2020 Mortgage Update
In our experience, different representatives from the same lending institution may approve or decline your mortgage application based upon 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. First and foremost, 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.
Why pre-approval is paramount in this market
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 unsuccessful bids due when financing does not materialize, leaving both the buyer and seller in an extremely disappointing situation. In other cases buyers become “property rich and cash poor” because most of their income is tied up in cottages and/or homes. 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. For example, on a $100,000 25-year mortgage, an increase of 1% to the rate would add approximately $72 to your monthly payments. That’s over $800 in a year that could have gone towards something a little more fun. Without a pre-approved mortgage, a sudden increase in mortgage interest rates could mean you no longer qualify for your dream home.
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 this time frame you may renew your agreement at the going interest rate when your guaranteed rate expires.
A firm offer
Buyers with a pre-approved mortgage have the upper hand when they put an offer on the table. That is because having a pre-approval demonstrates that you’re serious about purchasing, that you've done your homework and have 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 or if you find yourself in a bidding war – and because you know your limit, you won’t place a bid that goes beyond what you can afford.
After your offer is accepted, all that’s left for you to do give us your lenders 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 in a matter of hours.
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.