What You Should Do Before Getting Mortgages

To secure the right deal on a home mortgage, it is necessary to discuss mortgage rates with multiple lenders. Canada’s leading banks and alternative lenders do not offer the same terms and rates. Some provide discounts on interest rates, lower closing costs, or prioritize minimizing other aspects of mortgages. 

Mortgage payments on the same-sized loan can vary by up to $100 a month between lenders. This difference keeps more money in your pocket and can save you thousands of dollars over your mortgage term. This is why it is strongly encouraged to do due diligence and investigate different mortgage offers.

Compare lenders and settle on the mortgage that suits your needs. Whether you’re obtaining a new mortgage or refinancing, here’s how to compare mortgage rates.

Calculate your mortgage with a mortgage calculator

Start with a mortgage calculator if you don’t know what to expect from a mortgage offer. Most mortgage lenders offer this service on their websites. 

Enter your information, such as property value, requested loan amount, down-payment amount, credit score, and income information. This will let you know what to expect regarding numbers from the lenders you speak to.

Decide what type of mortgage you want

Learn about mortgage types. Consider how long you want a mortgage term and whether you want a fixed-rate or adjustable-rate mortgage. A fixed-rate mortgage may make sense if you plan to stay in a home long-term and the interest rate is favourable. 

Alternatively, an adjustable-rate mortgage could provide better terms if you plan to sell within five years. Check with a mortgage agent to determine your best options.

Obtain the documentation to get an accurate rate

Ensure you have your documents ready to apply for a mortgage. You must show your income through bank statements, investment statements, retirement accounts, a record of all debts, including student loans, tax returns, financial commitments such as child support or alimony, and bankruptcy records.

Choosing a bank mortgage vs. a non-bank mortgage

Brick-and-mortar banks are what most homeowners go to for a mortgage. As a for-profit institution, they typically charge the most fees. The advantage, however, is that they also offer various mortgage options. They also provide additional services that could make mortgage payments easier. Many start here when comparing mortgage rates.

Credit union mortgages have many advantages

Credit unions are non-profits, unlike banks. Their fees are often fewer and lower. You may find a better mortgage through a credit union. They offer competitive loans and have more flexible lending criteria. The primary disadvantage is that credit unions provide fewer choices in mortgage types.

Examine the mortgage financing options available

Many mortgage finance firms offer competitive rates and terms. These lenders are not banks, but they specialize in mortgage loans. 

If you’re only looking for a mortgage and want quick approval or preapproval, speedy closing, and funding within days, these companies offer a wider variety of mortgage types and terms than other lenders.

You can compare mortgage rates online. However, to get an accurate loan estimate, you often need to make phone calls or visit in person. Speak directly to a mortgage loan officer who can assess your financial situation and offer input. 

Be sure to ask around family, friends, and online forms such as Reddit, which lenders are worth talking to. 

How a loan estimate is structured

A lender will take the information you provide and give you a loan estimate. This is a multi-page document sharing several key pieces of information about your loan. It includes the loan amount, quoted interest rate, closing costs, prepaid interest, third-party fees, escrow expenses, and monthly payment estimate. 

Assign a value to each of these numbers based on what you prioritize. Each of these can be compared between lenders.

Watch out for these terms in a loan estimate

In a loan estimate, certain terms and conditions are outlined. They may offer a lower monthly payment for a short period before you refinance or make a specific balloon payment. Look for if there is a prepayment penalty, which is a fee incurred if the mortgage loan is paid off early. 

Examine the mortgage insurance rate and the estimated cash to close, outlining your closing costs. Pay attention to all the terms in your estimate, not just the mortgage rate.