Understanding the Cost of Mortgages & Understanding Your Credit Score
Understanding Mortgage Costs & Your Credit Score
When purchasing or refinancing a home, there are multiple costs to take into account. Your loan amount, interest rate, monthly payment amount plus various fees must all be taken into account when making this decision. Getting the best deal possible on all these items helps ensure you don’t overspend during the purchase of your new property.
A great credit score can save you thousands of dollars over the course of a loan by decreasing the amount of interest charged. It also improves your likelihood of approval for mortgages, credit cards and insurances.
Your credit score is a three-digit number lenders use to assess your ability to repay loans. It’s determined by several factors, including how much debt you owe and how long you’ve had credit.
Maintaining a good credit score requires paying your bills on time and not accruing too many debts. A high score will enable you to receive the most competitive interest rates on mortgages and auto loans.
It’s essential to remember that your credit score can improve rapidly when you take steps towards improving it, so be sure to check in regularly and monitor your report. Doing so is free, and can help determine if any adjustments need to be made in order to obtain the best mortgage or other financial products.
Credit scores are used by employers, landlords and insurance companies to assess your creditworthiness. Therefore, it’s essential that you keep your score up-to-date and make any corrections or deletions promptly.
If your credit is poor, lenders may require more money in order to approve a mortgage. A low credit score can restrict your options and raise both the interest rate you’ll pay on the loan as well as your monthly payments.
Depending on your individual situation, you can reduce your mortgage rate by making an upfront payment. This practice, known as “discount points”, can prove very cost-effective in the long run.
You may qualify for a better mortgage rate with a large down payment and/or good credit history. Nonetheless, it’s wise to shop around and negotiate your rates to ensure you’re getting the best deal available.
Mortgage rates are determined by lenders, who must cover their expenses and earn a profit on each loan. Your rate is determined by a combination of factors including your credit score, current market rates and the lender’s funding cost.
Lenders make money by charging you more for a mortgage than they paid to borrow your money – this is known as the “mortgage rate” or “financing rate”.
Canada has responded by increasing the Bank of Canada’s policy interest rate, but this pandemic has still put undue strain on some lenders who are still charging higher rates than they should.