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Things to Consider When Shopping for a Fixed Mortgage

Are you researching mortgage options for your dream home? You’ve most likely come across many different choices, including four- or five-year fixed mortgages. Five-year rates are currently more competitive than ever, but shorter-term rates are making a comeback, with some really attractive bargains. To attract attention, some lenders may offer a 3 or 4-year special rate that is lower than the 5-year fixed rate.

The lowest pricing attracts a lot of future homeowners. However, getting the lowest rate for a certain period does not always mean you will be getting the cheapest mortgage. If that were the case, 100 percent of those looking for a mortgage would pick variables over fixed since the rate is cheaper.

If you’re not sure which mortgage is right for you, this article will walk you through the many factors to consider.

Changes in Rates

Rates are presently at record lows because of the COVID-19 pandemic. Today’s 3.34 percent on a 5-year fixed rate was deemed a terrific deal in the summer of 2018. There’s a good chance that rates will rise from where they are now. However, we can’t anticipate pandemic rates to continue indefinitely.

By opting for a shorter term, you are foregoing one to two years of assured low rate protection in exchange for a slightly cheaper short-term rate. The cheaper rate may appear to be a good option right now, but it might wind up being a pricey move depending on where rates are at renewal time.

Your Own Needs

Another question is how long you believe the new mortgage will be enough for your needs. Many people believe they won’t need another mortgage for at least another five years, but things can and do change. If rates were to decrease significantly, consumers could desire to break early. Unfortunately, some people may be forced to refinance or sell ahead of schedule.

Comparisons

Let’s assume you had a choice between a 1.79 percent 5-year fixed rate and a 1.64 percent 4-year fixed rate. In this example, the break-even rate is 2.48 percent, which implies that the 1 year fixed rate upon renewal, to round out the 5 years, would have to be less than 2.48 percent for the shorter term mortgage to be the less expensive choice. If the rates were higher, you would have been better off going with the five-year fixed option.

Your Current Situation

Everyone’s circumstance is different. Many people will tell you to always go variable or always go fixed, but it doesn’t always mean either one is the best option for you. People will give advice depending on their personal circumstances, risk tolerance, and so forth. It’s what they believe is best for them, so they automatically assume it’s best for others. 

Because each circumstance is unique, the perfect mortgage may change from one individual to the next. It will always be adapted to their specific requirements and objectives.

Conclusion

There was a period when shorter-term mortgages had cheaper interest rates than longer-term loans. The lowest prices in recent years, however, were nearly invariably for 5-year terms. As a result, demand for shorter-term mortgages has virtually vanished.

When looking at mortgage rates, most individuals choose for 5-year periods because they are the most common. This isn’t to say that a five-year loan is suitable for everyone; in certain situations, a shorter loan makes more sense. It will all be determined by your own requirements, preferences, and financial resources. You may always get advice from a mortgage professional to determine which choice is best for you.

Are you a first-time home buyer in Ottawa? Well, Ottawa Mortgage Services can help you. We provide mortgage agent services for first-time homebuyers, self-employed individuals, and commercial clients. We also help with refinancing, pre-approvals, and debt consolidation. Talk to us now.

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What to Know About Obtaining Preapproved Mortgage Letters

When looking to buy a home quickly, the smart thing to do is to get a preapproved letter from a mortgage lender. To the seller, this means that you are serious about the purchase, causing them to take you a lot more seriously. This is a great advantage to have, especially if other buyers are competing with you. In the end, it can be the difference between securing a home or walking away empty-handed.

That being said, we want to talk more about preapproved letters—why it’s so important, how long it will take to get one, and more.

Why Are Preapproved Letters Important?

As mentioned in the introduction, a preapproved mortgage letter is essential simply because it proves you have gone and looked through your finances. To the seller, this means that you are serious about the purchase and have figured out that you can buy the home. This is a big benefit to you, especially against another buyer that has yet to have a mortgage letter to show to the seller.

How Long Does It Take To Get a Preapproved Letter?

If you initially thought that a preapproved letter takes weeks to get, you’re mistaken. Online inquiries typically take only a few minutes to complete, and you might find yourself waiting for approximately a week to get your letter. However, if you are lucky, you might just get a response within the same day!

Regardless of how long it takes, you should be applying for a preapproval mortgage letter as soon as possible. This way, you can get the letter needed to secure the home you are interested in buying a lot earlier.

What Happens If the Preapproved Amount Is More than the Home Price?

Sometimes, there’s a chance that you might be preapproved for more than you need to buy a home. While there is certainly nothing wrong with this, be wary that the seller might try and take advantage of that amount. If you want to fix the amount, you can contact the lender to readjust the letter amount.

How Can I Make Sure That the Preapproved Amount Aligns with My Budget?

One worry you might have is paying more for a large preapproved amount that you may not necessarily need. To ensure that the amount stated on the letter isn’t the maximum amount you’re eligible for but the amount you’re comfortable paying, work closely with the lender. This way, you can strike a balance between how much you qualify for and how much you are willing to pay.

Conclusion

Simply put, if you are looking to buy a house, do yourself a favour and get preapproved for a mortgage. This way, not only do you know that you qualify for a mortgage when you do want to buy a home, but you can realize how much you qualify for to help you pick the suitable homes that fit your budget. That said, always spend the time to look for professional and trustworthy lenders to work with and compare different mortgages against each other. In doing so, you stand a higher chance of being qualified for the right mortgage that helps to purchase your home and save as much money as possible.

Ottawa Mortgage Services provides mortgage agent services to help first-time homebuyers, commercial clients, and self-employed individuals get the mortgage solutions they need and more. Apply with us today and get the mortgage you need!

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3 Mortgage Tips for the Self-Employed Canadian Home Buyer

Getting a mortgage for your home may be as simple as providing a pay stub and a job letter as two forms of requirements. Sure, there are other prerequisites right after that, but the laundry list of requirements for the typical employee is usually accessible and easy to accomplish. However, there is a different story when it comes to self-employed Canadians.

They will have to go through stricter measures to prove that they can pay the mortgage amount monthly. They will need to show their credentials and various validations to show that they are not a scammer hoping to get an easy score over the mortgage agent.

With that said, there are quite a few ways for you to prove that you are serious about the mortgage and that your stature of being self-employed will not affect your ability to pay on time. The following tips may just help you out in the long run:

1. Do Your Best to Improve Your Credit Score

Even with the roadblock of being a self-employed home buyer, you are still allowed to prove yourself through your credit scores. The thing about credit scores is that they will mainly reflect the habits and attitudes of the borrower. If you have a high credit score, it will say so much about your character as a person who never sleeps until they pay off all their debt, and neither are they lazy or laid back when it comes to their financial obligations. 

Think about it, who do you think the lender will most likely vouch for? Is it the person who has a high credit score but has no definite corporate employer? Or is it the person that is traditionally employed yet, has a bad credit score that will scare off many lenders by nature?

2. Save All of Your Tax Records

A person who pays off all their taxes is trustworthy in all regards. While taxes can be challenging to work with, they offer the best for you to get in the good graces of lenders, especially if you are self-employed. If you have no debt with other lenders and the government, you will be able to prove that you can regularly pay without any form of hassle. 

Government-implemented taxes tend to increase prices in one way or the other. If you can show the lender that you had no problem paying for that consistently, they may be impressed with your determination and attitude towards paying.

3. Establish Your Own Venture Well

Being self-employed has its perks, but it also means that you should handle all your transactions appropriately. You must not run your business to the ground—otherwise, it may give off a negative impression of you. 

If the lender sees your motivation and leadership firsthand through your business records and sales figures, they will have no problem approving your mortgage on the spot.

Conclusion

These mortgage tips will not only improve your chances of getting a good mortgage amount but may also break the stereotype when it comes to self-employed home buyers. People who aren’t traditionally employed don’t always equate to people with common financial problems. 

Some of today’s most successful entrepreneurs started small, pushing their businesses towards success with the right attitude and determination. If you can showcase that, along with the other tips that we’ve given above, you may very well be on your way to getting that well-needed mortgage approval.

If you are looking for a well-trusted mortgage agent in Ottawa to handle your mortgage application for you, look no further than Ottawa Mortgage Services. We also specialize in refinancing, pre-approvals, and debt consolidation, among other things. Contact us today and let us discuss your financial options.

Customer signing contract for a new house.

What You Should Know About Buying a House in Ottawa

If you’re reading this article, you’re probably looking into buying a home in Ottawa. You’re not alone: more and more people have been looking into it and actually making a purchase. It’s never been more crucial to search Ottawa for mortgage services that are reliable than nowadays since things are so intense, bidding wars are happening left and right.

Read on for what you should know about buying a house in Ottawa:

Know What You’re Looking For

There are many types of houses out there, and knowing what you want will definitely help things along. Some people tend to initially seek properties that they can improve upon to sell for a profit, or what’s otherwise known as ‘flipping.’ That’s why aside from people looking for their ‘forever homes’, the competition for securing a deal on a house involves many house flippers. Take note that Ottawa home purchases typically have a lot of upfront costs.

Location = Budget

Okay, you’ve decided on Ottawa, but where exactly? There’s no way around it: your budget will be the key factor. Popular suburbs include Barrhaven, Kanata, and Orleans; if you want to move into Glebe, Hintonburg, or Westboro, be prepared to dig into your finances since prices there are quite steep. In general, downtown Ottawa tends to be quite pricey.

The Search Is Fast-Paced and Won’t Be Easy

The Ottawa housing market is in such a frenzy right now that offers are put in as ocular inspections are ongoing. Yes, this means that the house you’re considering can be sold and gone before you’ve even left the property.

Find a real estate agent you can rely on to point you towards ideal neighbourhoods and houses. Offering more than the asking price is practically a default in order to have an actual fighting chance. Bear that in mind when you take on mortgage services. If anything, it’s almost like less of a search and more of a hunt, where the quickest and sharpest get the “prize” home. 

If you see something you really like, decide quickly. A good rule of thumb is to have pre-set terms and limits, like a ceiling for your budget and non-negotiables for a home. That way, you don’t accidentally put down an offer for a house that doesn’t turn out to be what you want in the long run.

What About Renting?

There used to be a misconception that renting was a better way to get savings going instead of taking on a mortgage. However, looking into the numbers, there’s a big chance that what’s being paid in rent can be similar to mortgage payments. Make sure you really weigh your options since making payments towards buying a home also comes with the benefit of building equity.

Conclusion 

Buying a home in Ottawa these days means getting involved in a fast-moving market. The demand is quite high as more people are looking to relocate to the area. Bear in mind that you should know what you’re looking for, location will depend on your budget, and that the search is fast-paced and won’t be easy.

Looking for a mortgage agent in Ottawa? Reach out to Ottawa Mortgage Services today! We provide mortgage agent services for first-time home buyers, self-employed individuals, and commercial clients alike. 

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How Can Your Mortgage Get Denied After Pre-Approval?

The pre-approval stage is a necessary step before you can secure a mortgage. This is why homeowners shopping for different lenders get pre-approved for numerous loans before settling down on the right one for them. While the pre-approval period can last from 90 to 120 days, it’s important to remember that you can still lose your current loan terms under specific conditions.

Losing Your Mortgage During the Pre-Approval Phase

Pre-approval is a necessary agreement between you and your chosen lender on the mortgage you’ll sign. This sets the rates, conditions, and other terms in your contract as you enter an arrangement as a borrower. 

Although some homeowners see this stage as a guarantee of their purchase, they can still be denied their loan under specific conditions. Since scouting for a new loan after being denied can be a more challenging feat, you must be wary of the variables that can compromise your value as a borrower.

While you’re in the pre-approval stage of securing your loan, here are three things you need to watch out for:

1. Incurring New Debt

A recurring reason lenders can deny borrowers in the pre-approval phase is to notice a higher degree of debt. This is because having other financial commitments will compromise a borrower’s risk of paying their dues on time. Even a small increase in debt can make your lending company cautious about pushing through with your contract. This is why you need to minimize your credit usage before finalizing your loan.

Keep in mind that securing your loan isn’t an excuse to take up new debt right away. It’s a whole different matter to /project your future financial expenses than actually paying them. Give yourself time to adjust to your new monthly dues before making any significant purchases.

2. Changing Employment Status

Mortgage companies consider your capacity to pay debt consistently by seeing if you have a sustainable income. It’s one of the most important variables when they take in a borrower. If you change jobs mid-way through a loan application, you can be at risk of losing your current deal and terms.

Changes to your employment don’t always reflect negatively on your current mortgage terms. In fact, getting a job with higher pay won’t benefit you in any way. However, it’s best to consult your mortgage broker before you commit to these career choices or if you should finalize your mortgage first.

3. Altered Credit Score Standings

The changes above can greatly impact your current credit score, depending on your financial situation. Small changes to your credit score won’t disqualify you from securing your current loan terms. However, a considerable drop can cause your mortgage lenders to pull away from the current terms.

Besides losing your current mortgage terms, you will find it much harder to apply for a loan in the market. Since your credit score is significantly lower, you will have to settle for loans with low credit score eligibility with considerably higher mortgage rates. This is why it’s best to maintain your credit score standing at least four months until your mortgage finalization.

Conclusion

Consistency is the key to earning the trust of your lenders. It’s a principle that will remain true from the start of your loan application till the end of your mortgage’s term. This is why you should always be sure about the financial choice you make. Thankfully, you can get a second opinion from credible professionals to back up your decisions.
At Ottawa Mortgage Services, we understand that securing a mortgage is a major milestone in every Canadian’s life. For this reason, it’s our goal to provide the right financial strategies with adequate options in the market. Contact us now for a free consultation!

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3 Tips for Getting Pre-approved for a Higher Mortgage

Buying a house is an important milestone in life since it offers peace of mind and brings you and your family closer to your desired lifestyle. Plus, nothing beats the feeling of being secured and coming home to a house knowing it is all yours. 

Affording a house often means having to secure a mortgage. But to truly enjoy your desired level of comfort in a place you can call home, you may need to select a substantially expensive real estate. This means you are left with no choice but to strive to get approval for a higher mortgage loan. 

To get approval for a loan, good credit scores, assets, and work that pays well are necessary. If you need a more in-depth guide to improving your options, here are several strategies to achieve more borrowing power:

1. Increase Your Income

Increasing your income is an ideal way to boost your chances of getting your loan application approved. This is especially true if your mortgage pre-approval provider isn’t willing to give you your expected full loan amount. You can even ask them upfront what level of income you will need to get a higher mortgage amount.

While increasing your income as soon as possible is not an easy feat, there are some ways to increase your chances of increasing the amount of money you will be pre-approved for. For instance, you might want to consider negotiating for a higher salary with your employer. On the other hand, you might benefit from finding a side hustle and other sources of income. 

If you’ve reached a wall in your current employer, another option is to look for another job that pays better. However, note that your employment’s stability is another factor that lenders consider, so remember that before quitting your current job.

2. Find a Lower Mortgage Rate

Failing to compare rates before getting pre-approved can cost you thousands of dollars more in yearly fees. To find a lower mortgage rate, take your time to look around from various lenders and compare all of your options.

Look for a lender who will approve you for a lower mortgage rate and place a bigger portion of your payments towards the principal. By doing so, you will get lower monthly mortgage payments and reduce the overall cost of your homeownership. 

3. Improve Your Credit Score

Your credit score is a crucial factor when getting a great mortgage rate. It serves as proof of being a responsible debtor to your prospective mortgage lenders. While a good credit score can vouch for your borrowing capability, a lower credit score will cause lenders to be less willing to lend you the money you need. 

Generally, lenders look for a credit score of at least 600 in Canada. To keep your credit score healthy, check your credit score regularly, pay your bills on time and in full as much as possible, and use less than 30 percent of your total credit. 

Conclusion

Searching for your ideal home can be exciting, but it can be discouraging once you see that their prices are more than your maximum budget. If you decide that your best option is to increase your mortgage amount, don’t worry because there are many ways to do so. It’s also advisable to run the numbers to see how much you can afford by reaching out to mortgage specialists and seeking a mortgage loan pre-approval.

Find the best mortgage on the market by reaching out to Ottawa Mortgage Services. Our team can also help you get your mortgage pre-approval letter so you can determine how much you can afford for your property. Contact us for a free no-obligation assessment!

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Our Guide to Mortgage Pre-Approval: What You Need to Know

If you’re a first-time home buyer in Ottawa, then you’ll have to start exploring your financing options to help you purchase your dream home. The prospect of getting your first mortgage can be intimidating, especially if you aren’t sure of what you need. But working with a mortgage agent in Ottawa who truly knows what they’re talking about can help you separate fact from fiction.

Part of getting a mortgage is getting pre-approved for it. When you get a mortgage pre-approval, you can secure an interest rate for up to 120 days while acquiring a credible estimate of your mortgage limit. With this in hand, you can demonstrate your seriousness as a buyer to agents and home sellers as you’ve taken the time to get your qualifications. Additionally, although pre-approval can take some time, it can also save you the inconvenience of applying for a mortgage when you’re occupied from closing on your new home. 

What Is a Mortgage Pre-approval?

A mortgage pre-approval is securing an amount of money that you can borrow from a lender should you choose to buy a home. It also gives you a locked-in interest rate. However, the pre-approval and locked-in rates are valid only for a specific period, usually 60 to 120 days. You will also have to supply the lender with documents such as your proof of income, employment, bank statements, and a credit check, similar to the process of applying for a mortgage. 

When everything checks out, the lender will give you a mortgage pre-approval letter, which can boost your chances of the seller accepting your offer on a home as it demonstrates your secured financing. However, keep in mind that a pre-approval is not a guarantee that the lender will give you a mortgage, nor does it oblige you to get your mortgage from that specific lender.

How Is It Different From a Pre-Qualification?

A mortgage pre-qualification is a straightforward way to estimate how much mortgage you can afford based on your income. However, a pre-approval carries more value since it comes with a written contract and involves a more comprehensive study of your financial situation. You can get pre-qualified online or over the phone by offering a few details about your financial situation, which is great for when you’re in the early stages of buying a home. However, if you have a complex financial standing or need a more precise estimate, a pre-approval offers more assurance. It also shows the seller that you’re sincere about your interest in their home, giving you a higher chance of closing on it.

How Do You Get a Mortgage Pre-approval?

You can get pre-approved from a mortgage broker or most lenders. You’ll have to supply the lender with detailed information about your financial situation and establish your income. Some documents you may have to submit include verification of employment, bank statements, credit report, and your previous tax assessment. 

Your credit score plays a vital role in deciding on the amount of mortgage for which you qualify. If you have a low credit score, lenders will be more likely to decline your mortgage. The required credit score ranges between 300 to 900, but most major banks in Canada hold it at a steady 600 to 700. Your score is determined by various factors that account for your potential to be a safe, responsible borrower or one who has difficulty repaying loans.

For instance, if you have a long history of paying your debts and bills on time, your credit score would increase. However, if you miss a payment or bill, your credit score could sharply drop. A hard credit check can also temporarily affect your credit score, which happens when you apply for a loan or line of credit. This happens because lenders are typically cautious of borrowers who borrow money from various lenders out of nowhere. You can get a free annual credit report from each prominent credit reporter in Canada, Equifax and TransUnion, to keep a close eye on your score.

Conclusion

A mortgage pre-approval can help you move closer to securing your dream home while preparing you for the mortgage process. It tells you how much you can borrow from lenders, allowing you to analyze your credit situation and find a lender that offers the most favourable rates and terms.

If you’re looking for a mortgage agent in Ottawa, be sure to let us know at Ottawa Mortgage Services! We have the best refinance rates and mortgage services around, helping first-time home buyers, self-employed individuals, and commercial clients get a mortgage. We also assist in refinancing, pre-approvals, and debt consolidation. Contact us today to find out more about how we can help you!

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6 Signs Now Is the Best Time to Refinance a Mortgage

Refinancing a mortgage means paying off your current mortgage and replacing it with a new home loan. Doing it can seem tempting, especially when refinance home loan rates are low. But before going through the process, keep in mind that it is a major financial transaction. It can save or cost you money, depending on your goals and circumstances. 

To learn more about how a mortgage refinance can help you and determine if now is the best time to take out a new mortgage, you should completely understand how it works. Here are several signs for why it makes the most financial sense:

1. You Want to Shorten Your Loan Term

Many first-time borrowers start out with a 25-year home loan. If you want to become debt-free much faster and save a significant amount of money in interest, consider refinancing to a 15-year fixed-rate mortgage. Besides being able to shorten your term without a big increase in your monthly payments, doing this lets you build your equity faster. This is especially helpful if you are planning to sell your home.

2. You Prefer a Better Mortgage Rate

Refinancing lets you lower the interest rate on your current mortgage. This allows you to save money, boost the equity in your home, and reduce your monthly payment. To figure out if refinancing is a good idea, a rule of thumb is to ensure you can reduce your interest rate by a significant percentage rate to make it worthwhile.

3. You Prioritize Having Lower Monthly Payments

You could save money through refinancing. When you lower the interest rate, you can also lower your monthly payments. This is particularly true if your new loan has the same payoff date as your previous mortgage. Additionally, you can lower your monthly payments by extending the payoff date so you can pay less in principal.

4. You Want to Have More Predictable Costs

If you took out an adjustable-rate mortgage (ARM), you may notice that it starts at a low, fixed-rate for a specific term. But that rate may increase for the remaining loan term after this pre-specified term ends. Thankfully, you can secure a low initial rate by converting your existing mortgage into a fixed-rate loan. Doing this strategy is ideal for you if rates recently dropped, and you now prefer a predictable payment. 

5. You Need to Borrow Money

You never know when a financial crisis can happen. If you need quick cash, you can take some out from your home equity with a cash-out refinance. It lets you obtain funds for any purpose as long as you have over 20 percent equity. So whether you need money for education     or immediate roof repair, you can get the money you need to cover these expenses.

6. You Have to Remove a Person from a Mortgage

Some major life changes like a divorce can cause someone who originally signed onto a mortgage to be no longer held financially responsible. To remove that person from that loan and free them of liability, refinancing is necessary. 

Conclusion

There are many reasons why refinancing can be beneficial for you. But just like any other big transaction, it comes with risks and disadvantages. For this reason, make sure to consider the list in this guide and do the math. If you think it’s time to refinance your mortgage, reach out to trusted mortgage agents.

Whether you prioritize lowering your monthly payments, increasing your cash flow, or shortening your loan term, you can get the best mortgage refinance rates from Ottawa Mortgage Services. We take the time to understand your situation and assess the right mortgage solution for you. Contact us for a free consultation!

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How to Use Your Mortgage to Consolidate High-Interest Debt

There are many financial products that are available to help you reach financial freedom and stability. During difficult financial times, you may have used these loan products to ease your financial burden. However, when the time comes to pay off these debts, it may seem like forever when you try and pay off your loans’ interests, let alone the principal amount itself. 

At this point, you may be thinking that these high-interest loan products may have permanently damaged your chances of reaching financial stability. However, as you pay off your loans, you shouldn’t get too discouraged. The good news is that there is a way to better manage your debts and get on top of your financial situation. This blog post will shed some light on what this secret weapon is.

How to Use Your Mortgage to Consolidate High-Interest Debt

You may be wondering how this can be done, it involves looking into the current equity of your home. You will be able to consolidate your debt by refinancing your home loan. If your home has built up a certain amount of equity, you may be able to have your existing home loan refinanced into a debt consolidation mortgage. 

Consolidating Debt into Mortgage

Using the equity, you are able to get yourself in a better financial position. Ideally, the idea of taking out this type of refinanced mortgage is to use it to slowly pay off your high-interest loans and consolidate them into one loan payment that will have a lower interest rate.

The first step is to find a lender that provides home equity loans, or that can give you a home equity line of credit. The equity of your home will act as the security for the loan. By consolidating all your debts into one convenient payment, you will be able to gain control over your financial situation and pay your debts sooner rather than later. 

What If You Don’t Have an Existing Mortgage Yet?

This question may have popped into your mind if you are considering consolidating your debt and taking out a fresh new mortgage. The good news is that this option is not only available for people who have existing mortgages. First-time applicants for mortgages may also be able to take advantage of the benefits of this type of mortgage.

For you to be able to qualify, your loan-to-value or LTV needs to be under a certain amount. LTV refers to the size of your loan in comparison to your home’s value. Should your lender decide that your LTV has an acceptable range, they may let you roll in your other existing debts into the new mortgage for the purchase of a new home.

Conclusion

If you have read this far, you will now be aware of how using your equity on your mortgage can be wielded as a tool to help you gain financial security in the long run. If it is done right, you may be able to see an enormous amount of savings and see all your debts properly paid off when you’re through. 

If you are ready to get a better deal on your interest rate and gain financial security in the process, come to Ottawa Mortgage Services! We believe that all Canadians should have the right to invest in their future. We strive to provide convenient and transparent financial services to help you reach your goals. Contact now for a free consultation and assessment to find the financial structure best for you.

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Mortgage Mistakes Self-Employed People Should Avoid

Securing mortgage approval has been a common problem among self-employed individuals. It is common knowledge that lenders prefer long-term employment records to ensure consistent payments, over variable self-employed income. But it is not always impossible. 

In Canada, the growing number of self-employed individuals is forcing lenders to adapt. They are continuously trying to find a way to meet their potential clients’ needs.

If you are a self-employed person considering a mortgage to finance your home purchase, you need to prove how financially stable and capable you are. It all starts with ensuring that you have financial strength. If a self-employed person can prove that they have a good income and pay all their bills on time, they have a high chance of successful mortgage approval. 

Here are some mistakes you should avoid:

Mistake 1: Not Reporting All Your Income

Lenders rely primarily on your reported income when making their assessment. Your income will define how much money you can spend and borrow. If you only report a fraction of what you earn, lenders might assume that this is your full financial capacity. Therefore, whether you make cash, goods, or traded services, it would be best to report them all to your tax income report to show your actual worth. 

Mistake 2: Overstating Earnings

Although reporting your income is recommended, overstating income also has its consequences. Usually, some claim additional income to improve their potential mortgage approval. However, before making claims like this, make sure that you have legal documents to support them. At the same time, these documents should pass the lender’s review. 

Should your application get approved and your stated income does not match your actual income, it might be challenging for you to pay off your monthly mortgage. Not being able to pay your monthly mortgage could result in penalties or foreclosure.

Mistake 3: Concealing Debts

If you hide your debts, the lender would not have a clear picture of how much money you have. The debt to income ratio is an essential element in determining how much you can borrow. Anyone can still apply for a mortgage despite having debt, but lenders need to see how well you manage them. Borrowers who have debt usually find it challenging to pay off subsequent loans, and you need to prove your lenders wrong instead of hiding it from them. 

Mistake 4: Avoiding Having Credit Cards or Loans

Why get credit cards if you do not want to have debts? Unfortunately, some people see credit cards and loans as traps instead of a potential asset that can prove your creditworthiness. Having a loan or credit card bill to pay every month and paying them on time shows how well you manage your finances and pay your bills. Having a credit card or another manageable loan could be a helpful tool for you to secure your mortgage. 

Conclusion

If you plan to get a mortgage loan soon and are self-employed, make sure you avoid committing the mistakes listed above. Focus on what lenders prefer: a person who has good credit and income. If you can prove those and your capacity to pay back your mortgage, you can have a good chance of getting approval for the loan you want. 

Also ensure you find a mortgage agent who can help you find the best offer that fits your unique situation. Ottawa Mortgage Services is an Ottawa-based mortgage agent that can help you find lenders that let self-employed Canadians with good records qualify for the lowest mortgage rates. Contact us to learn how we can help.