You may be wondering why you should get pre-approved for a mortgage if you are not even sure of buying a home yet. Maybe you haven’t found the home of your dreams or still feel unsure if buying a house is something you can afford to do.
A mortgage pre-approval will be able to answer those very questions. It will determine whether you can afford to buy a house and even get you focused on your house hunt because you will know how much you can get for a loan.
Many people don’t know that a mortgage pre-approval should be the first step to take when planning to buy a house. It can save you a lot of time and heartache. Most importantly, it will give you more confidence to make an offer once you find your dream house!
You may also be unaware that you can get a mortgage pre-approval with a mortgage broker, at no cost!
You can lock in the lowest rate with your pre-approval with the lender of your choice for a period of time while you look for a house. If your plans don’t materialize and you don’t get to buy your new home, you don’t pay anything.
In case you don’t qualify during the pre-approval, you will know what you need to work on to qualify for a home loan in the near future.
Mortgage renewal and what you should do
Your mortgage has a term that refers to the period that your loan is valid. In Canada, most mortgages carry a 5-year term.
At the end of the term, if you have not fully paid your mortgage, your lender will send you a renewal notice. If you sign it, your mortgage with your lender will continue under the same terms and conditions.
While the easiest thing to do is to sign the renewal notice with your lender, it is not in your best interest to do so. You should first compare your options with other lenders to see if you can get more favorable terms, specifically, a lower interest rate. This is crucial because even a small reduction of the rate can potentially save you thousands of dollars over the term of your loan.
To compare multiple offers from other lenders, you can obtain free and no-commitment quotes using our short online form.
You can choose to switch lenders and save on interest or remain with your current lender. You can try to renegotiate the mortgage terms with your lender if you get a better offer from another lender. If your lender refuses, you can decide to switch to a new lender but ask your broker about the costs and implications.
Switching a mortgage to a new lender
When the time comes to renew your mortgage and you get a better offer from a different lender, it may be time to switch. This entails breaking your mortgage if your mortgage term is not finished.
Understand that switching a mortgage can have related costs and implications. Let’s take a closer look at what it could cost you to switch to a different lender.
The cost to break a mortgage depends on the type of mortgage you have – closed or open.
An open mortgage lets you switch lenders without having to pay a penalty. With a closed mortgage, you normally pay a penalty for breaking your mortgage that could amount to thousands of dollars.
Before you decide to break your mortgage, you need to check:
· If you have a prepayment penalty and how much
· The cost of administrative fees
· Appraisal fees (with the new lender)
· Mortgage discharge fees (for removing the current mortgage on your title and registering a new one)
· Legal fees
A mortgage broker can explain to you these different costs and assess if it is worth it to break your mortgage. He may also be able to advise you on how to save on prepayment penalties.