With the real estate market so hot across the Greater
Toronto Area (GTA), you may be looking at the interest rates being offered for
mortgages and wondering if there’s anything you need to do before applying for
one. There are a couple of steps you can take to better prepare for your
mortgage application. If you already have a mortgage and need money, you may
qualify for a second mortgage or gain by refinancing your current mortgage.
Home Buyers’ Plan
For those looking for a first mortgage, there is help to
make owning a home an attainable goal.
If you’re struggling to put together a down payment, the
Buyers' Plan (HBP) for first-time buyers may help you find the cash you
need for the GTA home of your dreams. The HBP lets you withdraw money from your
RRSP—tax free—to use towards your down payment.
You and your spouse or partner can take out up to $25,000
each toward a down payment, for a total of $50,000. You’ll be able to repay the
money over 15 years, starting at the beginning of the second year after you
withdrew the money. Each year a set amount will be required. If you fail to
repay the money, the unpaid amount due for that year will be considered taxable
income for that year and you will owe taxes on the money.
Getting Pre-Approved for Mortgages in the GTA
Pre-approval is the next step if you’re looking for a
mortgage in the GTA. Pre-approval means that a lender has agreed to provide you
with a mortgage up to a certain amount at a certain interest rate. Normally the
lender locks into this pre-approval for a set amount of time, giving you two or
three months to find a house. If interest rates rise, you’ll be guaranteed the
rate you were pre-approved for. If they go down, your lender should give you
the lower rate.
Mortgage and Refinancing
If you already own a home and have been making your mortgage
payments for years, you may be able to take advantage of the equity you’ve
built in your home. Equity is a term for the difference between the amount you
still owe on your mortgage and the current market value of your home. Given the
skyrocketing value of GTA homes, you may much more equity than you suspect.
You can take out a second or third mortgage, based on the
amount of equity available in your house. Extra mortgages can help you pay for
home renovations that can increase the value of your home even further. You can
also use the money to consolidate debt—offering you a much lower interest rate
than credit cards and store cards. Whether it’s your child’s education or tax
arrears, a second or third mortgage can help you borrow money a rate lower than
If interest rates have fallen since you’ve taken out your
mortgage, it may be worthwhile to refinance your
. This involves taking out a new mortgage that pays off your
existing mortgage. There are many reasons for refinancing. You may want a lower
interest rate, a longer or shorter amortization period, or lower monthly
By doing your research on mortgages before house hunting
even begins, you’ll be prepared when the house of your dreams turns up in the