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Buying a home is a major expenditure and is likely the biggest investment you’ll ever make. Given the magnitude of such a purchase, the odds of having enough cash to cover the entire price tag are pretty low. The vast majority of homebuyers in Saskatchewan take out mortgages in an effort to finance a home purchase.
For more information about the cost of a mortgage in Saskatchewan, look here.
As helpful as mortgages are, they can be somewhat complex. Here is everything you need to know about mortgages in Saskatchewan.
While not mandatory, it’s generally recommended that buyers get pre-approved for a mortgage before starting their search for a new home. A mortgage pre-approval will help get the ball rolling in the mortgage process and can help you determine exactly how much you’ll be able to afford in a home purchase. That way you don’t waste your time looking at homes that are way out of your budget.
Getting pre-approved for a mortgage will also help you gain a competitive edge when you’re looking at homes you’re interested in. Sellers prefer to deal with buyers who are financially qualified to go through with a deal. If a buyer is unable to follow through with mortgage approval, sellers could wind up back at square one looking for a buyer. And if you’re ever in a multiple offer situation, a pre-approval will come in very handy.
Want to know the difference between being pre-approved and being pre-qualified? Find out here.
Getting pre-approved for a mortgage in Saskatchewan can also help move the mortgage process along faster after you put in an offer for a home. Since you’ve already supplied most of the documents needed for the lender to make a decision about approving your mortgage application, the process can be more streamlined once your real estate deal is in escrow.
Types of Mortgages in Saskatchewan
When you apply for a mortgage in Saskatchewan, it’s important to understand what types of mortgage products that are available.
Conventional mortgages – These types of mortgages require a minimum 20% down payment. Any less than this amount would require you to pay mortgage default insurance, or CMHC insurance, to protect the lender. If less than 20% is put down, this would be considered a high-ratio mortgage, which would require a minimum 5% down payment.
Fixed-rate mortgages – This is a popular option for mortgages, especially among first-time buyers and those who like to have steady, predictable mortgage payments every month. With a fixed-rate mortgage, the interest rate remains the same throughout the term of the home loan, which keeps the mortgage payments unchanged every billing period. This is an attractive option when rates are expected to increase in the near future. In this case, it makes sense to lock in at a lower rate before they rise.
For a more detailed explanation of fixed vs. variable rate loans, check this out.
Adjustable-rate mortgages – Unlike fixed-rate mortgages, adjustable-rate mortgages come with a rate that fluctuates and adjusts every so often. Because of this change in interest rate, mortgage payments can change as well. This is an attractive option because the rate is usually lower than that of fixed-rate mortgages.
However, this rate can and does change, in either direction. Buyers who choose this options are usually those who do not plan to stay put in their homes for very long, which means they can take advantage of a lower rate before the initial introductory period expires and the rate adjusts. However, if rates are expected to increase soon, fixed-rate mortgages may be best.
Bridge loans – People who have bad credit and are not able to get approved for a conventional mortgage may turn to bridge loans, which are designed to provide a short-term solution to consumers by using the equity in their homes to give their credit a boost when conventional lenders reject their home loan applications. Bridge loans provide consumers with the opportunity to access lower interest rates on mortgages in the near future.
Need to know more about short term mortgage financing and bridge loans? Take a look at this.
Home equity line of credit (HELOC) – HELOCs allow borrowers to borrow money against their home and are also known as second mortgages. These loans work by taking out a new loan on a home that is already mortgaged. By borrowing against the equity in a home, borrowers can access money to be used for other purposes.
Having trouble deciding between a HELOC, refinancing, or a second mortgage? Try reading this.
Mortgage Payments Options
A mortgage is a type of installment loan, which means the full loan amount is repaid in regular installments until the entire amount is paid off in full by the due date. The most common mortgage payment schedule includes monthly payments, but there are other payment schedules available, including the following:
- Bi-weekly – Rather than making one monthly payment, you would make two payments per month for a total of 26 payments.
- Accelerate bi-weekly – This schedule helps to pay the mortgage off sooner and involves making one-half of the monthly mortgage payment every two weeks.
- Weekly – As the name suggests, a weekly schedule means you would making payments once per week.
Credit Score Needed to Get Approved For a Mortgage in Saskatchewan
There are specific requirements needed in order to get approved for a mortgage in Saskatchewan and a good credit score is one of them. In Saskatchewan, the minimum credit score needed to secure a mortgage is generally around the 680 mark. Any lower than that can make it very difficult to get approved for a home loan.
This is why all Canadians should be monitoring their credit scores.
Even if you were to get approved, the interest rate you would be offered would likely be much higher compared to that which would be offered to a borrower with a high credit score.
A credit score is a reflection of a borrower’s financial past. Low scores are usually indicative of a history of missing debt payments, which is exactly what lenders don’t want. In the eyes of a lender, the higher the credit score, the better.
Bad Credit Mortgage Alternatives
Bad credit can get in the way of mortgage approval in Saskatchewan. But luckily, there are alternatives that bad credit borrowers can look into in order to make their dreams of homeownership a reality. Here are some options that may be available to you:
Co-signers – If you are not able to get approved for a mortgage because of your bad credit, getting a co-signer with good credit to sign the home loan documents along with you may be just enough for the lender to approve your application. Co-signers essentially back up the loan in case you ever default on your mortgage payments at some point.
You can also try applying for a guarantor loan.
Bad credit lenders – While conventional lenders require borrowers to have a good credit score, there are lenders out there who specialize in lending money to borrowers with bad credit. Rather than focusing on a person’s credit score, lenders place more weight on other factors, including income and down payment amount.
Improving your credit score – If your credit score is lagging, the ideal situation would be to take the time to improve it. After a few months of being diligent with your credit and your finances, you may be in a better position to apply for a mortgage in Saskatchewan and get approved. To improve your credit score, be sure to keep the following in mind:
- Make all payments on time and in full every billing cycle
- Don’t apply for many loans at once
- Don’t close any credit accounts that still have balances on them
- Keep old credit lines open
- Keep your credit card expenditures less than 30% of your credit limit
Being responsible with your credit can help you increase your score within a few months, which can help make it easier for you to get approved for a mortgage in Saskatchewan.
Compare Different Mortgages In Saskatchewan
Just like shopping for other items, it pays to compare different mortgage products from different lenders. This will help you find a mortgage that comes with more ideal terms for your situation. When comparing mortgages, pay attention to the following details:
- Interest rate
- Amortization period
- Pre-payment options
- Early repayment penalties
- Points to pay down to lower the interest rate
Comparing each of these factors between mortgages can help you choose the one that will be most affordable for you.
Here are some other features you’ll want to see in your 2018 mortgage contract.
Mortgage Amortization Period
You will be given a certain amount of time to pay off your mortgage in full. This is known as the amortization period, and it can vary in length from one mortgage to another. That said, the most common length for an amortization period is 25 years.
You can choose to go with shorter or longer amortization periods depending on your needs. There are pros and cons to each choice, so it’s important to understand them before you make your decision.
Click here for an idea of how long you should amortize your own mortgage for.
Shorter amortization periods are beneficial in that they allow you to pay off your mortgage in a shorter amount of time. They also involve paying less in interest over the life of the loan, which can translate into thousands of dollars saved. However, shorter amortization periods require higher monthly mortgage payments compared to longer amortization periods.
Longer amortization periods are attractive to borrowers because they require lower monthly payment amounts, which can make buying a home more affordable for many buyers. However, they take longer to pay off and are more expensive overall because of all the interest that is paid over the life of the loan.
What’s the difference between a mortgage amortization and mortgage term? Find out here.
Mortgage Insurance Rules in Saskatchewan
In order to borrow a certain amount of money to buy a home, you will need to contribute a lump sum of money up front first, which is known as the down payment. The amount you put down depends on the amount you need to borrow and the type of mortgage that you are applying for.
As mentioned earlier, a conventional loan, with a less than a 20% down payment, requires mortgage default insurance, which is typically rolled into the mortgage payments. This insurance policy is paid by the borrower but covers the lender in the event that you default on your mortgage payments at any point over the life of your home loan.
Read this to gather more information about high-ratio mortgages and mortgage default insurance.
How to Save for a Down Payment
Saving up thousands of dollars for a down payment can be tough, especially when you consider how expensive homes are these days. But there are things you can do to save up for a down payment if you take the time to do so. Here are a few tips to save up for a down payment to get approved for a mortgage in Saskatchewan :
- Make saving a priority
- Cut down on your spending
- Take a percentage of your paycheck to be put toward your down payment
- Automate your savings
- Pay down high-interest debt to free up funds to save for a down payment
- Borrow from your RRSP account
- Look into First-Time-Homebuyer Programs
- Borrow from a family member
Need to know how to borrow money for a down payment? Try clicking here.
How do I get a pre-approved mortgage in Saskatchewan?
Where is the best place to get a mortgage in Saskatchewan?
What are prepayment penalties and privileges?
Getting The Mortgage You Want
Getting approved for a mortgage is a big deal and a huge feat. But with the right product, some due diligence on your part, and help from the experts, there’s no reason why you can’t secure a mortgage in Saskatchewan. Get in touch with Loans Canada today to find the right home loan product for you.