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.

 

 

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 government’s Home 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.

 

 

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.

 

 

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 most loans.

 

If interest rates have fallen since you’ve taken out your mortgage, it may be worthwhile to refinance your mortgage. 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 payments.

 

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 GTA.