  • Show Multiple Sources of Income

To get your home loan application clearance in one go, try to include an additional source of income if possible. That can be from a rented property, any part-time job or a side business. With this step, your financial health can improve, and your lenders have a surety of loan recovery on time.

  • Add a Co-Applicant

Including the name of family members, spouse or siblings that have a stable source of income and good credit can be extremely beneficial in the case of joint home loan. You can club their earnings with yours and make them a co-applicant to get your loan sanctioned quickly and at affordable interest rates.

  • Keep Your Calm

There is no benefit in hurrying over a home loan. A good amount of research and effort is required for the process, and terms and conditions have to be finalized. All the necessary documents have to be arranged and a full assessment has to be done. So, take your time and go with the flow.

Four Crucial Loan Tips for First-Time Home Buyers

Home buying is exciting and fun, especially for the first-timers. There are long-term dreams that are on the verge to get fulfilled, hence a great impatience to sign off the deal and take over the ownership. However, amidst that eagerness, one can commit mistakes that can lead to severe disappointments or financial setbacks.

One must understand that a real estate investment is an expensive one. Also, the mortgage liability that comes along is complicated and critical. So, to get most out of it and ride through as smoothly as possible, you have to do some research and be considerate enough of the following things –

  1. Assess your Loan Affordability

You might be eyeing a 5 BHK villa on popular streets of Montreal, but have to forego 70 to 80% of your monthly salary. Therefore, you better be realistic with your pocket limits and filter out the extravagant choices in the first step. Use a mortgage calculator to know what price of the home you can afford. That way, you will not have to waste time in looking over properties that are outside your budget or trying to get pre-approval for loans with high EMIs. Choose the programs where mortgage rates are within 50% of your disposable income.

  • Make Arrangements for Down Payment

Generally, banks and other lending institutions fund up to 90% of your property value; which means if you are buying a property worth $500K, you might get a loan up to $450K. But, that does depend on your lender and the type of loan you choose. So, be ready with at least 10% of the purchase price as the down payment of the home. If a large down payment is not your cup of tea, then look into FHA loans. Also, discuss with your mortgage broker for the other suitable options.

  • Maintain Good Credibility

Every mortgage lender first evaluates your credit report before loan approval. Hence, if you wish to get the best deal on your home loan shortly, you have to start improving your credit status from now on and fix the flawed records as well because a low credit score decreases your chances of getting loan approvals. You just keep up with the habit of clearing off the bills and not apply for any new credit if you aren’t sure of it. After all, you don’t want to mess up your credibility during the loan process in case the lenders pull out your credit report for the second time.

  • Compare Rates

All loan programs are not equal. Even the mortgage programs offering the same interest rate can differ from each other and its benefits can vary from lender to lender. If you find yourself in a similar situation, just be thoughtful of the components that go into determining its overall price. Then, make a sensible comparison between various banks and lenders. Make sure you watch over the seasonal offers and subsidized rates too.

Is the COVID-19 Pandemic Right Time to Buy a House?

The impact of COVID-19 is severe in many countries affecting all types of business and leading the downfall of the economy, as stated by most of the people and news channels. It was not enough that the announcement of lockdown adversely affected the capital market, leading to some severe changes in the stock market and falling of the property prices.

It could be good news for many homebuyers who are looking for a property for self-use since the reasonable prices could become even better in the coming months. Although many buyers and sellers are in a dilemma whether the real estate prices will sway for good or not.

The simplest thing that could be concluded during this pandemic is if you have searched for the home that seems right for you and are financially sound with a stable job, you can get financing at historically low rates. Having a mortgage broker to buy you a house in the time of a pandemic will turn out to be even more beneficial since he can negotiate the price for you. Therefore, buying a home with the help of a mortgage broker would be the wise thing to do- even now!

 Do you want to buy an investment property? The story is same for the investment properties too. A few years back, a housing crisis allowed investors to take up properties at extremely low prices and to finance them at low-interest rates. Hence, nobody can make out whether the property prices will fall back again.

Remortgaging during the COVID-19 pandemic-

Coronavirus has most of us in the lockdown, but you can still have the opportunity to remortgage and save a considerable amount of money. The average time people could look out for remortgaging is 4-months prior to existing fixed rates. However, since most of the people are falling sick during the pandemic, I would advise you to start remortgaging six months prior to your existing rate ends.

How to find a mortgage broker near you and what will they charge?

Since you cannot physically contact people by going out, so the best way to find the mortgage broker is by doing online searches and critically analysing the websites of the one you find suitable. Contact a mortgage broker who is local and has displayed his email and contact number on his website for an easy approach. Mostly, a mortgage broker gets their commission from the mortgage lenders and you do not have to pay them, while some of them may charge you reasonable fee.

How can a mortgage broker help you?

Due to COVID-19, some bankers or lenders may have problem processing mortgage applications at that time, but the mortgage brokers will be available at your service to find which lender is suitable during this time and is ready to offer low-interest rates. There is no need for you to risk your life; the mortgage application work will be completed on your behalf by your broker.

Second Mortgage: Working and Advantages

Many people apply for home loans and mortgage to buy their desired home. Since we all know that your home is your valuable possession and that value increases with time. Therefore, your home is your asset. A second mortgage loan allows you to borrow against the worth of your house for indulging in some new ventures. A second mortgage loan is also referred to as Home Equity Line Of Credit (HELOCs) or a home equity loan because it enables you to borrow against the equity of your home. In short, you can use your home for investing in other projects and goals without having to sell it.

What is a Second Mortgage?

A second mortgage is basically a subordinate mortgage made while the first is still in effect. The second mortgage receives repayments only when the first loan has been paid of. So it is regarded as collateral, similar to the one that you used in purchasing your house. You must know that the rate of interest imposed for the second mortgage tends to be higher and the amount acquired will be lower as compared to the one in the first mortgage. 

Second mortgage dives into the equity of your home, which could vary depending upon the time but eventually, it grows over time. Several things can change equity. They are discussed below-

  • Equity increases when you make monthly payments on your loan and reduces the loan balance.
  • Equity increases when you make improvements in your home based on the strong real estate market that increases the value of your home.
  • Equity decreases when you borrow against your home or when your home loses its value.

Forms of Second Mortgage- A second mortgage comes in various forms so you must talk to your reliable mortgage broker before committing to one. Let’s have a look-

  • Lump-Sum- It provides lump-sum money to use for the new project that could be paid in the form of fixed monthly payments. With each payment, you pay for a portion of your loan balance and interest coast known as Amortization.
  • Line of Credit- You can borrow using the line of credit or a pool of money from where you can draw. Your lender will specify the borrowing limit and you can continue to draw until you reach a maximum borrowing limit.
  • Rate Choices- Rates may vary depending upon the type of loan you choose. A fixed-rate interest loan will not change, while the variable-rate interest will change according to the market value.

Advantages of a Second Mortgage-

1) Loan Amount- The second mortgage allows you to borrow a significant amount based on your property. Though acquiring the amount depends on your lender but, you can borrow about 85 per cent of your home’s value.

2) Interest Rates- The second mortgage provides a lower rate of interests since securing the loan with your home reduces the lender’s risk and helps you achieve interest rates in single digits.

3) Tax Benefits- There is a possibility of deduction in your mortgage interest with the second mortgage.

Overcoming The Challenges Of Getting A Mortgage When You Are Self-Employed

There will always come a time in your life when you may need to acquire a mortgage for the property of your dreams. Applying for one has some qualification procedures that you must follow. It will be easy to secure documents that you need in order to qualify for that much-needed mortgage if you are employed by a company who can help certify your capacity to pay the mortgage amount. The question is what will happen if you are self-employed?

Self-employed Canadians and the mortgage scenario

mortgage refinance

It has to be noted that almost 23% of income earners in Canada are self-employed or have at least made a living from part-time jobs. These statistics is an indication that more and more Canadians are attracted to being hired on a contractual basis or becoming self-employed to survive everyday living. The sad thing about this is it will be not as easy as it is for them to get approved for a mortgage loan from private lenders as it will be if they are employed by private companies or other companies for that matter.

The benefits and drawbacks of being self-employed

Being self-employed allows you to say you can work and survive on your own. Add to that, you can also pay slightly lower taxes because you can include your personal expenses among your deductibles before arriving at your taxable income figures. Take note though that there is a drawback that comes with the choice of being self-employed, one of which is it will not be easy for you to prove your income. Since you have a smaller income reflected on your tax return, it follows that you will have a hard time qualifying for mortgage and even if you do, you will only be granted a minimum mortgage amount.

Overcoming these challenges

It is good to note that mortgages are now available for you even when you are self-employed and just like you, there are other self-employed individuals who want to avail of such a privilege. Mortgage agents and brokers have made it possible for you to enjoy your hard-earned money and own the property you have dreamed of.

These agents work with you and give you access to lenders to get the amount of mortgage you need. They negotiate on your behalf in order to make the terms more flexible and agreeable for you. You can use these mortgages to buy a new home or other properties that you have in mind. All you have to do is basically show proof of income using documents such as income tax returns or a six-month bank statement. Business licenses, contracts, invoices, and articles of incorporation may also be required if you own a business.

New mortgage rules

One of the things you should bear in mind when looking for mortgage lenders in Montreal is to make sure that you are updated with the existing mortgage rules especially that new rules have been made effective on January 2018. You have to take note of what is in store for you with these new rules. Never hesitate to ask questions or make a research before signing the mortgage contract.

Are You Unsuccessful In Your Mortgage Renewal?

When your mortgage hits its maturity date, you will have to renew the outstanding balance for yet another term. You can do this repeatedly before fully paying off the mortgage. Before your term expires, your lender sends you a renewal offer via email. The new offer contains information on the new term and mortgage rates, with a slip on which you can sign and send back. However, as convenient as it may seem, your approval odds are never 100%. A great way to evade the inconveniences is switching best mortgage companies in Montreal. But, if your slip is denied, there is no need to worry. Let’s explore the possible options you may have if your slip is denied.

Reasons For Denial

While switching lenders is convenient, why not exhaust all available options before leaping out? A good reason to move on with your lender is that you won’t have to re-qualify. If you pay off all your mortgage payments during your term, your lender will not deny you the mortgage renewal application. They will still review your current financial situation to figure out whether you are creditworthy. They may even evaluate your current employment and income rates to weigh the scales. If your finances are questionable, the lender may choose to deny your renewal. It is good to negotiate to see if you can increase your chances of fast approval.

Contacting A New Lender

If your lender denies you the mortgage renewal, or you are in search for better terms out there, you may consider going to another lender. To find a new lender, contact a mortgage broker or agent. However, the downside is that you have to submit a new mortgage application for renewal.

Since the new lender does not know anything about your financial status apart from your outstanding mortgage balance, they will have to verify your income to ensure you meet the standard credit requirements for approval. This makes it even more difficult. Therefore, do not cut links with your current lender just yet.

Possible Solutions After Being Denied

Both your current and new lender may deny you renewals. If so, do not give up. You can try convincing them into accepting your terms. If you fail, just consider other options. For instance, if your “A” lender is a bank or credit union, branch out to “B” lenders. Typically, they may be bad institutional lenders and trust companies for cash-strapped individuals. However, lenders go with logic. Therefore, if your credit score is way below the reasonable standard, you will still miss out. But, don’t bow out. Private lenders can suit you best at this level so you don’t sell out your home. You will have to convince that private lender because they need an assurance too before approving your request.

Getting to the point where you will be forced to sell your home is never your only last option. It can only happen when your finances dwindle below the required standards. To evade this tragic situation, make sure you timely pay all your monthly payments and you will maintain your good credit score. If you religiously follow the rules, it will not be difficult to have your mortgage renewed for another term.