…even with poor credit!
The spring house buying season is upon us and. this year, there are a range of low interest rates being offered. What does this mean right now for potential home owners in Canada? For individuals with bad credit, there may be even more implications that may very well decide the fate of whether or not they can secure a mortgage, not to mention – will they be able to realistically afford to purchase a home at all?
As reported by various financial institutions and experts in the country, the current interest rates are at all time record lows. For example, a credit union in the Toronto area is currently offering a mortgage with a fixed rate of 1.49% over a 18 month period. Ultimately, this is certainly a much lower rate, as compared to a typical interest level of 2.49%, with a 5 year mortgage. As a result home owners will be able to save money with this lower rate, however it is important to also note that there will be certain conditions that also apply and should be taken into account when weighing the pros and cons of these deals.
Of course this rate of 1.49% is offered through this particular Toronto credit union and only available to those in the Ontario region who are also members of this credit union. Secondly, in order to join the credit union, there will be a fee and to top that off, as previously mentioned, this lowest offered rate is only available for the first 18 months and then after that the rates will go up.
Again, with that being said, the silver lining could be that the rates are lower at this time throughout Canada – and may go down again even further in the near future. Alternatively, if Canada-wide rates are going to increase in 2016, then by taking on a mortgage with an interest rate set for an uphill climb – could prove challenging for your current home ownership plans.
Since the 1.49% rate is only applied for the first 18 months of the mortgage term – then applicants will need to prove they can afford the higher rates as well once they begin to rise. Therefore in order to qualify, borrowers will need to have the means to keep up with their payments. This perhaps will be an extra hoop that individuals with poor credit will have to jump through – and depending on your own financial situation this may or may not work for you. It is important to think about the long-term as well as taking advantage of the initial appeal of a mortgage offer like this and just know that even though its offers a significantly lower rate – there is likely some type of a catch.
All in all, individuals – especially those with poor credit will need to understand that the low interest rate alone is not the only mortgage feature that should be examined. With that being said, the realty of it is that many Canadians will be looking to take advantage of the low interest rates, as a method of entering into the property ladder for the first time – or if they are already existing home owners, they will be moving higher up that ladder.
For this very reason, if you are moving forward with your own plans of homeownership, then there are some tips that can help you take advantage of the record-low interest rates. Read on for more ideas that may benefit you in this endeavour.
Tip #1: Gathering Resources for a Down Payment
Knowing that you may be in for a lower interest rate, that potentially could increase in the near the future – is an even better reason for looking to gather enough funds for a decent mortgage down payment. The typical mortgage down payment that is required by most financial institutions is 20% of the total cost of the home and this can seem daunting, especially if your home is up there in value.
If you are not able to secure a down payment of 20%, then you may choose to wait and save more money or you may instead look to borrow more and buy your home now. Either way, knowing what is best for you at this point in time is a very personal decision. That being said, if you borrow more now, you will be paying more in interest charges over time – despite the lower interest rates.
In the case of the current low interest rates – this may obviously work out better for you than it would when rates were much higher. On the other hand, if you decide to save and hold off on purchasing a home now – by the time you are ready the interest rates may have gone up. This situation may prove to be a tricky one to navigate and decipher on your own – and this leads us into the next point.
Tip #2: Consulting a Mortgage Broker
There are a variety of mortgage brokers in Canada that can help borrowers with their home-buying needs. In particular, there are many brokers who specialize in working with borrowers with a range of credit histories. If you have poor credit, you can take advantage of their expertise and connection of lenders who offer bad credit loans. One of the main benefits of working with a broker is that they can seek out the best rates and the most favourable and flexible terms that will align with both your short-term and long-term financial needs and goals.
Tip #3: Identifying your Boundaries
Lastly, if you are set on stepping onto the property ladder now, knowing where your finances stand and how much you can realistically afford – aka identifying your financial boundaries is important. This may mean being reasonable about the price range of your ideal home. You will want to be sure to find a home that is within your means, even if you have your sights set on something larger and/or costlier. Using this approach can help you take your first steps onto the property ladder and you can then ease into it without upsetting your finances with more borrowing than what is manageable. In turn, this can help you as you look to build equity and a potential investment for your future.
In the end, if you are savvy about the pros and cons of certain low interest loan features, you can take advantage of the positive aspects of these all time low rates. As long as you know what type of situation you are entering into, if you are opting for a low interest rate deal – make sure you understand that sometimes the rate will rise down the line. Being prepared for this outcome will help you to stay focused on managing your home loan with a higher level of success and all of the benefits that the current low interest rates have to offer.