The Bank of Canada announced and lowered its overnight rate by 50 basis points on March 3rd to 1.25 percent, the first such reduction since 2015. As a purchaser, after you have signed your agreement of purchase and sale, one of the first things you may do is contact a mortgage broker and/or a bank to get your financing in place (unless of course you have applied for a pre-approval).
Not all lenders are the same
Many financial institutions will seek to entice and bring in clients by offering competitive and rock-bottom interest rates. However, one must be aware that not all lenders are the same. For example, if your down payment on the purchase of your home is less than twenty percent (20%), your mortgage loan will need to be insured by the Canadian Mortgage and Housing Corporation (CMHC). This cost is passed onto you which you can pay as a lump sum or add into your monthly payments. The premium you will have to pay for mortgage insurance can be expensive and may affect your bottom-line. CMHC has a calculator that allows you to determine how much your insurance premium will cost.
Further, some lenders may have expensive fees that get added to your mortgage loan. When choosing your mortgage, take the time to discuss the terms and conditions with your mortgage broker and/or financial institution. These will generally be disclosed in the commitment letter you sign with your financial institution.
Do the math
There are many tools which can assist you with determining the costs associated with getting a mortgage. One such tool is a mortgage calculator on the Government of Canada’s website.
These types of tools help you to determine the number of payments you will make during your mortgage term, your monthly principal and interest payments, amortization period and the total cost of the loan itself.
Once you have chosen the right mortgage for yourself and signed all of the necessary paperwork, your financial institution will forward instructions to your lawyer for the closing. As a purchaser, you should try to ensure that your lawyer receives instructions well before closing so the transaction may be completed in a time-effective and efficient manner.