Have you been thinking about buying a home?
Or maybe refinancing or renewing what you already have?
If so, I bet the news outlets scare you on the regular with their constant coverage of rising rates. Higher qualifying rates. The doom and gloom of the financial sector.
But what if I told you there is a way for you to navigate the craziness we are in right now with a simple formula to help you get the best rate possible?
If that is something that might interest you, continue down and let's take a look at all the different aspects of the "best rate" that you want.
Step 1: Ingredients
All sauces have the best ingredients used to make the taste the best it can be.
Are you working with the best ingredients when it comes to your finances?
I hear it more often than not in both the mortgage and real estate worlds that buyers feel they have wonderful credit, not outstanding issues, and can skip the steps of pre-approvals to start looking at homes.
What then ultimately arises is that long-lost first credit card that has been lingering on your credit report all these years eating away at your score.
When this happens, the dreaded non-waiver of conditions usually comes next.
But we aren't just using something bland as mayo as your sauce, we want to include the best.
This is where it becomes critical to speak to a mortgage professional, regardless of the stage of your refinance or purchase so that you can build the list of ingredients to a point where lenders will fall over one another to give you the best rate possible.
Some of these ingredients can include:
Are you salaried or self-employed?
Do you have a minimum of 3 years of work experience - and if not, can your previous employer be contacted?
Do you have loans like credit cards, auto loans, alimony, child support etc that you have an obligation of paying?
Is your credit in good standing? Not only that but is it good?
These are just some of the items we look at when we are working to develop your application for a mortgage.
Our goal is to polish and make this as pristine as possible prior to speaking to a lender so that they can develop an idea of your credit and character.
They only offer the best rates to those they feel can show them the best of these two features.
But it doesn't end there. You can have all of the best ingredients, but if the tools you use to make the sauce are not right, you might not get what you want in the end.
Step 2: The Tools
Did you know that if you put less than 20% down you are getting the best possible rate, based on your credit and character that is possible from any of the lenders we speak to?
Do you know why that is?
Mortgages with a certain amount of down payment offer different types of rates. To understand why that is, we need to understand why a lender is charging an interest rate to begin with.
Yes, I know the main reason is to profit. This is given by our financial institutions. But the other reason is what most people don't know.
It is to mitigate the risk of lending you this significant amount of capital for a home.
When you look at the rate from that lens, it makes sense that those mortgages that are less risky to the lender would receive the best rates possible. Whereas those that are riskier do not.
Mortgages that are insured/insurable by the three mortgage insurance companies in Canada receive the lowest rates because they are either insured or can be insured by the lender.
If you have an insurance policy out again and default on the money you lent out, you might not be so concerned about the return in the rate since the insurance is there to cover any risk of loss.
This is why the CMHC premium is important to understand when it comes to understanding how much money you'd like to put down in your home.
There are a couple of sweet spots in the amount of down payment you put that will give you the best rate possible. The first is of course if the mortgage is insured, but there are other amounts that can also generate lower rates for you.
When we are preparing your application for a mortgage, we look at the different down payment amount you are able to pay for the home and how looking at different scenarios will help you achieve the best rate.
You might be surprised at why some people leverage the CMHC premium to their favour even though they have the means to pay more.
We look at the down payment you bring, the assets you have as collateral, and the incomes you generate from different sources and use these along with the ingredients to start to make the best sauce of a rate possible.
Of course, having the ingredients and tools is one thing, but having the recipe is a whole different part of the equation to get the best sauce possible.
Not all of us can make scallops like Gordon Ramsey our first time 😊
Step 3: The Recipe
Now that you have taken the time to prepare the ingredients and have the tools in place, our next step to preparing the sauce is so that the customer (lender in this case) wants to pay top dollar for it (with the lowest rate).
Your sous-chef is your mortgage broker. We have been working to help you select the right ingredients, prepare the right tools, and now will guide you to help you prepare the application for your lenders so that they see everything in the best light possible.
The plating and presentation are the first impressions, and our job is to make sure the customer is licking their chops and is waiting for your sauce. And they will pay top dollar for your sauce.
But you might be thinking at this point, Aly, you've outlined everything I need in this post. I'll take this advice, head to my lender, and get the best rate.
And sure, you might be able to take what you have learned here and do just that. But before you do, consider this.
Does the only customer in the restaurant pay top dollar when the seating room is empty? Or will they try and save some money and tell you they are supporting you and you should give them a break?
Using a broker adds that competition. We add that lineup of lenders that want your business. There are so many lenders that have mortgages as their sole means of revenue and would try and offer the best rates possible to pull you away from a large bank.
Wouldn't you want them to offer their best to you to get the best rate?
We take your ingredients, your tools, and all the time and equity you have put in to make your application the best it can be, package it for each lender the way each one likes it so that they can pay top dollar to have the opportunity to gain your business.
And in this case, that is offering you the lowest rate possible.
The Sauce Is Key
Each one of these steps is critical to make sure you get the best rate possible for your situation. Rates are not a one size fits all.
What you might see advertised on different websites, or posted by different banks are all subject to the credit, character, assets, and risk level you bring to the table for lending.
Having your mortgage broker assist you to make sure you are making the best sauce possible for the lowest rate is critical to saving you thousands over the amortization period, but also the knowledge to start and be free and clear of your mortgage faster.
As always, thank you for your time in checking out this post. I hope it has added some value to you and your understanding of mortgages.
If you'd like to set up a time for us to chat more about your mortgage or real estate needs, feel free to book a time below that works for you.
Thank you once again for your time and I hope we can connect and I can help you navigate your mortgage and real estate needs.