A home to stay – understanding residential mortgages

Applying for a home mortgage isn't as complicated as you think!

Whether you’re thinking or even just dreaming about buying a new home, it’s never too early to start planning. There are many factors that you’ll need to consider before making the leap into homeownership, the most important of which is your financial status. What is the right term for your mortgage? How much money can you afford as a downpayment? How long do you plan to stay in your new home? The answers to all of these questions will factor into your mortgage decision.

What is a residential mortgage?

Very few women (or men), regardless of their financial know-how, are able to buy their dream home outright. That's why so many Canadians carry a mortgage. A residential mortgage provides a home buyer with the funds needed to purchase a home, and provides them with the flexibility to pay it back. The mortgage lender loans this money to the potential home buyer and the buyer is required to pay back the money, plus interest, over an agreed upon period of time. So, how is an inexperienced home buyer supposed to shop for a great mortgage rate? With the help of an experienced residential mortgage broker, of course! A residential mortgage broker will review your financial situation and find a rate that works for your family’s needs.

How can I get a great residential mortgage rate?

Applying for a residential mortgage is easier than you think. All you need to do is power up your computer and apply for a mortgage pre-approval online. Online mortgage pre-approvals are quick convenient, and completely confidential. Once you’ve secured a pre-approval, it’s time to start thinking about your current financial situation. This includes:

1. Deciding on a downpayment

   Finding the standard 20% downpayment can be tough for married couples, so just imagine the financial strain that single women, for example, face when searching for a competitive mortgage rate. Luckily, things have changed in the world of finance, and borrowers are now capable of securing a cash back mortgage with as little as a 1% downpayment. Of course, the lower the requirement, the higher you can anticipate your interest rates to be (so think this through carefully).

2. Investigating mortgage types

   There are two major types of mortgages available – fixed and variable rate. Variable interest rate mortgages can rise or fall depending on the state of the market, causing monthly mortgage dues to fluctuate dramatically. If you’re worried that this much give-and-take will put too much strain on your household budget, consider opting for a fixed mortgage rate. A fixed rate mortgage stays consistent for the term of mortgage.

3. Get a handle on your finances

   It’s your mortgage broker’s job to act as a liaison between the lender and you, the borrower. This means that you’ll need to air all of your financial laundry to your broker, so that they have a full understanding of where your bank account is at (the good and the bad). If you can, have your annual income statement handy, along with any information on outstanding debts. Your broker will be able to speed your residential mortgage pre-approval along, and help you find a residential lender rate that works for you.

Tip to remember

If you require help with your residential mortgage search, don’t just assume a bank lender is your only option. The banks typically only have access to a limited number of residential mortgage products. A mortgage broker will be able to provide you with a more comprehensive comparison and a seemingly endless option of lender offers.