Five easy ways to make sure you find the right mortgage for the perfect home

BY CLEVE DeSOUZA

If you’re thinking about buying your first home, here’s what 2019 home buyers said were the top three most important factors to them, according to a Canada Mortgage and Housing Corporation survey:

1. Price and affordability were the number one concern to 80% of 2019 buyers.
2. The number of rooms was key to 73%.
3. Proximity to public transit was important to 67%.

A mortgage broker can’t tell you how many rooms you need, or determine how far public transport is from you. What a mortgage broker can do is shop the market for you.

We recommend doing a little homework before you begin shopping for a home or a mortgage. Here are five easy ways to make sure you find the right mortgage for the perfect home in a neighbourhood that’s gaining value.

1. Read up on the neighbourhoods where you would like to live. Are home prices rising or shrinking? You want your home to gain in value, so avoid any area where prices are falling.

2. Don’t fall in love with a home until you know the bottom line on price. Buyers who fall in love often rush through financing and agree to pay more than the house is worth. That could mean making a costly mistake and committing to a high interest rate.

3. Before you sign the paperwork, make sure you understand how much of your monthly payment is principal and how much is interest. A low monthly payment could stretch your mortgage loan out by years, costing you thousands of dollars in interest. Often, a higher monthly payment is the least-expensive option.

While you’re studying interest rates, read up on prepayment options and amortization. Amortization is the length of time it takes you to pay off the mortgage. Make sure you understand how making a couple of extra payments a year can significantly reduce the interest you pay to the bank.

4. Create a budget and stick to it. Since affordability is important to so many of us, it’s no surprise that we pay a great deal of attention to our budget when shopping for a home. In 2018, 78% of us spent the maximum amount we could on a home. Just a year later, only 60% of us bought the highest priced home we could afford.

5. If you already own a home, consider staying there instead of moving. Real estate transactions aren’t cheap. Every time you switch homes, the banks make money. If your home is gaining value, consider staying put a few more years.

While you’re doing your homework, don’t get overwhelmed and decide not to buy. Remember that 87% of Canadians agree that buying a home is a sound long-term investment. Resources exist to protect you.

For example, Canada’s new mortgage qualification rule (also known as a stress test) may encourage people to borrow less. The test requires banks to check that borrowers could make payments at a higher interest rate than they’re offered. Generally, it forces banks to issue smaller mortgage loans. The goal is to protect the bank and the borrower if the interest rates rise.

Still, nothing replaces the good advice of a professional. Mortgage brokers and lenders help you learn what you need to know and empower you to confidently make strategic moves to grow your wealth.