One of the most exciting times in Canadian residents’ lives is when they’ve made the decision to buy a home. Amid all the excitement, there are many things to consider and one of those is going shopping for a mortgage.
When you’re on the hunt for the perfect loan that fits your lifestyle and your budget, there are some things to consider asking potential lenders. Following are seven questions you should be sure to ask before committing to a lender.
What would be the best type of loan? Getting comfortable with the types of loans available and your particular situation is likely the first line of business in settling on a lender. A lot depends on your financial health, comfort with the loan and what you’re offered as choices. Some of the more popular loans are fixed rate, high-ratio, conventional, open or closed, etc. Ask about the pros and cons of each.
What would the interest rate be? Firstly, ask the lender about the mortgage stress test which affects all buyers of real estate who are financing their purchases. Interest rates depend upon the current Bank of Canada prime rate. Banks have wiggle room on those figures. Private lenders tend to charge more interest than conventional lenders. Ask what you’d be able to qualify for.
Can I prepay the loan and, if so, are there any fees? All mortgages have maturity dates. Some, however, allow for prepayment before the date the loan is due in full. Ask if there would be a penalty if you wanted to do that. If there is a penalty, ask how much that would be along with other prepayment terms.
When will you be able to close the mortgage? When you’re buying a home, you need to know how long it will take your lender to arrange the mortgage. Ideally, that should be within 30 days or so. Some mortgages may take longer to complete and close. This is something your lender will be able to advise you on depending upon your individual circumstances.
Can I get help with a down payment? There might be some down payment help programs of which you might be able to take advantage. Your lender should tell you about these. For instance, you might be able to borrow against any RRSPs you have.
What documents do you need to see? A lender may wish to see your proof of employment, a statement of assets and liabilities, personal identification and your credit history.
Is there a charge for locking down an interest rate? A lender may ensure you get a specific interest rate with a lock down, but they sometimes charge for doing so. If there is a charge, find out what that will be.