Mortgage | Beyond the interest rate

With the recent rise in interest rates, it is normal for future buyers to consider this element before taking out a mortgage loan. However, a variety of factors must be taken into account. Here are a few, according to the experts.

Overall situation

Buying a property is buying a lifestyle, as pointed out by Pierre-Raphaël Comeau, Senior Advisor, Financial Planning, at Laurentian Bank Securities (LVBL). “Saying yes to a house also means saying no to certain expenses, such as travel or restaurants,” he says.

The latter likes to pass the “reality test” to first-time buyers. He calculates with them the total monthly cost of the coveted property (heating, maintenance, insurance, etc.) and compares it with the current expenses related to the rent. “We can then set up a savings plan before buying the property. In addition to the budget, other projects are to be considered.

Borrower profile

“Just as you have an investor profile for your investments, you have a borrower profile for mortgage financing,” says Jonathan Dion, mortgage representative at Desjardins. He explains that someone who is risk averse might prefer the fixed rate, which is much safer since the rate and the payments will be guaranteed over time. The lowest rate is therefore not necessarily the most suitable for you.

Insurance and protection

What happens to your mortgage contract in the event of death or disability? The delicate question deserves to be asked. “Banks generally offer life and disability insurance as part of the mortgage product. It’s not a stress you want to manage when you’re in the middle of it. Better to have an umbrella before it rains,” says Pierre-Raphaël Comeau.

The wealth management expert points out that the legal aspect should not be neglected at a time when the mortgage often lasts longer than the couple. “We buy together most of the time. With respect to the mortgage, we will be jointly and severally liable for the debt. This means that if one of the two is no longer able to pay, the other must take care of it. »

Flexibility

The conditions of a mortgage loan vary from one institution to another, notes Jonathan Dion. “Do borrowers have a mortgage margin? Is it possible to make early repayments of its financing? If so, what are the conditions? Can mortgage payments be doubled? There are plenty of small clauses that potentially allow you to repay your loan more quickly and save interest in the end, ”he illustrates.

Transform a variable rate into a fixed rate within the term, refinance your loan without going to the notary and use the practice of moving (which consists of taking the financing of a property that you are selling and transferring it to a new acquisition) are all elements that change according to the flexibility of the institutions.

Term

The term of a mortgage is the length of your contract. Economic forecasts are taken into account in the choice of term. “If we expect interest rates to rise, we may be better off going with a longer term,” says Jonathan Dion.

The same consideration applies to the amortization period, ie the number of years during which you repay your loan. “Depending on borrowers’ ability to repay, a longer amortization will give them more liquidity for the time being. Conversely, a shorter amortization will increase payments, but save a lot of interest over the term of the financing. »

Prequalification and preauthorization

Prequalification allows future buyers to have an idea of ​​the financing they could obtain. It does not require a credit check or validation of documentation. The more official pre-authorization confirms this amount.

“I think this is a crucial step, which guides the rest of the project, says Jonathan Dion. However, this is not mandatory even if more and more real estate brokers require documentation to make a visit. Pre-authorization also facilitates the search for a property and the process when filing a promise to purchase. »

Accompaniement

Without wanting to preach for his parish, Jonathan Dion believes that it is essential to be helped by a specialist throughout the process. “The support must be adapted to your needs, depending for example on the type of property or your level of comfort. As this transaction is often a life project, it is important to choose someone with whom the current passes. The expert can also put you on the track of promotions or advantageous criteria.