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How to plan your mortgage in Ontario

How to plan your Mortgage in Ontario

Welcome to the exciting journey of buying a home in Ontario! Securing your dream home is a significant step that demands careful planning and consideration, especially when you need a mortgage in Ontario. Your financial future is vital, so let's navigate this process together with confidence and expertise.

Getting a mortgage in Ontario can be complicated and overwhelming. However, if you have the right information and help, you can make smart choices and get the best mortgage for your needs.

We should note that qualifying for a mortgage has changed significantly in the last 8 years and when we started to see home inventory shortage. The process can be can be tough and complex, however If you have a mortgage broker helping you through the process, it gives peace of mind, and you can relax while your mortgage broker does the search for you.

Home in Ontario and major cities, are one of the most expensive in Canada. Therefore special thought and consideration, should be given to your down payment, type of income, income stability and credit score.

Usually mortgage brokers do not charge a fee, unless we have to get you a mortgage that is not with the banks or our B lenders.

In this article, we emphasize the importance of mortgage planning in Ontario, and offer mortgage tips.

Is Mortgage Planning Important?

Mortgage planning is important because we evaluate your financial situation and determines the best mortgage options for your situation. We considers factors like:

  • Income types, such as: Salary, self-employment, commission
  • 5 C's of credit: Character, Capacity, Capital, Collateral, and conditions.
  • Debt-to-income ratio,
  • Down payment and the source.

Understanding Your Budget

Mortgage calculator

One of the most important aspects of mortgage planning is understanding your budget. Usually this tends to be ignored because all we want to know is what is the best mortgage rate we can get while we forget how important it is to go through our income, expenses and life style.

Unfortunately, this can cause hardship in a household and things don't get evaluated properly. So what is a home budget?

A house budget, also known as a home budget, refers to the financial plan or limit set by individuals or families for purchasing a house. It includes the maximum amount of money they are willing to spend on buying a property. This budget takes into account various factors such as the individual or family's income, savings, financial goals, and affordability. Creating a house budget helps people determine the price range of homes they can consider and ensures they make a financially responsible decision when purchasing a house. It also helps in planning for associated costs like down payment, mortgage payments, property taxes, insurance, and maintenance expenses.

With my holistic approach, I go deeper and offer a free budget analysis. This is how I help my clients stay on track and improve their credit score. We analyze the clients' home expenses and keep get on the right part for the long haul.

When you plan your mortgage, we use our mortgage calculator that helps you determine:

  • how much can you borrow?
  • the expenses linked to the purchase. 

Remember that purchasing a new construction home will mostly and likely have more costs than when you buy a resale home.  This is why you must:

  • revisit your purchase agreement.
  • pay attention to the closing costs with your lawyer. 
  • There is nothing worse than having to come up with a large check at the time of closing.

Best Mortgage Rates in Ontario

Mortgage planning involves researching and comparing mortgage rates from different lenders. We do our best to provide the best mortgage rate for your scenario.

In Ontario, we work together with different financial institutions including major banks, credit unions, trust companies, B lenders, non-traditional lenders, and individual lenders.

We offer solutions for seniors' that cannot qualify with other banks, this is called a Chip Reverse mortgage.

Avoiding Unnecessary Fees and Penalties

Mortgage planning can also help you avoid unnecessary fees and penalties. For example, some mortgages may have prepayment penalties if you pay off your mortgage early. By understanding the terms and conditions of your mortgage, you can avoid these penalties and save money in the long run.

Tips for Mortgage Planning in Ontario

Now that we have established the importance of planning a mortgage, here are some tips to help you go through the process in Ontario.

Start planning Early

House hunting

If you plan to purchase a home, I would recommend to start your mortgage search at least six months before your purchase. This will give you enough time to improve your credit score, save for a down payment, and research different mortgage options.

Get Pre-Approved

Before you start looking for a property, it's a good idea to get pre-approved for a mortgage. This will help you know exactly how much you can afford.

The mortgage broker will collect your income and down payment documentation. A request for a pre-approval will only mean that the lender will hold the rate for you.

The lenders will not analyze your income unless they have a "live deal', however they rely on the broker to do their due diligence.

I always caution my clients not to incur additional expenses prior to closing the home purchase.

Work with a Mortgage Broker

Mortgage broker

A mortgage broker can be a valuable resource when planning for a mortgage in Ontario.

Through contacting various lenders, they can help you find the mortgage rates and terms that best match your financial situation.

They can also provide advice and guidance throughout the mortgage planning process.

Consider All Closing Costs

When planning for a mortgage, it’s important to consider all costs associated with buying a home.

By downloading my mortgage calculator, you can accurately determine all expenses, such as legal fees and land transfer taxes.

I highly recommend you download my free mortgage calculator, as well as my budget template.

Don’t Overextend Yourself

In a competitive housing market, it's tempting to buy a bigger or pricier home than what you can afford.

However, it’s important to stick to your budget and not overextend yourself financially. Remember, you can always upgrade to a larger home in the future when your financial situation allows for it.

Mortgage Planning Resources in Ontario

There are several resources available in Ontario to help with mortgage planning. Here are a few to consider:

Ontario Mortgage Calculator

My mortgage calculator will assist you in making all the necessary mortgage calculations. In includes all closing costs and mortgage rates, terms and amortization.

Mortgage Brokers Association

The Ontario Mortgage Brokers Association and Mortgage Professionals Canada are professional organizations that represents mortgage brokers in Ontario. They provide resources and education for both consumers and mortgage brokers.

Canadian Consumer Agencies

Equifax and TransUnion are Canadian credit agencies that collect and maintain credit information for individuals and businesses. They provide credit reports and scores to lenders for assessing borrowers' ability to repay borrowed money

Knowing your credit score is important when applying for a mortgage in Ontario or any other province in Canada.

You can ask Equifax and TransUnion for a credit report every year. This will let you look at your credit history and make sure it's correct.

Monitor your credit regularly. Check your credit report for errors and discrepancies and monitor your score regularly to improve mortgage

Eligibility is the state of meeting the requirements to qualify for something.


Common Mortgage Types in Ontario

There are several types of mortgages available in Ontario, each with its own advantages and downside. Here are some of the most common types of mortgages you may encounter when planning for a mortgage in Ontario.

Fixed-Rate Mortgages

A fixed-rate mortgage has a set interest rate for the entire term of the mortgage. This means your monthly mortgage payments will remain the same, making it easier to budget and plan for the future. However, if interest rates decrease, you will not benefit from the lower rates.

Variable-Rate Mortgages

A variable-rate mortgage has an interest rate that can fluctuate based on market conditions. This means your monthly mortgage payments may change, making it more difficult to budget. However, if interest rates decrease, you will benefit from lower payments.

Open Mortgages

An open mortgage allows you to make additional payments or pay off your mortgage in full without incurring penalties. This can be beneficial if you plan to make lump-sum payments or pay off your mortgage early.

Closed Mortgages

A closed mortgage has restrictions on prepayment and may have penalties if you pay off your mortgage early. However, they often have lower interest rates than open mortgages.

In Conclusion

Mortgage planning is an essential part of the home buying process in Ontario.

To get the right mortgage deal and avoid extra charges, here are three main steps you should follow:

  1. Figure out your budget.
  2. Get mortgage rates.

Seek assistance from a mortgage broker.

Remember to start early and consider all costs associated with buying a home. With the right planning and resources, you can make informed decisions and achieve your dream of homeownership in Ontario.


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Updated: 01/22/21
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