Arrange Financing

Get a Mortgage Pre-Approval

An important ingredient in a successful home search is knowing how much you can afford. You don’t want to fall in love with a property only to find out it’s outside your price range.

That’s why we recommend getting a Mortgage Pre-Approval. This is a document from your bank or Mortgage Broker stating how much of a mortgage they are willing to give you. There are two advantages to getting this pre-approval:

  • It gives you the peace-of-mind of knowing you can afford homes you view on the market, and won’t have problems arranging financing.
  • It’s a sign to sellers that you are a serious, prepared buyer – which gives you the edge when making an offer, as in today’s market and if you are in competition, it is best to go without a financing condition to have a chance at winning.

You can arrange for a Mortgage Pre-Approval with your bank or other lender, or by working with a good mortgage broker. We’re well-connected in the local real estate scene, so if you want us to recommend a reputable broker or lender, please contact us.

How Much Home Can You Afford?

Banks and lenders use specific criteria to determine how much of a mortgage they’re willing to offer you. They look at your income, expenses, credit history and employment status, as well as the down payment you plan to make on a home. It may seem like a scary process, but it is actually straightforward. You can usually get a Mortgage Pre-Approval in a day. You’ll be glad that you did.

By knowing what you can afford, you can confidently shop within that price range. For example, if you qualify for a $250,000 mortgage, and you have another $100,000 available as a down payment, you can look for homes in the $350,000 range.

There also has been some changes this past year:

If you are wanting to purchase a primary residence with less than 20% down payment, which is classified as an “insured mortgage”, regardless of the term, you will now have to qualify under the Bank of Canada Benchmark rate, which currently sits at 4.84%, rather than the “contract” rate, this is what is being referred to as “The Stress Test”. For instance, a home buyer can qualify under the “contract” rate which is around 2.84%, under the new rules you will need qualify at 4.84%, a difference of 2%! For buyers in this situation, we have calculated that it will affect buyer’s affordability by approximately 20% of what they would qualify for before this changes took effect.

Land Transfer Tax for First-Time Buyers: As of January 1, 2017, the Ontario government is doubling the tax break for eligible purchases from $2,000 to $4,000. This means that there will be no land transfer tax on the first $368,000 on the cost of a home, benefiting more than half of all first-time home buyers who will not have to pay any provincial land transfer tax.

Have questions about arranging financing? Please submit the form below or call or email us at yourhomeconnection@remaxchay.com

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