As I am sure you have heard, the Bank of Canada has reduced their prime interest rate by 0.25%. I am hear all you with variable rates cheering in the background. For those of you with a fixed rate, what should you do?
Now is not necessarily the time to jump into re-financing. Here are 8 things that you need to do before you take that step:
- What is your current mortgage rate? Hearing that the interest rate is almost at a level that the banks will start paying you (interesting concept!) often causes people to jump at their mortgage applications. Compare your rate and penalties to the savings. Only sign up if it is saving you money.
- Find out how much equity you have in your home. On average in the GTA, prices have fallen about 4% since last year. Depending on your area, that price drop could be eating away at your equity. Knowing that will help you determine what kind of re-financing candidate you are.
- If you are underwater with your mortgage, find out how deep. House values, like any investment, fluctuate. Having a mortgage that is more dear than the house it is secured on, doesn’t mean that you don’t have options. Collect all the information you can, and talk to your bank or mortgage broker, they can be your best ally.
- Know your credit history and score. Contact Equifax to find out what shape your credit is in. With lending decisions becoming more rigid, know your score. Banks can decide only to give the best rates to the players with the top scores.
- Start identifying potential lenders. Shopping for your mortgage can be a lot like shopping for you house. Check out the features and benefits of banks, trust companies, credit unions, and mortgage brokers. Find someone you are comfortable with and trust.
- Look at the big picture. Interest rates are just one of the pieces of your mortgage puzzle. There is often a discharge penalty and, possibly, a fee to create the mortgage. If the mortgage is going to cost you $5000 in penalties and fees, and you are saving only $50 a month, it will take you 100 months to realize any benefit.
- Get your paperwork together. Completing the mortgage can require you to submit your income letters, notice of assessment, bank statements, etc. Collecting those a head of time can save a lot of back and forth.
We have collected a team that can help you with almost all of this.
Adapted from Ilyce Glink, Inman News, Thursday, April 23.