Introduction: New Year, New Rules, New Ways to Master the Market
Happy New Year! So, it’s 2018 – the year of the dreaded stress test in the Canadian mortgage market.
Should we worry? Well, it depends. There’s still opportunity and energy in the Toronto homebuying market, and by following some straightforward, common-sense steps, anyone buying or investing in property can come up aces in the end.
If you’re thinking about a new mortgage in 2018, this blog could save you from panic and poor results. Getting a mortgage is a really big deal (literally, you’ll be borrowing hundreds of thousands of dollars!), but that doesn’t mean it should be complicated or confusing.
So, without further ado, here are the five steps to mortgage success in 2018:
Step 1: Get Financially Organized
The first and most important step is to get financially organized.
For many, what should be a relatively easy process becomes a nightmare. Why? Well, just because their documents and finances aren’t in order. As mortgage rules become tougher, and compliance and regulations become increasingly stringent, borrowers in 2018 need to be educated, empowered, and informed. So, let’s simplify
How should one become financially organized? Follow these dos and don’ts.
- DO save your pay stubs
- DO pay your debts on time
- DO create an account at Revenue Canada
- DON’T shuffle your money between different accounts
- DON’T take on new debts during the homebuying process
- DON’T invest in crypto-currency (or sell what you have for real-world cash)*
*The last part was a joke, but if you’re planning on using crypto-currency as a windfall, it’s best to convert it to cash. However, talk with me or a financial adviser before selling too soon.
This year, Toronto’s lenders will be thorough and scrupulous. To get approved for a mortgage and buy a home in the GTA, you’ll need to enforce good, risk-reducing financial habits.
Step 2: Be Careful About Changing Jobs
When you’re shopping for a mortgage, changing your job could sink your chances. Why? Lenders almost always want a one-year track record of your earnings history. It’s all about consistency – can you be trusted to work steady and radiate a sense of responsibility?
Yes, some bosses are ogres and some tasks are mindless, but if you’re planning on buying a home in Toronto in 2018, stick with it. If a change is an absolute must, review your career aspirations and see how they’ll impact your move. Of course, it’s usually best to move first and change jobs later.
Step 3: Think Rates and Terms
Recently, a Toronto buyer became upset because his rates were higher than what he thought they should be (or from what the current rate was). Well, rates move up and down. His increase only equaled $78 more per month, so I shifted the conversation to terms.
“What’s a term,” I hear you ask. Simply put, term is the fine print on your mortgage and it’s just as important (maybe even more) as your rate. Rates in Toronto were low in 2016 and 2017 for a variety of reasons but they’ll be going up for everyone in 2018. That’s why Toronto buyers need to think beyond rates and focus on the fine print.
Step 4: Monitor Your Credit
Never ignore a payment and always be cautious of third-party providers. A credit check is a must, but some companies aren’t as accurate or reliable as they should be. What score matters? The score brokers, banks, and lenders see. Don’t rely on someone’s assurances – take charge of your debt and know what you owe and when you owe it.
A tip: Equifax now cares less on how often your credit is checked, and more about how above the limit you are (over 50% is a big no-no). Avoid this trap by calling your credit providers and increasing your limit. Another tip: Send your void cheque to EVERY prepaid service (cell phone, cable, and internet) so you never have another late payment affecting your score.
Step 5: Make Your Down Payment Matter
Here’s how down payment works: Lenders need a 30- to 90-day history of your money. Gifted funds usually need a gift letter and proof of deposit. However, RRSPs, TFSAs, Bitcoin savings, cash savings, investments, etc., need to have been sitting in your account for three months.
Toronto buyers often make the mistake of moving around money non-stop from one account to another. If you want to buy property in Toronto, consolidate all your funds into one or two major accounts – and let them be. Don’t even take out RRSPs. Your mindset should be “set it and forget it.” If you absolutely need to use a line of credit for a deposit then, by all means, do it – but be sure to pay it off before closing.
Toronto brokers and lenders aren’t interested particularly in your transaction history, but if they see money bouncing around they might get concerned. So, be financially organized and financially responsible.
Conclusion: Finding a Mortgage to Match Your Lifestyle in 2018
Those are the five steps to mortgage success in 2018. That said, there’s a secret step I didn’t include: Call me. I’m the broker Toronto trusts, with over fifteen years of awesome, people-first experience.
Yes, buying a home is difficult, but getting a mortgage to match your lifestyle shouldn’t be. Complete a Mortgage Quiz at MortgageJake.com, write an email to firstname.lastname@example.org or give me a call at 416-910-4448 and I’ll help guide you through the mortgage thickets.
Keep Calm and Mortgage On,