Getting a mortgage approval is an exciting step toward owning a home, but it can be a lot of information to process — and truth be told, there’s often a fair bit of paperwork involved. Fortunately, it’s a completely manageable process that is well worth the end result: your new house.
If you work with Interior Savings, we’ll show you some great mortgage options and offer personalized recommendations, walking you through each step of the process to ensure that you’re comfortable and well-informed.
It can help to go into a meeting with your lender feeling confident and prepared. Here are some questions to help get the conversation started.
What are my payment options?
When you sign a mortgage agreement, you’ll be committing to specific repayment details including amortization, interest rate, and payment frequency (often weekly, bi-weekly or monthly). It’s important to understand what different mortgage amounts, rates and payment structures translate to in terms of real numbers, so ask your lender to walk you through some concrete examples so you can see what aligns with your budget.
You may also want to ask your mortgage lender if you’re able to make extra payments throughout the year (and if so, how often and what amount), or if you have the option to skip a payment if need be (for example, if you unexpectedly lose income).
What do I need to know about interest rates and renewal?
Mortgage options come with a choice of fixed or variable interest rates. With a fixed mortgage, you lock into one interest rate for a specific borrowing period (for example, 2.3% for five years). With a variable interest rate, your payments will vary based on how the Prime interest rate changes over the course of your borrowing term.
Interest rates do change somewhat over time, which means that regardless of your mortgage type, you may end up renewing your mortgage at a slightly higher or lower rate when it comes to term (typically, after 3-5 years). In addition to understanding how interest rates work, ask your lender what penalties would apply if you broke your mortgage agreement or refinanced your mortgage before your renewable date.
What can I afford without feeling house poor?
A realtor will show you homes in any price range you identify, but at the end of the day, there’s a difference between what’s available to you and what’s feasible on your budget. It helps to consider fixed and variable expenses, debt, savings and other elements of your financial situation. A financial advisor will be able to help you identify the specific price point that suits your budget, allowing you to house hunt with confidence. You’ll enjoy your new home more when it’s not adding stress to your budget!
What else do I need to know?
It’s important to understand the difference between a mortgage pre-approval and a mortgage approval, so be sure to ask your lender what they’re offering. It may also help to ask your lender how your down payment will impact your mortgage — for example, if you have less than 20% and require mortgage insurance. You also want to make sure you understand all land transfer and taxes associated with the purchase of a home in your region.
A house is typically the largest purchase you’ll ever make, so feel to take your time and ask questions along the way. If you’d like to speak to a mortgage specialist or financial health coach at Interior Savings, please contact us — our team is ready to help.