Buying a property
2. Get pre-approved for a mortgage
Getting pre-approved for a mortgage by your financial institution means you are eligible for a mortgage. The pre-approval letter specifies the amount for which you are pre-approved.
This procedure is usually free and does not mean you must accept the mortgage, even if you buy the home.
One advantage of pre-approval is that it saves you hours of searching for and visiting properties…only to find out that you can’t get the right mortgage after making an offer.
To avoid wasting time, many sellers refuse to negotiate with buyers who have not been pre-approved. This is what Eureka.House coaches advise sellers to do.
Attention: A pre-approval is not an official mortgage!
Even if you meet the condition of mortgage pre-approval in an offer to purchase, you still need a “real” loan specifically for the house you are buying. Pre-approval alone is not enough.
You don’t need to get the mortgage from the same financial institution that pre-approved you. Shop around to get the best possible rate.
To get pre-approved for a mortgage, contact your financial institution.
Shop for the best rate
The lower the interest rate, the more you save. Here is an example:
Mortgage amount: $250,000
Contract renewal: after 5 years
Number of years to repay mortgage: 25 years
|Rate||Monthly payments||Annual savings|
|4,5 %||$ 1 384||$ 840|
|5,0 %||$ 1 454||–|
In the example above, a -0.5% difference is equivalent to $840 in savings per year. Conclusion: shop around for the best possible rate!
Here is a simple and effective strategy that can help you get the best rate. First, ask your financial institution for the best rate they can give you. Then, ask the same of their competitors or a mortgage broker. If a competitor offers a better rate, return to your financial institution and ask them to offer you this rate. Most financial institutions will accept. This way, you get a better rate and continue to do business with the same financial institution.
Use this strategy twice:
- When applying for pre-approval for a mortgage
- When applying for a mortgage
If interest rates rise between the dates of your pre-approval and your mortgage approval, use your pre-approval letter. If interest rates drop, you will benefit from the lower rates.
Next step : Assess your needs.