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Three Questions to Ask Your Mortgage Lender
It’s important to do your research before committing to a lender; you can save a significant amount over the term of your mortgage simply by choosing the right one. Many first time buyers aren’t aware that they can shop around to different lenders and negotiate a rate, rather than simply accepting what their own financial institutions offer them. Even though information like your credit score and salary is set, financial institutions can interpret your information differently. This means that the rates and conditions offered will vary from lender to lender.
A lower interest rate equals less money paid toward your mortgage each month. Consider that even half a point makes a $900 difference per year on a $300,000 condo (25 year mortgage term).
The first step to securing a great mortgage rate is finding the right lender. Research your options by following the steps below, then ask these questions to ensure you’re making an informed decision.
Know your numbers
Click on “Select a Rate” on our mortgage calculator to see what the main banks are offering. This will give you a general sense of what a competitive interest rate is and what your monthly payments might be around that rate. You could also compare different mortgage term lengths at different rates to see how the interest payments change based on the length of the loan changes. Being familiar and comfortable with the monetary value attached to interest rates will make the negotiation process much easier.
Get a quote from your own bank, from other banks, and from a mortgage broker
Specific brokers and banks may be able to get you a better deal than others. Once you’ve gotten a quote from your own bank, ask for quotes from a variety of different lenders and compare the results. You can always bring a lower rate back to your own bank and ask them to match it. Consider using a mortgage broker; they will do the necessary research to find the lowest possible rate on the market, and their services are free.
When you get a quote, it generates a hard inquiry on your credit report, which can negatively affect your credit score. But if all the inquiries are generated closely together, they’ll count as a single inquiry on your report. So try to do your mortgage research within a short time frame — under 7 days is the safest.
Three questions to ask your mortgage lender
In addition to getting quotes, take down a list of important questions you plan to ask lenders. These questions are meant to help you understand how you can get the best rate, and which terms make the most sense for your finances. Here are the three questions you need to ask lenders before locking in your pre-approval mortgage rate:
- How long will the rate be locked in?
Lenders will lock you in at a specific mortgage rate while you look for you home and put in your offer. If the local ratse go up during that time, your rate will be protected, while if they goes down you’ll go down with them. When you get quotes for mortgage interest rates, you also need to ask how you can lock in that quoted rate. If you miss the deadline, you may have to resort to accepting a potentially higher rate later on.
- Are you eligible for any promotions offered to buyers? Some financial institutions as well as mortgage lenders will offer special incentives for first time buyers. These promotions range from cash back offers to reimbursed notary fees or moving costs. Note them down if they apply to you, and calculate whether the incentive has a significant impact on the overall offer.
- Will the size of my down payment impact the interest rate or fees on the loan? If you put down less than 20% when you apply for a mortgage and buy a home, you’ll have to pay private CMHC mortgage insurance. Be sure to understand the minimum down payment and how it can affect the rest of your fees.
Keep in mind that a mortgage loan is not standard across all banks or brokers. The difference between them can cost you big over the long run, so it’s well worth doing some research to consider all your options. Come prepared with a list of questions so you can secure the best rate on your pre-approval, and save the most money possible over the life of your home loan.
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