How soon should i start looking for mortgage

[Seesus]

My condo's occupancy is around mid of 2012. I am new at this but all i understand until now is that the cost of borrowing changes from time to time and its a good time now to borrow. However - assuming that i get my occupancy around June 2012 (lets say the building gets registered without much delays), Ideally my mortgage will start kicking in say by August 2012.

Under the given conditions,

1, when should i start looking for mortgage ?
2, what is the best way to go for shopping mortgage ?

I am sorry if this question has already been asked and answered but i am wondering - just go walk in a bank and start asking for rates or would a mortgage broker be a better option and how much would that cost ? and where can i get a good mortgage broker from ?

Any and all help is much appreciated.

 

[UrbanVigor]

I'm in the same boat as you are.

I just purchased a unit at Market Wharf and while prior to that I received pre-approvals using mortgage brokers, BMO has a capped mortgage rate program with Market Wharf so I'll be applying through them so that I will have capped my rate 36 months in advance.

It's essentially the exact same thing as getting a pre-approval with the rate guaranteed for 90-120 days only the rate is guaranteed for 36 months. So see if the developer of your condo has a program with one of the banks so that you can cap your mortgage rate.

Then, 90-120 days before your mortgage needs to kick in, shop around.

 

[KA1]

My condo's occupancy is around mid of 2012. I am new at this but all i understand until now is that the cost of borrowing changes from time to time and its a good time now to borrow. However - assuming that i get my occupancy around June 2012 (lets say the building gets registered without much delays), Ideally my mortgage will start kicking in say by August 2012.

Under the given conditions,

1, when should i start looking for mortgage ?
2, what is the best way to go for shopping mortgage ?

I am sorry if this question has already been asked and answered but i am wondering - just go walk in a bank and start asking for rates or would a mortgage broker be a better option and how much would that cost ? and where can i get a good mortgage broker from ?

Any and all help is much appreciated.

It might not be a bad idea to go around and find out as to what type of information a lending institution would need.

In 2001, I had applied for a mortgage. I was told that since I am self-employed, my mortgage application will be automatically approved as long as my credit ratings are ok. No proof of income or confirmation of the fact that I am self employed was asked. Banks had lost shirt in the hi-tech meltdown and they were fighting with each and every other lending institution to lend money.

In 2008, I had once again applied for a mortgage approval. Closing is June 2012. This time, lenders wanted previous 4 years statements of business income and expenses together with my tax returns to see if I have enough cash flow to make mortgage payments. I did not go through with the application. Since then, I have been 'dressing up' statement of business income and expenses attached to the tax return.

Better safe than sorry.

 

[Seesus]

I'm in the same boat as you are.
Then, 90-120 days before your mortgage needs to kick in, shop around.

As Ka1 suggests, good to know what is needed to the mortgage, but would please share your experience as to what are the requirements from a bank along with a mortgage application. I would assume they would require a letter from your employer stating your salary etc but what else is required other than that ?

Also using is it so that having mortgage broker is better in the case of going to get my first mortgage ? or does it not make a difference ? why would one use a broker for mortgage versus not use one?

 

[KA1]

Brokers deal with various lending institutions. You deal with only 1 bank at a time -- very time consuming.

'Posted' interest rates are for the 'Birds' only. Very few deals happen at these rates. Final mortgage rate is a few percentage + or - the 'posted' rates -- depending upon the market conditions and the quality of the mortgage loan application.

Brokers work stricly on commissions that they get from the lending institution.

A bank's mortgage officer works on a salary plus commission. They also have a minimum quota to meet.

Both the brokers and mortgage officers of a bank are out to make money -- at your expense. They are not your friends. Just like a car sales person, they want to assure you that they are on your side. That's a big 'bull ..'.

Depending upon (a) as to how desperate the banks are to lend money at the time you want to get the mortgage (b) how desperate a mortgage broker is to make money and (c) how desperate a bank mortrgage officer is to meet 'quota', you could get a deal. Brokers and bank mortgage officer could give you a slightly lower rate, and cut into their commission, to get a deal. Shop around

One thing no one tells you is that even if all the papers have been signed well in advance, both you and the bank could refuse, at the last moment, to go through a transaction without having to give a reason.

There is no substitute for your own independent research. Visit the mortgage lending section of web sites of various banks . Talk to more than one (1) mortgage broker.

In March 2008, I was enquiring about a mortgage at around 60% of the purchase price of a condo expected to be delivered in June 2012. Other than the BMO, no other bank mortgage lending officer or broker was willing to talk to me other than to say -- give us a call 6 months before the title transfer date. Brokers promoised to return my call when they have finished dealing with the customer stilling in front of them. They never returned the call.

Through all this, I was able to get a few morsels of financial requirements I would be expected to meet. As a self employed individual -- an accountant, who has some knowledge of Income Tax Act --- I have been 'dressing' up my statement of business income and expenses year by year. Towards the last 2 years, I will do extra 'dressing'. This time around, I hope to drive a bargain.

Good luck in your research.

 

[Seesus]

I have been 'dressing' up my statement of business income and expenses year by year. Towards the last 2 years, I will do extra 'dressing'. This time around, I hope to drive a bargain.Good luck in your research.

This is fantastic level of detail KA1 and i very much appreciate your detailed response. I kind of had an idea about this but now a couple of things are quite clear to me. Much appreciated.

One quickie - What do you mean by "dressing up" ? Sorry i am not into accounts and would be curious to know if a person like myself who has a job with average salary needs to do some dressing up too to get a good deal or were you only referencing dressing up to be done for self employed ?

Thanks again !

 

[KA1]

Ka1

please see the private message sent to you.

 

[UrbanVigor]

would please share your experience as to what are the requirements from a bank along with a mortgage application. I would assume they would require a letter from your employer stating your salary etc but what else is required other than that ?

Either a letter or copy of a pay cheque stub is required by the lender. If you've only been with your company for a couple of years, they may overlook bonuses as part of your compensation.

They will also ask for a net worth statement - a list of your assets (cash, RRSPs, etc.) and liabilities (credit card limits, lines of credit, RSP loans, etc.)

In order to get a better rate, your lender may suggest using part of your down payment to pay off a liability.

I've used 3 brokers to attain a mortgage approval and am currently speaking with 1 bank (BMO) in regards to a capped rate mortgage approval. They will all ask for the same information at varying degrees. But I should mention that I have yet to actually take out a mortgage. So the best advice I could give is to provide as much information and documents as necessary. With that said, I don't really think it's that much.

 

[Tacoma]

.. As a self employed individual -- an accountant, who has some knowledge of Income Tax Act --- I have been 'dressing' up my statement of business income and expenses year by year. Towards the last 2 years, I will do extra 'dressing'. This time around, I hope to drive a bargain....

Won't dressing up your T2125 increase your taxes payable? I'm not sure this action will bear any fruit.

 

[KA1]

Ka1

Won't dressing up your T2125 increase your taxes payable? I'm not sure this action will bear any fruit.

It will increase income on T2125 and taxes payable.

Bear in mind I am an accountant with 'some' knowledge of income tax act. I can bring income forward temporarily. As they say, there are plenty of ways to skin a cat -- as long as you know what you are doing.

 

[X2 Buyer]

My condo's occupancy is around mid of 2012. I am new at this but all i understand until now is that the cost of borrowing changes from time to time and its a good time now to borrow. However - assuming that i get my occupancy around June 2012 (lets say the building gets registered without much delays), Ideally my mortgage will start kicking in say by August 2012.

Under the given conditions,

1, when should i start looking for mortgage ?
2, what is the best way to go for shopping mortgage ?

There are two options to go with for the pre-construction condo.

1. consult with the mortgage specialist introduced on site. Most projects / builders will engage a typical bank (mortgage specialist) attached to the project. In common deal you can get your rate capped up to 42 months (usually 36 months). The advantage is the long term that you are able to cap but you have no choice to shop around

2. to consult each of the banks but usually the branches only have the 90 - 120 days that they can cap the rate for you

You can actually do both to cap it with a long term first and then shop around when you are told when to expect the occupancy.

Mind you though the occupancy date to closing date it may take up to half a year. Say you have capped your rate for 36 months since Jan 1/2010 then by the end of 2013 it will expire. You will need to make good estimate the likelihood your building will get delayed after then. It happened to people in my building they have lost the good rate they capped after the 36 months due to a couple of delays. I am not sure how to avoid this, I assume you can cap another one after one year passed just in case? Back then I have waited and lucky enough mine was still within the 36 months although it was a bit higher than the earlier rate.

 

[RedSkyAtNight]

There are two options to go with for the pre-construction condo.

1. consult with the mortgage specialist introduced on site. Most projects / builders will engage a typical bank (mortgage specialist) attached to the project. In common deal you can get your rate capped up to 42 months (usually 36 months). The advantage is the long term that you are able to cap but you have no choice to shop around

2. to consult each of the banks but usually the branches only have the 90 - 120 days that they can cap the rate for you

You can actually do both to cap it with a long term first and then shop around when you are told when to expect the occupancy.

Mind you though the occupancy date to closing date it may take up to half a year. Say you have capped your rate for 36 months since Jan 1/2010 then by the end of 2013 it will expire. You will need to make good estimate the likelihood your building will get delayed after then. It happened to people in my building they have lost the good rate they capped after the 36 months due to a couple of delays. I am not sure how to avoid this, I assume you can cap another one after one year passed just in case? Back then I have waited and lucky enough mine was still within the 36 months although it was a bit higher than the earlier rate.

In my view, the "special" bank mortgage financing available from a bank that has partnered with the developer is a bit of a mirage which helps the developer and the bank more than it does the buyer. I think it really exists in order to:

1) eliminate one of the barriers to buying, by providing the buyer with a (false) sense of security of what their mortgage costs will be down the road when they need the mortgage. Of course, the guarantee period has usually expired by then and a new rate prevails;

2) serve as a filter so that the developer knows that the buyer is financially worthy and is in a position to be able to close the deal. When you provide your financial info to the bank to determine your eligibility for a mortgage pre-approval, they ascertain your credit worthiness, and your developer wants this info;

3) provide the partnering bank with contact names for everyone in the building so that they can follow up to try and enter into a mortgage with them. A good way of getting leads;

In my case, in 2005 RBC (which had partnered with my developer to provide guaranteed pre-approval rates) gave me a rate that they would guarantee for 24 months. Because of rezoning/OMB delays, it is now four years later and my building is still not complete and the guarantee period has long since passed. Although this might be an extreme example, I think that you would be hard pressed to find any developer that could sell, build and register a condominium building in 24 months.

Getting such a pre-approval doesn't hurt (as you are under no obligation to actually take out a mortgage with the bank that pre-approves you) and it doesn't cost you anything (except for a little time spent on paper-work), but I suspect in many or most instances -- because of guarantee periods that are too short -- it doesn't provide any real benefit.

 

[W. K. Lis]

Mortgage rates do not have much more to go lower, only higher. Better to start looking at them before July. That is when the HST is to start in Ontario. Better make the spring your deadline, and do your mortgage shopping now in the winter.

 

[X2 Buyer]

In my case, in 2005 RBC (which had partnered with my developer to provide guaranteed pre-approval rates) gave me a rate that they would guarantee for 24 months. Because of rezoning/OMB delays, it is now four years later and my building is still not complete and the guarantee period has long since passed. Although this might be an extreme example, I think that you would be hard pressed to find any developer that could sell, build and register a condominium building in 24 months.

Mine was with RBC too for a 36 months capped rate. I bought the condo in 2003 and waited until the beginning of 2006 to get the rate capped. The closing date happened to be in 2007.

 

[UrbanVigor]

The advantage is the long term that you are able to cap but you have no choice to shop around

I don't think this is true. I received pre-approvals that are good for 120 days, but then purchased a unit at Market Wharf where they partner with BMO. BMO has a 36-month capped rate program... essentially it is a pre-approval with the rate guaranteed for a longer period. I'll always have an opportunity to shop around when it comes time to actually take out a mortgage.

Or am I missing something?