Mortgages & Financing   -   Helpful Tips

      Give Yourself a Negotiating Advantage by Planning Ahead

Buying a property requires good knowledge of market conditions, personal finances as well as the ability to judge what is a good investment. Equally important is being in a position to negotiate realistically when you do decide to make an offer. That comes of doing as much up-front thinking and preparation as you can before you are actually in the position of preparing a formal offer to purchase.

Market conditions
Look at the long-range prospects of your borrowing commitment. For instance, in a period of low interest rates, you should take into consideration whether or not prices are expected to increase in the future. In that case, you may want to seriously consider locking in at a reasonable rate for the opportunity of considerable gain in the future.

How Much Can You Afford?
Before you go into the market to look for a house, review your current spending and loan commitments. A mortgage lender will use a ration of about 30% of gross income as the amount of mortgage you can carry. You will have a good idea of your own capacity if you review your finances beforehand. Property tax is an additional cost that must be factored into the equation.

Having settled on a price range for your prospective house purchase, the next step may be locking in a mortgage interest rate with a pre-approved mortgage. Knowing that you already have your mortgage arranged can increase your comfort level at the negotiating table. To arrange a pre-approved mortgage, you meet with a lender who will confirm your borrowing capacity, perform the required credit review and make an agreement to honour a particular interest rate for a specified time.

Existing Mortgage
If there is an existing mortgage on a property you are selling or on one you are looking at, there is more to consider than simply the balance outstanding and the interest rate. You should know, before you get into negotiations, whether or not the mortgage is assumable by the buyer or is it due upon the sale. If it is assumable, must the new buyer qualify in order to take it over and what is involved in doing that?

Be aware, as well, of any pre-payment terms. If your mortgage is open, of course, you can repay it at any time without penalty. However, a mortgager may have "lock-in" clauses. These may include payment of a bonus or the lender's interest revenue loss for the balance of the term should you repay early. You should clarify all this with your lender.

Portability
A very popular feature now is mortgage portability. That means that you can transfer your existing interest rate, loan balance and remaining term to a new mortgage without penalty although there may be some restrictions. Be sure you understand what they are before you get into negotiations.

Mapping the Route
Just as you would orient yourself beforehand to the law of the land in a country where you were going to live or even to visit, the same holds true for preparing your journey into the property buying market.

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