EP 57 | 8 Strategies to Secure a Lower Mortgage Rate | How to get the best mortgage rate

00:00 Introduction 8 Strategies to secure a lower mortgage rate

Eight strategies to secure lower mortgage rate interest rates have risen rapidly this year triggered by the bank of canada’s efforts to curb inflation we recently saw the bank of canada increase the policy rate by 75 basis points on september the 7th with the next announcement due on october the 26th in july the mnp consumer debt index found that 59 of canadians

Are already feeling the effects of these interest rate increases why has the impact been so widespread well in part it has been due to the rising popularity of variable rate mortgages according to the canada mortgage and housing corporation in the latter half of last year the majority of mortgage borrowers opted for a variable over a fixed rate variable mortgages

Are typically pegged to the lender’s fine rate which means they are immediately affected by changes in the interest rate whether falling as we saw during the pandemic or rising as we are currently experiencing as they are trying to curb inflation homeowners with fixed mortgages aren’t impacted as quickly because their interest rates are locked in but they will

Face higher rates as well when their mortgages are up for renewal and many homeowners are finding it increasingly difficult to afford or even qualify for a mortgage at today’s elevated rates fortunately there are steps that you can take to strengthen your position if you have plans to buy a home or renew an existing mortgage my name is evelyn lopez with the evelyn

Lopez realty team and ipro realty serving the northwest toronto gta here are eight strategies to help you secure the best available rate and as a bonus at the end of this video i will share with you how you can get a free white paper on the eight strategies to secure a lower interest rate number one raise your credit score borrowers with higher credit scores are

Viewed as less risky to lenders so they are offered a lower interest rate in most cases and a good credit score typically starts at 660 and can move up into the 800s if you don’t know your score you can access it online from canada’s two primary credit bureaus being equifax and transunion then if your credit score is low you can take steps to improve it over time

You should start to see your credit score climb which will help you qualify for a lower mortgage rate number two keep steady employment if you are preparing to purchase a home it might not be the best time to make a major career change unfortunately frequent job moves or gaps in your resume could hurt your borrower eligibility you see when you apply for a new

Mortgage lenders will typically review your employment and income history and look for evidence that you have been financially stable for at least two years if you earned a steady paycheck you could qualify for a better interest rate a stable employment history gives lenders more confidence in your ability to repay that loan that doesn’t mean that a job change

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Will automatically disqualify you from purchasing a home but certain moves like switching from a corporate employment to a freelance or self-employment status could force you to delay your purchase since lenders will want to see proof of steady long-term earnings number three lower your debt service ratios even with a high credit score and a great job lenders

Will be concerned if your debt payments are consuming too much of your income that’s where your debt service ratios will come into play now there are two types of debt service ratios number one is your gross debt service often referred to as gds this ratio speaks to the percentage of your gross monthly income that goes towards covering housing expenses mortgage

Property taxes utilities and 50 of any condo maintenance fees number two the second type of debt service ratio is known as your total debt service ratio or tds now this is the percentage of your gross monthly income that goes towards covering all of your debt obligations housing expenses credit cards student loans car loans and any other debt that you may have

So what is considered a good debt service ratio lenders typically want to see a ges ratio that’s no higher than 32 percent and a tds that is 40 or lower low debt service ratios will also help you pass a mortgage stress test which is required by all canadian banks and some other types of lenders the stress test is designed to help ensure that you can continue to

Afford your mortgage payments even if interest rates should rise you can use the government of canada’s mortgage qualifier tool to calculate how much you can afford to borrow i’ll put the link down below if your debt service ratios are too high or you can’t pass a mortgage stress test you may need to consider purchasing a less expensive home increasing your down

Payment or paying down your existing debt a bump in your monthly income will also help number four increase your down payment minimum down payment requirements vary by loan size and property type but in some cases you can qualify for a lower mortgage rate if you make a larger down payment why do lenders care about the size of your down payment because borrowers

With significant equity in their homes are less likely to default on their mortgages that’s why you will be required to purchase mortgage default insurance if you put down less than 20 it’s important to know that some lenders offer discount rates for borrowers but down less than 20 and this is because the required default insurance protects the lender from any

Potential loss however the cost of cmhc or private mortgage default insurance will typically exceed any interest savings you will also have to pay interest on that you add it to your mortgage so the bottom line is you will save money in borrowing costs if you can afford a larger down payment fortunately there are a couple of government initiated resources designed

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To help eligible first-time buyers with their down payment for a home we’d be happy to discuss these and other programs tax rebates and incentives that might help you increase your down payment you can simply scan the qr code shown here to schedule a 20-minute free phone consultation to review your options number five compare and weigh interest rate options all

Mortgages are not created equal and some may be a better fit than others depending on your priorities and risk tolerance for starters there are several interest rate options to choose from the fixed rate gives you some protection if rates go up while the variable offers some benefit if rates fall so what’s the best choice if you’re looking for the lowest mortgage

Rate the answer is it depends if mortgage rates don’t rise much higher or drop back down in a couple of years you could win by opting for a variable rate however if they continue to climb you may be better off with a fixed rate the best plan of action in selecting a mortgage is to speak to your mortgage lending professional if you would like some recommendations

To some great lenders feel free to reach out to us and we’ll be happy to share number six compare loan terms a mortgage term is the length of time your mortgage agreement is an event at the end of the term a mortgage holder will need you to either pay off the mortgage or renew it or another term there are three major types of mortgage terms shorter term these can

Range from six months to five years and they are the most popular type in canada borrowers can choose between a fixed or variable interest rate longer term these are longer than five years but generally no more than 10 years in length longer-term mortgages are more likely to feature fixed interest rates and fd repayment payments convertible mortgages offer the

Option to extend a shorter term mortgage to a longer-term mortgage typically at a different interest rate which loan term offers the lowest rate a shorter term mortgage will typically feature a lower interest rate than a longer-term mortgage however the rate on a one-year or a three-year mortgage could be higher or lower than a five-year mortgage depending on the

Current economic climate and whether it’s fixed or variable but to find the best rate you need to compare your options at the time of purchase or renewal a good lender will also review your situation and your future plans which may also impact the type of mortgage term that would best suit your scenario number seven get quotes from multiple lenders when shopping

For a mortgage be sure to solicit quotes from several different lenders and lending types to compare interest rates fees but also prepayment privileges and other options within the mortgage such as skipping or doubling up on payments depending on your situation you could find that one institution offers a better deal overall in terms of the type of loan and term

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Length you want ideally you should begin this process before you start looking for a home if you get pre-approved for a mortgage in most cases you can lock in the mortgage rate for 90 to 120 days depending on the institution and this is especially important when interest rates are rising don’t forget that we can be a valuable resource in finding a lender especially

If you are new to the home buying process after a consultation we can discuss your financing needs and connect you with a loan specialist or broker best suited to your situation number eight ask for a discount when shopping for a mortgage don’t be afraid to negotiate in canada it’s commonplace for the lenders to discount their advertised interest rates which are

Called hosted rates and in many cases all you have to do is ask of course the strength of your application will come into play here so don’t neglect strategies one through four that we discussed here is a pro tip keep in mind that interest rates aren’t the only thing on the table you can negotiate other contract terms as well like prepayment options and rebates and

If you get a great offer from one lender you can leverage it by asking your preferred institution to match or beat it getting started unfortunately the rock-bottom mortgage rates we saw during the height of the pandemic are behind us however today’s five-year fixed rate still fall beneath the historic average and are well below the all-time heat of 20.75 that we

Saw back in 1981 and although higher mortgage rates have made it more expensive to finance a home purchase they have also ushered in a more balanced market consequently as a home buyer today there are benefits you will have a greater selection of homes to choose from you will have the ability to perform your due diligence in terms of conditions such as financing

And home inspection and you will have the ability to negotiate terms with sellers and obtain better value for your investment for a white paper summary of these tips simply click on the link below if you have any questions or would like more information about the buying or selling of a home reach out and schedule a free consultation we’d love to help you weigh

Your options navigate this shifting market and reach your real estate goals again my name is evelyn lopez with the evelyn lopez realty team and ipro realty and we’re here to help

Transcribed from video
EP 57 | 8 Strategies to Secure a Lower Mortgage Rate | How to get the best mortgage rate By Evelyn Lopes Realty Team Your Home Sold Guaranteed*