Before Getting a Mortgage, Read This…

Buying real estate is one of the biggest financial decisions Canadians make in their lifetime. While organizing and carrying a mortgage may seem a stressful feat, most homeowners maintain that owning their own home is very rewarding and provides a sense of pride.

Prior to buying your first piece of Toronto real estate, moving up or down-sizing, it is a good idea to get pre-approved for a mortgage. However, before you do this, there are a few things you need to make sure you have lined-up.

How is your credit? Most Toronto mortgage lenders need to see a certain credit rating achieved. Having no credit is considered the same as bad credit when looking for real estate. To build up credit, you can begin by getting a credit card from any Toronto bank or credit union and start using it. Even if you purchase goods or services on the card and then pay it off within the month, it is good to show activity on the card, as this builds your credit and shows on record that you can have control over your money.

Don’t default with any bills you have. This includes things you may see as trivial such as cell phone bills or cable/utility bills. Failure to pay these on time could go on your credit record and negatively affect your credit score.

How much you pay in Toronto rent doesn’t necessarily mean you can afford the same amount for a mortgage and household expenses. When owning real estate in Toronto, you need to remember that you will have to cover property taxes, repairs and maintenance and house insurance.

How long you plan to be in your Toronto home should be a factor before you consider where in Toronto you want to buy your real estate. You should plan on being in your new Toronto home for at least 3 to 5 years to help ensure a good return on your real estate investment.

How much down payment do you have? Generally, banks and other lenders require a minimum of 5 % down payment on real estate purchases. However, if you don’t want to pay the insurance premium that comes with lower down payment amounts, you usually need to put at least 20% down. It may seem a lot to begin with, but the larger your down payment, the less you have to borrow, resulting in a lower monthly mortgage payment, and of course, less interest over the term of the mortgage.

Be honest with yourself about buying your Toronto home. Being house poor and in over your head with mortgage payments can become very stressful and is a situation I want to help you avoid. An option you may want to consider to help pay your mortgage would be buying a place with a potential rental income. This could help offset the cost and pressure of your mortgage payment which means you have more money to enjoy what Toronto has to offer.

Anil Khera

Your Toronto Real Estate Agent