Getting a mortgage for the first time is usually a tricky issue for many people, particularly if they don’t have a background in finance and mortgages. It is usually a good idea to do extensive research before signing up for a mortgage, since it will be a long-term commitment which will require you to sacrifice money regularly. In addition to that, it would also be necessary to know about personal finance issues that may affect your mortgage rate. This way, you can work to change some of your personal finance issues, so that by the time you apply for a mortgage, you will have the best rates possible as well as leverage to negotiate for better terms. Some of the personal finance issues that can affect your mortgage include:
Your credit rating
Your credit rating is a measure of how you handle debt. Having a bad credit rating obviously reduces your negotiation leverage, and also has an effect on your mortgage rate. Fortunately, it’s easy to find out what your credit rating is. Major credit rating bureaus such as TransUnion and Equifax are obligated to provide clients with one free credit rating report per year, so you won’t need to spend any money to get one. Typically, such reports also contain guidelines on how to interpret the rating.
Once you have this information, you can then take steps to improve your credit rating. This is a process that might take several months. Some of the simple measures you can take include paying your bills on time, reducing how much you borrow, sticking to one or two credit cards rather than having many of them and so on. You can easily find more information on how to improve your credit rating online. With an excellent rating, you will be in a better position to negotiate for better mortgage terms.
When applying for a mortgage, you will always be asked to provide information regarding your sources of income, including any businesses that you might have besides a regular job. Usually, this is looked at in the long term. For instance, when assessing your income status, mortgage firms will consider a 12 or 24-month history. You can also plan to create other sources of income once you get the mortgage, which makes it easy to keep up with the payments.
Your saving patterns
How you handle your savings can also influence the mortgage in Montreal which you apply for. For instance, when you have a long history of saving regularly, you will be in a better position to get better terms and conditions for the mortgage. As with your income, the savings have to be over a long term, such as two years.
Your other loan obligations
If you have other credit lines such as pending car loans or student loans, they will eat into your income, and this will affect how much you can afford to pay for the mortgage. This potentially reduces the maximum you can borrow, increases the interest rate (since it’s riskier to the lender) or increases the amount of time you will need to service the mortgage. One way round this is by making an effort to clear all other outstanding debts (if you can) so that you can then free up more income that can be directed towards the mortgage. This also improves your credit rating as well.
These are just a few of the personal finance issues that affect your mortgage, and it would be wise for you to take them into consideration way before you actually sign up for one. Optimizing all the above and more can go a long way in making your mortgage more affordable.