Whether you’re looking to step into the real estate market or a seasoned home owner, finding a mortgage lender that you feel comfortable with can be a bit of a challenging task.
There are so many things to consider when looking for a mortgage lender, interest rates, options and more. However, mortgage brokers and specialists have plenty of tools and resources to help you secure a mortgage that suits your individual needs.
Let’s start by talking about the types of mortgage lenders and how they are organized. This will provide a foundation for your search.
- A Lenders: These types of lenders traditionally encompass banks and credit unions and are suited for borrowers with good credit scores and steady incomes.
- B Lenders: Typically a good solution for borrowers who may not qualify for a mortgage through an A lender for a variety of different reasons, it could be a lower credit score and un-steady income.
- Private Lenders: Often these are used in conjunction with another lender as a means to help top of your mortgage approval. They fall outside of the regulated sector and have lower qualification rates than an A or B lender.
However, it’s important to mention monoline lenders. You’re probably thinking, what is a monoline lender? Well, A monoline lender would typically fall under the A lender category. Unlike a bank who offers multiple services such as credit cards, investments, and bank accounts, monoline lenders specialize in mortgage loans.
When starting your mortgage search, mortgage brokers are typically a good place to start. Mortgage brokers have access to a variety of different lending solutions, whereas a bank would hold the mortgage itself. In other words, a mortgage broker will have access to dozens of lenders making it a one-stop shop when looking for the best mortgage rates.
Whether you decide to use a mortgage broker or bank, there are a few questions you should ask. The first and most important question is: how much can you afford? This will start the pre-approval process in which you will need to provide some information so that your mortgage specialist will be able to assess your credit history, employment history, and a down payment to determine how much of a mortgage loan you can qualify for.
As you work with a mortgage broker, you’ll also want to ask what the differences are between a bank and a monoline lender. For example, asking things like pre-payment privileges. Essentially, pre-payment privileges are an additional sum you can make on top of your regular mortgage payments.
Another important consideration when selecting a mortgage is whether you will want to select an open or closed mortgage. The main difference here is the flexibility you have in making the extra payments or paying off your mortgage completely.
Open Mortgages:
The interest rate is typically higher on an open mortgage than a closed mortgage with a comparable term length. However, it allows more flexibility if you plan on putting extra money toward your mortgage.
An open mortgage may be a good choice for you if:
- Plan to pay off your mortgage soon
- Plan to sell your home in the near future
- Tink you may have extra money to put toward your mortgage from time to time
Closed Mortgages:
The interest rate is typically lower on a closed mortgage than an open mortgage with a comparable term length. Closed mortgages usually limit the amount of money you can put toward your mortgage each year. The pre-payment privilege. Not all closed mortgages allow this.
A closed mortgage may be a good choice for you if:
- You plan on keeping your home for the rest of your terms loan
- The prepayment privileges provide enough flexibility for the prepayments you expect to make
Another important thing to consider is whether your mortgage is portable or not. Knowing if it’s possible to transport your mortgage in the event that you need to move houses. Porting a mortgage may be favourable if you have good terms on your existing mortgage and you want to avoid prepayment penalties for breaking your mortgage early.
Unfortunately, because interest rate differential penalties right now are really high, it’s important you know what you’re getting into and not over commit on a term.
Another point worth mentioning that is probably not mentioned enough is when considering lenders, consider more than just your rate. Customer service and communication are important. Your representative should be easy to access and communicate with you when needed. One of the biggest frustrations is calling an 800-number and not getting through to the right person.
If you’re looking at purchasing a home and don’t know where to start, contact us today. We have a large network of mortgage specialists who we can recommend. Having a pre-approval will help you to find your home quicker and more effectively.
