In 2021, if your household income was $170,000, you could qualify for a purchase of $815,000, at the best rate, with the minimum down payment ($56,500). This fall, with the same income, you qualify for a property worth $680,000, under the same conditions (minimum down payment of $43,000). (Photo: 123RF)
GUEST EXPERT. Are you renewing your mortgage soon? The new rates give you nightmares and you fear seeing your payments swell to the point of seriously encroaching on your purchasing capacity or your savings leverage?
If you imagine your bloated mortgage as the giant marshmallow man from the Ghostbusters (I know, I’m betraying my age here), I don’t have a magic solution.
The market may never again be what it once was, a borrowing paradise. But in order to help you sleep better, I may have some ideas to help you avoid the worst.
So here is my obstacle course to shop for the best possible rate.
Shop!
First advice: never renew with your current lender before having explored the competition. After all, you shop around for the price of your appliances, your renovations, your trips or your cars. Why not your biggest purchase?
I will add, at the risk of repeating myself: blind loyalty to your current lender almost never pays off. When you receive a renewal letter, do not accept the rate you are offered until you have looked elsewhere and negotiated.
However, your ability to negotiate may be affected by the new situation imposed by the key rate.
In fact, these modify your borrowing capacity and your resistance to the stress test now imposed on all new borrowers.
Can I give you a clear example to better measure this gap? In 2021, if your household income was $170,000, you could qualify for a purchase of $815,000, at the best rate, with the minimum down payment ($56,500). This fall, with the same income, you qualify for a property worth $680,000, under the same conditions (minimum down payment of $43,000).
Strategy
This is good to know before you start shopping.
Otherwise, here’s how you should go about it:
– Start the process approximately six months before your current mortgage comes to an end. This will give you time to consult several institutions (tips and tricks you can consult a rate comparator like monmeilleurtaux.ca, then freeze your rate. This can be protected for four months (120 days). (By the way, nesto is the only online lender that offers to lock your rate for 150 days) If rates drop, you can always have yours lowered too. If they come up, you’ll be safe.
– Get your documents in order before you start. You will need your home insurance, proof of employment and to demonstrate the value of your annual salary. If you own a business, you will also be asked for its most recent financial statements, or even the last two years.
– Clean up your credit report. This means that if you have debts that affect your score, for example unpaid credit cards, paying them off will help you achieve a favorable posture. The less risk you represent to the lender, the more likely you are to qualify and get a good rate. Experts suggest aiming for a credit score of at least 680 to access the best products.
– Consult several financial institutions, online lenders and at least one broker. (It was by trying to avoid this step for which I never had time that I had the idea of founding nesto, the idea being to obtain the best rate offered the first time .)
Now, if for some reason you can’t change lenders (for example, because you no longer pass the financial stress test) all is not lost.
Find out what you can do to re-qualify elsewhere. If you have enough money to repay part of the amount owed on your home, for example $20,000, could this allow you to achieve this? Talk to your broker about it.
In any case, don’t lie or threaten to leave your institution because you got a better deal elsewhere. That would be dishonest. But take the numbers you got from your shopping and use them as negotiating leverage. No need to go into details about your qualification. Negotiate firmly, follow the rate cuts, secure yours at the slightest new drop and take control of your finances, if possible, to have more tools at your next renewal.
I know, it’s work. But believe me, it’s probably one of the most profitable negotiations there is if you put in the effort and take all the necessary steps to get the best rate.
I invite you to consult The latest nesto-meter report.
Please note: the above are my personal opinions and experiences and not the position of nesto Mortgage Expert. I am not a licensed mortgage or real estate broker.
2023-09-27 16:36:16
#Mortgage #Negotiation #Strategies
