Many websites will tell you that getting a mortgage is really complicated and that you can’t do it without getting (their) advice. The truth is, there is a lot of information available to you before you need to start talking to anyone.
We can show you that it is really not that hard at all.
First of all, at Apply Financial we understand that everybody wants the lowest rate possible -that’s a given. A lower rate saves you money. We put your options in front of you so you can feel confident you’re getting the best rate.
Next, you need to have an idea of what you want your mortgage to look like. For most borrowers there are a handful of key points to consider. Our application process breaks these down so you can understand the impact of each one, for example:
What rate type do you want -fixed or adjustable?
- For many borrowers a fixed rate mortgage is the way to go. Your rate, and monthly payments, are fixed for the term of the loan. Obviously, this certainty makes budgeting easier and can give you peace of mind.
- Alternatively, adjustable or variable rate mortgages are set at a spread to your lenders prime rate. The interest component of your monthly payment will change as the lenders prime rate changes, up or down. In spite of this potential risk, there are times when these mortgages are available at a lower a cost than fixed rate loans. Obviously, a lower initial cost can be appealing, as long as you are comfortable with the potential for higher interest costs over the life of the loan. click here for further discussion Fixed vs Adjustable vs Variable Rates
What mortgage term do you want -shorter or longer?
- Your mortgage term is the length of time until you have to renew your mortgage rate. In Canada, the most common term is 5 years. This seems to be the sweet spot for borrowers – not so short that you feel you are constantly renewing, and not too long that you are paying a higher rate due to an increased term premium.
- Now, if you plan on moving within the next five years, a shorter term might make more sense. click here for a further discussion on mortgage terms (tenors)
What loan amortization do you want -a quick payoff or lower payments?
- Amortization is the total length of time it takes to pay off your mortgage. Most borrowers will choose 25 or 30 years as their initial amortization.
- The shorter your amortization the sooner you pay off your mortgage. So, expect a shorter mortgage amortization to have higher monthly payments but a lower total interest cost over time.
- A longer amortization will have a relatively lower monthly payment. For this reason, first time buyers often opt for a longer amortization as it can help with up front affordability. It is important to understand that since your mortgage is outstanding for longer you will pay more interest over the life of the loan. click here for a further discussion on amortization
Early pre-payment: Allowable pre-payment provisions and breakage costs
- It is helpful to understand that these are two different things. Most mortgages in Canada are considered “closed for prepayment” except for their allowable prepayment provisions. An allowable pre-payment is the amount of unscheduled principal that you can pay down each year without incurring any interest penalties. The exception to this is an open mortgage which can be paid off at any time and typically has a much higher rate than a closed mortgage. Allowable prepayments are typically 15 to 20% per annum. That means, if you were fortunate enough to take advantage of the maximum prepayment amount each year, you would have your mortgage paid off in 5 or 6 years, as the case may be.
- In all other circumstances, including the outright sale of your home, early pre-payment will incur breakage costs. This is typically calculated based on your remaining outstanding principal balance and the interest rate differential between your current mortgage rate and the lenders prevailing rate for the remaining portion of your loan. Alternatively, you could be charged three months penalty interest, whichever is greater. click here for a further discussion of these matters
What Payment Cycle fits your schedule – monthly, weekly?
- All mortgage payments are calculated first on a monthly basis and then tweaked to reflect your payment frequency, weekly, bi-weekly, monthly.
- Most people find it convenient to align their mortgage payment with their employment income/payday. click here for a further discussion of these matters
Finally, you need to find the lender that aligns with your criteria.
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If you have a “cookie cutter” prime loan you will have lots of lenders eager to write your mortgage. However, the market has become very dynamic with different lenders taking turns offering the best rate. Finding today’s best rate is where we excel.
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The more bespoke your circumstance, the more you will appreciate our systems ability to streamline the lender search process. There are many lenders out there in the non-prime space, but finding them by yourself can be very time consuming and comparison shopping almost impossible.