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Should you get a mortgage in Ontario?

This is one of the very interesting topics. If you are planning to get a mortgage in near future, there are some things that you need to know before you make a decision. There are some new laws and rules that are being applied. Getting a mortgage is a very serious thing. And if you are wondering should you get a mortgage in Ontario, we are going to do our best to give you a proper answer!

How to get a mortgage in Ontario?

First of all, you need to know where you can get a mortgage in Ontario. You will need to find a company that offers mortgage loans for your needs. Different lenders have different interest rates and regulations. There are numerous sources where you can get a mortgage and some of them are:

  • banks
  • mortgage companies
  • insurance companies
  • trust companies
  • loan companies

All of them will have different rates and you will have to see every offer into details. Our honest advice is to check a couple of offers and then make a decision.

a picture of woman thinking to get a mortgage in Ontario
Make sure that you made the right decision

Pre-approval process

This is the moment of truth. This is when the lender is going to look at your finances and check what is the maximum amount you can get. Also, this is the moment when they will decide about rate an interests.

This process doesn’t guarantee that you will get a mortgage, it is just basically a screening process where the lender will decide if they are going to give you the loan. But this is the perfect time to take a look at the interest rate and decide if you want to get a mortgage or not.

Stress-test

This is something new in Canada and a lot of people do not know how it will impact their mortgage. At the end of 2017, the Office of the Superintendent of Financial Institutions (OSFI) brought different mortgage rules. These new rules are much more strict and they are requiring borrowers with uninsured mortgages (those putting a down payment of 20 percent or more) to undergo a stress test.

stress in red color
A stress test is just a way to ensure mortgages

Are there any bad sides to this?

Well, unfortunately, the answer to this question is yes. It is expected that the new rules will reduce homebuyers’ purchasing power substantially. So, you will have to have a lot more savings if you want to get a mortgage in Ontario. So, before you call local movers in Ontario to make sure that you can actually afford a mortgage under new rules. Get some more information online about what the rules are for your specific situation. Read them carefully and make a decision.

You will still need some money when getting a mortgage

Even though you can cover most of your asset with a mortgage, you will still need to have some money ready. Most Canadians cover up to 80% of the purchase price of their home. That’s because you want to try to avoid the high ratio mortgage. When you can cover only 5% – 20% of the purchase price with your down payment you are required to get a high ratio mortgage. It basically means that your mortgage loan will have to be insured. Some lenders can even require you to pay the whole insurance premium up front. On the other hand, others will include it with your monthly mortgage payments.

dollar bills
Make sure you have enough money to invest

But in any case, it will increase the price you will eventually pay for your home. So, before you decide to get a mortgage in Ontario, count the money you have and get some information from your mortgage broker or bank.  Also, you should consider what type of home you want to purchase and create clear criteria. 

If you are not sure, mortgage brokers can help

Finding all the current rates and rules can be a difficult task. Especially if you are relocating to Ontario from another country. That’s where mortgage brokers can help a lot. Mortgage broker’s job is to be a middle-man when dealing with lenders. And since they often work with multiple lenders the know all the tricks and quirks of each lender. Also, they will probably be able to find you a better deal than you could on your own. So, if you are thinking of getting a mortgage, contact a mortgage broker first. And then decide if the mortgage is the right way to go.

Types of mortgages

In order to make an informed decision whether to get a mortgage in Ontario loan or not, you will need to know a little bit more about them. There are several types of mortgages. They mostly differ in the interest rate and form of payment. Those are all decisions that you will need to make when getting a mortgage. So, before you even think about it, make sure you know the whole story. After all, you are investing your money in properties, so ask all the questions.

Fixed vs variable mortgage

Banks and other lenders can easily lure you with the promise of a low-interest rate. But that might not end up being what you expected. One of the decisions you will have to make is whether to get a fixed or variable mortgage. Fixed mortgage offers you the stability of having the same interest rate throughout your mortgage payments. On the other hand, variable mortgage rates are lower than fixed ones. But their interest rate can change without warning, which makes them a lot riskier. So before you start making calculations, make sure you are looking the right type of mortgage.

Open and closed mortgage

The decision you will have to make is whether to get an open or closed mortgage. Open mortgages give you the freedom and flexibility. If you happen to run into some money, you can pay all of it without penalty. Closed mortgages, on the other hand, require you to pay your monthly fee until the mortgage contract runs out.  Closed mortgages have more attractive and lower interest rates than open ones. But they tie you up for a long period of time. In the end, no matter what type of mortgage you are looking at, make sure that it fits your lifestyle, risk tolerance, and financial capabilities. That way you can make an informed decision about the biggest investment in your life.