Mortgage Information

2022 Mortgage Update

You’ve seen the latest news reports about rising interest and mortgage rates along with other challenges when it comes to purchasing property this year – but what does this actually mean when it comes to your mortgage and property search?

In his July report, Scott Lindsey, Mortgage Broker, highlighted a few issues including mortgage applicants who were applying for a variable rate mortgage when the prime rate changed. They didn't get approved fast enough and had to reapply at the new benchmark qualifying rate resulting in a more costly mortgage than they would have had a day earlier.
 
He also pointed out that rising interest rates have affected property values. "We have now seen a number of purchases where the property appraised for less than purchase price. That means the purchaser had to scrape up more down payment money than they budgeted for."
 
Lindsey adds, "...Mortgage rates have risen quietly and steadily for some time now. By looking back at some of my past bank correspondence I was surprised to see that a 5-year, fixed-rate, high-ratio mortgage was being priced at 2.14% on October 14, 2021. That same mortgage with that same Big Five Bank is priced at 5.34% today!  What a significant increase in a matter of 9 months."
 

In our experience, different representatives from the same lending institution may approve or decline your mortgage application based on whether or not they have experience with lending in rural cottage country.
 
We have also seen differing mortgage rates, requirements, and associated fees by virtue of where the representative is located versus where the property is located. 
 
Be sure to ask any lender representative you are considering whether they have worked with buyers of properties in cottage country and specifically on private roads, with septic systems, heated water lines and UV systems. If you get a blank look, call Mark or Susan immediately and we will personally introduce you to any number of competent professionals who can assist you in cottage country.
 
Out of all the news we’ve seen and heard regarding changes to mortgages over the past year, our most important recommendation is to get pre-approval before you begin your search.

Why pre-approval is paramount in this market

With recent changes in interest rates, your bank or mortgage lender will examine your current financial situation to determine how much you can afford to borrow, and give you a realistic idea of what your monthly payments would be.

Some people avoid pre-approvals because they feel they know how much they can afford or that they will figure it out when they find the right property. This approach often leads to both the buyer and seller disappointment. It’s worth it to take the time, which can be less than an hour or two, to start off on solid financial ground.
 
With a pre-approved mortgage, you have a realistic amount to guide your search. Instead of scrambling to see every potential property, you can focus your search on those that fit into your pre-approved price range. And by comparing similarly priced properties, you’ll be able to better gauge the value of each and more quickly find the one that’s right for you.
 
Bank of Canada rates are going up. Anyone who has experienced buying during a period of double-digit interest rates already knows the wisdom of obtaining a pre-approved mortgage with a locked-in mortgage interest rate. These are usually guaranteed for 90-120 days and, in the event that mortgage interest rates decrease during that period, will be lowered accordingly. Be sure to check this with your lender. Without a pre-approved mortgage, a sudden increase in mortgage interest rates could mean you no longer qualify for your dream home.

How pre-approval works

Whether you decide to use a mortgage consultant, who will negotiate on your behalf to compare rates and terms from several financial institutions, or your preferred bank, the process of getting pre-approved is fairly straightforward. You’ll be asked to provide your financial information, including all assets, liabilities and proof of income as well as the amount you have available for a down payment.
 
After reviewing your financial situation, the lender will determine the maximum mortgage amount you qualify for and lock in a mortgage interest rate. Pre-qualification certificates normally last for 90-120 days. If you don’t buy a property within the time frame you may renew your agreement at the going interest rate when your guaranteed rate expires.

How pre-approval makes buying property easier

Buyers with a pre-approved mortgage have the upper hand when they put an offer on the table. Having a pre-approval demonstrates you’re serious about purchasing, you've done your homework and you’ve arrived prepared. It also officially addresses your ability to finance the purchase, which leaves no question in a seller’s mind that yours is a firm offer.
 
It’s great leverage in negotiation because you know your limit, you won’t place an offer that goes beyond what you can afford.
 

What comes after the offer

After your offer is accepted, all that’s left to do is give us your lender's contact information and we will send them the property and offer details, along with any other information requested, and your pre-approved mortgage will be converted into your actual mortgage.
 
When it comes to buying property in Muskoka, Kawartha Lakes and Haliburton there’s no better way to approach a purchase than with the confidence and convenience a pre-approved mortgage provides.
 
Be sure to contact Mark or Susan if you need any help along the way.