If you are buying a home in Toronto you need to properly prepare yourself for highly competitive multi offer situations and a confusing array of new mortgage lending guidelines.
Toronto home prices continue to rise and with inventory in short supply, home sellers and their real estate agents are having a field day as more often than not their listing sells for significantly over their asking price. This is true all over the Greater Toronto Area (GTA).
Since late last year, the mortgage industry has been turned upside down as mortgage rate pricing just became quite complex and can be confusing even for experienced mortgage brokers.
This is a result of federal government intervention which resulted in massive changes. Now there are several different categories of mortgage applicants, and each have their own mortgage interest rate pricing.
Related information: Toronto mortgage interest rates enter a brand new era
And on top of all this, we have seen mortgage interest rates rise significantly in the past six weeks. By 0.5% to 0.75% in most cases.
How can home buyers protect themselves and put their best foot forward?
More than ever, a mortgage pre approval just makes sense. Even though a pre approval is not a guarantee the lender will come through when you have an actual purchase, there are many benefits.
(1) Protect yourself from further interest rate increases for the next 90 to 120 days. At the very least you will pay no more than the rate on your pre approval certificate, and if your lender’s rates are lower when you have a live purchase, you will enjoy the lower rate. Many lenders are pre approving five year fixed rate mortgages at 3.04% these days.
Our favorite lender is pre approving at 2.64% in the Greater Toronto Area today. And if the application is for an actual purchase, our clients are being approved at an incredibly low 2.44%.
(2) Having a mortgage pre approval certificate for your Toronto mortgage allows you and your real estate agent to stand out from other offers in a crowded purchase process. Even if you ask for a short (say 2 days) condition of financing clause, the seller will take great comfort from your certificate, and will be less inclined to think they are wasting precious days holding your offer.
(3) Being pre approved for your Toronto mortgage gives you a clear idea of how much mortgage you will actually be approved for. With the introduction of stress testing mortgage applications as well as tiered mortgage rates, depending on your borrower profile, this is more important than ever and also harder to predict than at any time previously.
Related information: Get pre-approved
Related information: MoneySense recently published this bullish article about real estate values in the Greater Toronto Area