Few people have the cash to buy a home outright. And yet, many Canadians feel that owning a home is a top priority for them. That’s why finding both the right mortgage and the right lender are of huge importance. If you’ve never been through the process of getting a mortgage before, it can feel rather overwhelming. But it’s really not that complicated, so long as you understand these 6 essential steps. Step 1: Find the right lender Finding the right lender isn’t as straightforward as you think – there’s more to a lender than the interest rates they’re offering. Chances are you’ve had some experience with a financial institution that offers mortgages, such as a bank, credit union or broker. You should reflect on how these companies have helped you in the past before expanding your relationship to include a mortgage. To feel truly comfortable about your decision, meet with representatives from a few different lenders to see what mortgage products and services they offer. You should also ask about mortgage payment options; for example, can you increase your payments at any time? And what would the penalties be if you were forced to break your mortgage? Keep in mind that you’ll have this mortgage for some time – perhaps 20 years or longer – so it’s important to be clear about what you’re signing up for. Step 2: Find the right interest rate Finding a low interest rate is one of the most important steps in acquiring a mortgage. Typically, banks, brokers and credit unions offer similar rates. On the surface, the differences between these rates might not seem all that significant; in many cases, they can be within a percentage point of each other. But over the course of a mortgage term, such as 5 years, that difference can really add up. For example, for a $500,000 mortgage paid over 20 years, with a fixed interest rate of 3%, the monthly payment would be $2,768.34. Keep everything else the same but drop the interest rate to 2.5% and the monthly payment goes down to $2,646.37. In the end, that’s roughly $122 more in your pocket every month (or more than $1,400 per year). Clearly, getting a lower interest rate can pay off. That said, remember that a lender may only hold your rate for a set period, such as 90 days. So, while you may have secured a great interest rate in April, if you haven’t bought a home by July you may be looking at a completely different rate. Step 3: Get pre-approved Getting pre-approved for a mortgage is an essential step towards making a home purchase. It can also make a significant difference if you’re competing against other prospective buyers. By showing a seller that you’ve already been financially approved – in other words, that you can afford to buy the home – you may have an advantage over competitors who haven’t gone through this process. But remember, a pre-approval is still subject to certain conditions, such as the property qualifying for financing.* Put simply, getting pre-approved allows you to move faster towards completing a sale when you find a home that you love. It’s also at this stage that you’ll need to think about your down payment, or the amount of money you can put towards the purchase at the time of sale. Step 4: Find your home This is the fun part – find the home that’s right for you. Here, the most important thing to determine is how much you can afford. Remember to factor in your down payment and the many other costs that accompany buying a home, from legal and land transfer fees to moving and home inspection expenses. You should also keep in mind that you won’t have a landlord to perform routine maintenance, so the cost of fixing anything that breaks down will be left to you. Ultimately, the final purchase price of your home should be comfortably below the number provided by your lender during the pre-approval process. Step 5: Work out the details Once you’ve reached an agreement with the seller, it’s time to work out the final details of your mortgage. This means you’ll need to meet with your lender to determine the following: Down payment – how much money you can put down at the time of sale Mortgage type – will you be acquiring a fixed- or variable-rate mortgage? Will it be closed, open or convertible? Amortization period – how long you will take to pay for your home Mortgage term – how long you’ll be making payments at a specified interest rate Payment schedule – will you make payments every week, biweekly or monthly? If you’d like to pay your mortgage off sooner, you may want to consider accelerated weekly or biweekly payments. Penalties – what will the penalties be if you have to break your mortgage? Step 6: Keep in touch Completing your mortgage and moving into your new home are just the first steps. In the future, you may have questions about your mortgage, particularly when it comes time to renew it. That’s why it’s crucial to find a mortgage provider that has a dedicated support team you can access on a regular basis – at the very least, once each year – to address your concerns and help you make adjustments to accommodate changes in your life. A financial security advisor with Freedom 55 Financial can help you understand your financial situation and put you in touch with a London Life mortgage planning specialist who can guide you through the mortgage process and help you choose the right mortgage for you. * Your income, credit history and property that meets the applicable conditions as set out by the lender are all factors involved in the pre-approval process. The information provided is general in nature, and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors.