Boosting Your Affordability

Here is a tidbit of financial advice I found the Canada Realty Newsletter. This is really just the tip of the iceberg, but it’s a good start. One thing I’d like to add to it is to not make any other major purchases when you’re getting set to buy a place. Particularly if you’ve already been pre approved or pre qualified for an amount. You could totally throw off the amount that you will qualify for.

I’ve mentioned the following before on this blog, but it’s worth repeating as I doubt most readers have gone through literally everything I’ve put up. The first thing I recommend to all buyers who will be needing a mortgage (and it’s not bad idea even if you think you don’t need one) is to go find a mortgage broker and get pre-qualified or pre-approved for a mortgage. This is because you need to know what you can afford before you start making offers. It may seem obvious but would be a big waste of everyone’s time and effort if you were to find the right place, have an accepted offer and then find out you can’t get the mortgage and have to collapse the deal. Some people think the “know” what they can borrow, but find out differently once they speak to a mortgage broker. This can and does sometimes happen even if you have spoken to a mortgage broker already, but it’s not very common.

Of course, in the end it’s up to you how much you feel comfortable borrowing. You may qualify for a $300,000 mortgage, but not feel comfortable making the payments on something that big. You might want to borrow less, or look at places have have “mortgage helpers”. That is, places with suites you can rent out. Interest rates are SUPER low right now which seems to be driving more home buyers out into the market of late. If you feel your source of employment/income is stable, there is probably opportunity here for you.

Ryan Coffey,

Royal LePage Nanaimo Realty

5 Tips to Boost Your Affordability When Arranging for a MortgageSmall Pic

The key to a successful mortgage experience is carefully considering all your options and buying within your means so that you can sustain your payments. Borrowers unsure of which approach is best can fall back on certain time-tested strategies for ensuring they don’t overextend.

Here are a few tip to boost affordability when arranging your mortgage:

1. Know what you can afford. A mortgage pre-approval helps you establish a price range and the maximum mortgage you can reasonably afford.  Most lenders will lock-in a rate for up to 120 days when pre-approving potential borrowers for a mortgage.

2. Revisit your current debts. When applying for a mortgage, a lender will look at your total debt service ratio (TDS), or how much of your total income is going towards various types of debts, including car loans, credit cards, and other consumer loans.  A mortgage broker can advise on restructuring your current debt (by increasing the amortization and lowering payments on your car loan, for example), to ensure that your TDS ratio is acceptable to prospective lenders.

3. Look into a longer amortization. Some lenders offer mortgages with amortizations longer than the traditional 25-year amortization which result in a lower monthly payment.  Those opting for a longer amortization should plan to make lump sum payments down the road or increase their monthly payments (say, after receiving a salary increase), to lessen the amount of interest they pay throughout the life of their mortgage.

4. Increase the size of your down payment. Increasing the size of your down payment means a lower monthly payment.  A common way for first time buyers to come up with more cash for a down payment is to make use of the federal Home Buyers’ Plan to withdraw up to $20,000 each from a registered retirement savings plan (RRSP) without tax penalty to buy or build a qualifying home.  Also, many lenders allow the down payment to come from a properly documented gift, and a borrowed down payment may be possible for some borrowers.

5. Consider locking in your rate for a longer period of time. If you’re uneasy about fluctuating interest rates and your ability to meet any increases, then a fixed-rate mortgage could be a good fit.  Many lenders are open to longer fixed terms, up to 10 years in some cases.

The above mortgage tips are brought to you courtesy of Invis.

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