Securing a home mortgage can be a stressful experience for many – even though it is also quite exciting. For many Canadians, buying a home is the biggest financial investment they will make in their lifetimes, with commitments ranging from 10 to 30 years.
Because of its far reaching impact on one’s life – for better or for worse – a mortgage should be carefully chosen and various factors should be considered.
However, there are some steps you can take upfront to just about guarantee more favourable mortgage terms. While these steps take a little bit of time and effort to put together, you will be glad you did it 15 years from now when you are paying low interest on a mortgage with extremely favourable terms.
Remember, it is all about minimising the percieved risk from the lender’s point of view.
Pay Off Other Debts Before Applying
Where possible, you want to try to increase your income-to-debt ratio so lenders can see that you have more disposable income available to make repayments. If your disposable income is currently getting chewed up by other debts, you might get denied or else get an unfavourable deal.
Improve Your Credit Score
Improving your credit score can take time, but if you’re diligent about paying off credit card debts and any other outstanding loans as quickly as possible, your score will go up. An improved credit score can do wonders for the interest rate you’re offered.
The sooner you start working on fixing your credit score, the better.
As much as possible, save. The earlier you start saving the better, so you can have a more sizeable chunk of cash available when you apply for a mortgage.
Savings can be useful in two ways. The first is that you can put down a deposit, thereby reducing the size of the mortgage and garnering you better repayment terms and interest rates.
The second way savings can be useful is if you can save up about three month’s worth of mortgage payments, kept as a cash reserve in case of an emergency. Lenders will view this kind of behaviour as responsible and will be more likely to offer favourable mortgage terms.
For assistance and advice on getting the best home mortgage possible, contact us at Nowik Mortgage today.