Mortgage Process In Canada
If you know that the last option to get some good money is mortgaging your property, then the next step is to understand the process and all that is involved in mortgaging. A mortgage as you can understand is a loan against your property. (Usually your home). In Canada, when someone buys a home and is not able to pay the price but still have loved the dream property, they need to mortgage. Banks, private financial agencies do provide mortgage loans but they have limited options while the mortgage market is vast. Buying a home is the huge purchase in a person’s lifetime. For such a purchase, not everyone understands the mortgage process which ends up in huge costs.
The process starts with Pre-Approval.
The initial step of the mortgage journey since you took the option to mortgage your property which lets you be the owner of your dream home. Pre-approval is a must due to two reasons:
1. It will let you understand your affordability clearly. Talking to the lender let you understand the business better
2. Along with helping you estimate a price range, you also get to know the interest rates. Rate guarantee during pre-approval is usually for 120 days and the lowest rates can be dealt. If rates increase in the 120 days, even then, the same rate is valid for you. But if rates decrease, you are lucky to get the reduced rate.
Pre-approvals are complimentary and you don’t have to pay for it
There is no obligation and you get the lowest interest rates
It just takes 10 minutes for you to fill up the pre-approval form.
The pre – approval amount varies based on the product you choose and the lender. Before you finalize, check for the different lenders. Lenders see that you don’t spend more than 35% of your total income on housing costs. Housing costs include mortgage expenses including principal amount and interest, property taxes and any other additional fees. This calculation is referred as Gross Debt Service ratio (GDS). Your monthly payments for any other loans, a line of credit or credit card payments/balance are all considered as Total Debt Service ratio (TDS). The total should not be more than 42% of your total income. Most importantly you should have a good credit score to get the approval for the loan. So you should have a managed budget as well as prompt repayment of any other loans.
Pre-approval doesn’t mean approval for a mortgage loan. It is something similar to an estimate and doesn’t guarantee any kind of approval from the lender. You have the freedom to opt out at any time. It only lets you understand what you can afford, lay down a budget as well as know the terms and conditions. You don’t need to furnish original documents for pre-approval. You also get the opportunity to communicate with a mortgage expert.
What is included in a mortgage?
Once you get an approval, there are certain important things that are part of the mortgage.
Term: This is the period for which you intend to take the loan by pledging your home or any kind of property.
Types: There are different types of mortgages namely:
Interest only mortgage
Fixed rate mortgage
Variable rate mortgage
Discount rate mortgage
Capped rate mortgage
95% payable mortgage
You can understand these by communicating with the lender or a mortgage expert. Also, there are a lot of online resources which you can read to know the best one as per your requirement.
Down payment: Buying homes in Canada is a blessing since you just have to pay as low as 5% of the total purchase amount when you opt for a mortgage loan to pay. Most home buyers opt for mortgage loans for this purpose. It is the best part of going in for a mortgage loan if you can choose wisely.
Understanding the above criteria and having a good calculation of finances will let you buy the best homes in Canada. The mortgaging industry is a huge source of revenue in Canada considering the beautiful homes and equally good amount of buyers. So as easy as it is to buy a home, such is the complexity of mortgaging. This article is hence towards helping each home buyer by providing complete knowledge about the process.