Month: July 2017

Are you planning to buy or invest in a property? As you go viewing and asking around for the price range of different property that appeals to you, it’s ideal to have a Pre-Approved Mortgage.

What is Pre-Approval?

It is where the lender goes through your finances and uses that information to determine the maximum amount that they can lend you and the interest rate to charge you. The Pre-Approval process can be daunting to many, but with the right documents, you are set to get started.

The process includes:

• Pre-qualification

  This stage is simply for gathering information on the state of your finances. You will need to look for a reliable and trusted mortgage specialist and discuss your finances. He or she will help you understand the options that are available to you.

• Pre-Approval

  At this point, you will need to present your potential lender with the relevant documents, e.g.

  • Identification, proof of employment,
  • If you are self-employed, you will need to provide the lender with Notices of Assessment,
  • Confirmation of the down payment,
  • Information on your assets and investments,
  • Show that you are employed,
  • Liabilities

  The fate of your case is in the hands of the potential lender. They will use the information you have provided to determine the maximum amount they can give and at what interest rate. If you are successful, you will receive a letter of pre-approval.

  However, you should keep in mind that this is a promise and not a guarantee.

• Approval

  If your application goes through, the lender will give you an approved mortgage amount that depends on the amount of down payment and the value of your home. Once you have the pre-approved mortgage, you can comfortably shop around for property that is in a lower price range.

  Benefits of Pre-Approval

  Having a pre-Approval is beneficial to you as a borrower, in that:

  • You will be able to estimate your mortgage payments
  • It gives you an idea of the amount of mortgage you qualify for
  • Depending on the lender, you could lock in an interest rate for 60 to 120 days
  • You will have realistic expectation of the price range of the property that you can afford to pay for
  • You will be more confident when you finally find the home of your desire

  As you wait for your application to be processed, refrain from acquiring new debt. It will change your financial position and status. Also, if you lose your job within this period, then, you will have to start the pre-approval process all over again.

We all seek to repay our debts in a short time, and when an opportunity presents itself in which you can clear our debts, we don’t think twice about, especially when we are in a position to. The same applies to homeowners.

Prepayment privilege is a situation where one can put more money towards repayment of the mortgage. However, if you go ahead and put more money than the maximum amount allowed, toward your mortgage, you may be liable to a prepayment penalty.

Go through your contract with the lender and discuss your options and terms of the contract, before you deposit any amount towards your mortgage. Depending on your lease agreement with your bank, you may be able to either:

• Make a lump sum payment

  If you choose this option, you will be able to pay a lump sum amount to reduce the outstanding balance of your mortgage. This amount is in addition to the regular payments that you make, according to the terms of your contract.

  The amount that you can pay is limited as indicated in the contract. You need to discuss your prepayment options with the lender. This lump sum payment can be paid:

  • At the end of the term of your mortgage contract
  • At specified times during the duration of the contract
  • Or before the length of the contract elapses

• Increase the amount of money that you pay regularly

  Another viable alternative is to raise the sum of money that you pay regularly. An increase even of a small amount can have a significant effect on reducing the time you need to repay the mortgage. The principles of prepayment apply here, too.

  You can only pay a limited amount as per the terms of your mortgage contract. If you increase the amount you pay, then, you will have to pay that amount, until the duration of the contract expires.

  There are other viable options borrowers could use to pay their mortgages faster. Such methods include sticking to the current monthly payments if you have the chance to renegotiate lower interest rates as you renew your contract. The other option is to choose an accelerated payment option.

  In this option, you can make weekly or biweekly payments in addition to the monthly payment that you make toward your mortgage.