19 Jul

Is a Refinance right for me?

General

Posted by: Conor Keys

Refinancing your mortgage can be a smart financial move, offering opportunities to reduce interest rates, lower monthly payments, or access your home equity. Here’s a comprehensive guide to help you understand and navigate a refinance to see if it is the right option for you!

Understanding Your Goals and Current Mortgage

First, it’s crucial to evaluate your financial goals and understand your current mortgage terms. Determine whether your goal is to lower your monthly payments, shorten your loan term, or take out equity for other expenses.

Types of Refinancing Options

There are several types of refinancing options available:

  1. Rate-and-Term Refinancing: This option allows you to change the interest rate and/or term of your existing mortgage, potentially reducing monthly payments and saving money over the life of the loan.
  2. Cash-Out Refinancing: This option lets you tap into your home equity by taking out a new mortgage for more than you owe and receiving the difference in cash. This can be useful for home improvements, debt consolidation, or other financial needs.

Preparing for Refinancing

Preparation is key to a successful refinance. Start by checking your credit score, as a higher score can lead to better terms. Gather all necessary documentation, including income verification, tax returns, and details of your current mortgage. Paying down existing debt can also improve your financial profile.

Shopping Around for Lenders

Comparing offers from multiple lenders is essential to finding the best deal. Each lender may offer different rates and terms, so obtaining several quotes ensures you get the most favorable conditions. Be sure to ask potential lenders about any fees associated with refinancing, such as application fees, appraisal fees, and closing costs.

The Application Process

The application process typically involves several steps:

  1. Submitting Documentation: Provide your lender with all necessary financial documentation.
  2. Home Appraisal: Your lender will usually require a home appraisal to determine the current value of your property.
  3. Reviewing Loan Terms: Carefully review the terms of your new loan to ensure they meet your financial goals.
  4. Closing the Loan: Once approved, you’ll close on the new loan, which will pay off your existing mortgage and establish the new terms.

Weighing the Costs and Benefits

While refinancing can provide financial relief and opportunities, it’s important to weigh the costs and benefits carefully. Consider the break-even point, which is the time it will take for your savings from the new mortgage to cover the costs of refinancing. If you plan to stay in your home for a shorter period than this, refinancing might not be the best option.

Final Thoughts

Refinancing your mortgage is a significant financial decision that requires careful consideration and preparation. By understanding the steps involved and preparing adequately, you can make a refinancing decision that best aligns with your long-term financial goals.

The complexities of a Refinance can be daunting, but hiring a mortgage agent to be on your team through it all is the easiest way through. If you’re thinking about a refinance, send me an email or give me a call and we can examine your options.

 

🏛️DLC The Mortgage Source Independently Owned and Operated FSRA#10145

📞 613-789-8859

📬 ckeys@dominionlending.com

 

 

10 Jun

What Does It Take To Get a Mortgage Approved in Canada?

General

Posted by: Conor Keys

Getting approved for a mortgage is a significant milestone on the path to homeownership. Understanding what lenders look for can help you prepare and improve your chances of securing a mortgage with favorable terms. Here’s a comprehensive guide to the key factors that influence mortgage approval in Canada.

1. Income and Employment History: Stability Matters
Lenders will scrutinize your income and employment history to ensure you can afford the mortgage payments. A stable employment history with a steady income is favorable. If you’re self-employed, be prepared to provide additional documentation to prove your income stability.

2. Debt Servicing Ratios: GDS and TDS Explained
Gross Debt Servicing (GDS): This ratio compares your housing costs (mortgage payments, property taxes, heating costs, and 50% of condo fees, if applicable) to your gross monthly income. Ideally, your GDS ratio should be 39% or less.
Total Debt Servicing (TDS): This ratio includes all your monthly debt obligations (housing costs, car payments, credit card payments, loans, etc.) compared to your gross monthly income. Lenders typically prefer a TDS ratio of 44% or less.

By assessing both GDS and TDS ratios, lenders get a comprehensive view of your financial health and ability to manage additional debt.

Disclaimer: While these are the ideal ratios, there are alternative solutions available if your ratios are higher. Reach out to me, and we can do our best to find a solution that works for your unique financial situation.

3. Credit Score: Your Financial Report Card
Your credit score is one of the most crucial elements in the mortgage approval process. It reflects your creditworthiness and is a major determinant of the interest rate you’ll be offered. Generally, a higher credit score leads to better mortgage rates and terms. Aim to maintain a healthy credit score by paying your bills on time, keeping your credit card balances low, and avoiding excessive new credit applications.

4. Down Payment: The Larger, the Better
The minimum down payment in Canada varies based on the purchase price of the home:
– 5% for homes up to $500,000
– 10% for the portion of the home price between $500,000 and $999,999
– 20% for homes priced at $1,000,000 or more

A larger down payment can improve your approval chances and reduce your mortgage insurance premiums.

5. Property Appraisal: Ensuring Value
An appraisal ensures that the property’s value aligns with the purchase price. Most lenders require a property appraisal to confirm that the property is worth the amount you’re borrowing.

6. Mortgage Stress Test: Can You Handle Higher Rates?
The mortgage stress test ensures you can afford payments at a higher interest rate. It uses the Bank of Canada’s qualifying rate or your contract rate plus 2%, whichever is higher. This helps safeguard against future interest rate increases.

7. Documentation: Be Prepared
Prepare to provide various documents, including:
– Proof of income (pay stubs, employment letters)
– Proof of down payment (bank statements, gift letters)
– Credit history (credit report)
– Identification (ID, SIN number)
– Details of current debts (loan statements, credit card statements)

Having these documents ready can expedite the approval process.

8. Financial History: Clean Slate
Lenders may review your financial history for bankruptcies or other financial red flags. A clean financial history boosts your approval chances.

9. Other Considerations: Co-signer and Pre-approval
– Co-signer: If you have a low credit score or insufficient income, a co-signer might help with approval.
– Pre-approval: Getting pre-approved helps you understand how much you can afford and shows sellers you’re a serious buyer.

Understanding these aspects and preparing accordingly can significantly improve your chances of getting approved for a mortgage in Canada. By maintaining a healthy credit score, ensuring stable income, managing your debts, and saving diligently, you can navigate the mortgage approval process with confidence and ease. Ready to take the next step towards homeownership? Start preparing today!

For personalized mortgage advice or to discuss your options, feel free to reach out to me. Let’s make your dream home a reality!

—

🏛️DLC The Mortgage Source Independently Owned and Operated FSRA#10145

📞 613-789-8859

📬 ckeys@dominionlending.com

24 May

The Waiting Game

General

Posted by: Conor Keys

The Waiting Game: Interest Rates vs. Real Estate Prices in Canada

In the Canadian real estate market, many potential buyers are strategically waiting for a drop in interest rates before making a purchase. While the allure of lower borrowing costs is clear, the potential savings must be weighed against the risk of rising property prices.

The Impact of Interest Rates

Interest rates directly affect mortgage qualification and affordability. To qualify, buyers must pass a stress test at a rate 2% higher than the actual rate. Even if you qualify, the monthly payments must be sustainable over the long term. While some buyers are holding out for lower rates and property prices, this strategy comes with significant risks. If rates do not drop as expected, or if property prices rise, waiting could prove to be costly.

The Effect of Falling Rates on Demand

A key concern is that lower interest rates could increase demand, driving up property prices. The Bank of Canada is carefully monitoring affordability issues, leaving buyers to wonder whether they should buy now at higher rates or wait for rates to drop. The decision is complex and depends on various market conditions.

Comparing Calgary, Vancouver, and Ottawa

Vancouver

Vancouver’s market has been characterized by high appreciation and competitive trading. Despite high interest rates, average prices have remained stable, with some exceptions in the condo market. Inventory recently increased by 40%, but it is unclear if this is a trend. Vancouver’s constrained geography and high demand suggest that prices will continue to rise in the long term.

Calgary

Calgary offers more affordable options, with single-family homes available for under $600,000. The city’s economy, heavily tied to the oil and gas sector, has faced challenges but remains attractive to buyers from more expensive markets like Vancouver and Toronto. Calgary’s real estate market presents a significant opportunity for those looking to invest in a more affordable yet promising environment.

Ottawa

Ottawa’s real estate market has remained stable despite rising interest rates, supported by the prevalence of the Federal Government sector. Similar to Calgary, Ottawa offers many affordable options relative to the markets in Vancouver and Toronto. The average home price in the first quarter of 2024 is $757,700, up 4.4% year-over-year. Ottawa’s market stability makes it an attractive option for buyers looking for affordability and growth potential.

Conclusion

A home purchase is a long-term investment, and acting sooner rather than later might be wise if you are financially ready and qualify for a mortgage. Current interest rates are expected to go down, making now an opportune time to buy. For example, a $700,000 property with a 10% down payment at a 5.39% fixed rate results in a $3,800 monthly payment. If rates drop to 4.39% next year, the payment would be $3,450, saving $4,200 annually. However, if property prices rise by 3.5%, you could gain $25,000 in equity. This is a modest increase, with the Bank of Canada anticipating the average home value to go up around 9% this year. The potential gain outweighs the savings from lower rates.

Connect with a mortgage agent today to get banks competing for your mortgage. With access to multiple lenders and a personal touch, we ensure that your mortgage fits your financial situation perfectly. Investing now could be a prudent step toward securing your future. Scheduling a call and getting a verified pre-approval for a mortgage is free. If you’re curious about what the market might hold for you, give me a call and we can get started.

🏛️DLC The Mortgage Source Independently Owned and Operated FSRA#10145

📞 613-789-8859

📬 ckeys@dominionlending.com