How to get easily approved for low interest rates in Canada
September 21 2017 Posted by Ryan Shaw
Whether you’re thinking about investing in your first property, upsizing, downsizing or a seasoned pro in the real estate market, taking advantage of low interest rates in Canada is key to building your real estate wealth. Getting pre-approved and qualifying for a mortgage might seem a daunting task given recent rate increases and new mortgage rules. This process however, can be easily explained, and by following certain steps, you can be well on your way to securing a mortgage with low interest rates.
It is important to take stock of your finances before you begin shopping around for a mortgage. This includes getting a current copy of your credit report and checking it to ensure there are no errors. Any potential lender will look at this report before approving you for a mortgage, and a good credit score is an important factor in qualifying for low interest rates. Maintaining a good credit score includes paying your bills on time, paying off your debts as quickly as possible, staying below the credit limit on your credit cards, limiting the number of credit applications you make, and having a credit history. Your mortgage approval however, does not depend solely on your credit score. Having a secure source of income, a sizable down payment, or a co-signer will also increase your chances of securing low interest rates.
Mortgages are offered by several lenders, including banks, mortgage companies, insurance companies, trust companies, loan companies and credit unions. Each of these lenders has specific criteria for pre-approval, and offer different interest rates and conditions for similar mortgage products. Some lenders only offer their products directly to borrowers, while some mortgage products are only available through brokers. Consulting with a mortgage broker gives you an advantage as brokers are licensed to negotiate the best mortgage options for you, and secure low interest rates where possible. Since brokers have access to a number of lenders, they may also give you a wider range of mortgage products and terms to choose from.
Before pre-approving you, a lender will look at your current assets (what you own), your income and your current level of debt. To qualify for a mortgage, you’ll have to prove to your lender that you can afford the amount you are asking for. Mortgage lenders or brokers will use your financial information to calculate your total monthly housing costs and total debt load to determine what you can afford. Your total monthly housing costs shouldn’t be more than 32% of your gross household income and your total debt load shouldn’t be more than 40% of your gross income. It’s a good rule of thumb to calculate these figures yourself, long before you begin your mortgage search, so you can make any budgeting adjustments to ensure you are within the approved ranges. There are many budget and mortgage calculators available online to assist you in determining the best mortgage options for you, and by planning ahead, securing mortgages with low interest rates should be an easy process.