5 Tips on How to Find the Best Company for Mortgages in Canada

Mortgage in Canada

Fulfilling your dream of becoming a homeowner in Canada requires a lot of work and paperwork, including finding the right mortgage company. Your mortgage company will define your homebuying experience: the right one will help you find the home of your dreams, while the wrong one can saddle you with debt for years and years to come.

With so much pressure riding on this choice, it’s normal to feel nervous about committing to a mortgage broker, especially if you are a first-time home buyer without much experience in buying a home. Here are some tips that can help you navigate the process.

1) Understand the Difference Between A and B Lenders

Most Canadian mortgage companies and brokers fall under two categories: A and B lenders. The A lenders are most of the big-name banks, brokers, and credit unions that you’ve heard of. They have most of the market for mortgages. While they tend to offer favourable terms, the criteria for getting a loan from A lenders are stricter.

B lenders are smaller banks and credit unions that often cater to people who can’t get a loan at A lenders. The criteria for getting a loan are easier, but the interest rates are higher.

A third option is to go for a private lender. Private lenders don’t belong to mortgage companies but are individuals with money who offer mortgages as investment opportunities. Most are willing to take chances on people who don’t meet a company’s high standards, but you are taking a risk going there.

2) Compare Interest Rates

The interest rate is the percent of your loan that you pay to the lender, kind of as a service fee for letting you borrow money. Interest rates are usually expressed as an annual percentage. Another thing to keep in mind is that the longer your loan, the more interest you will pay over time.

Calculate how much interest you will pay on different mortgages from different companies, adjusting for compounding interest and rates over time, before committing to anything.

3) Ask Your Mortgage Company the Hard Questions

Before signing anything, you want to get answers to all of your questions from your broker. Ask about worst-case scenarios, such as what happens if you miss a payment or need to remortgage. Obviously, you’re buying a house on the assumption that you will be able to afford it, but you never know what could happen. If a company is avoiding the question, try to look elsewhere.

4) Check for Incentives

You want to do business with a mortgage company that has your best interests at heart. Ask your broker if there are incentives in place to reward healthy financial behaviour. For example, if you want to prepay your mortgage, or pay as much as possible early on to pay it off faster, make sure that your company allows that. Some companies charge you a mortgage penalty if you don’t follow their rules about how much and how often you can overpay your regular payments.

5) Shop Around

Shopping for a mortgage is not the time to be a loyal shopper. Don’t be ashamed to go to different banks and credit unions to look for better rates and incentives. If you tell your broker that you are still looking, the company might even throw in an extra incentive to get you to commit with their company.

Getting a mortgage is one of the biggest financial decisions you can make, which is why it is important to research your companies, read the fine print on the mortgage terms, and compare different offers.

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