If you’re contemplating selling your house and buying another one and you don’t think that getting approved for a mortgage will be an issue, think again. In the 15 years that we’ve brokered mortgage, we’re finding more and more people declined by their own bank for their next mortgage.
Why? Tighter mortgage regulations are making it difficult for people to qualify. But mortgage brokers are providing good alternatives as trusted advisors.
Most people think that a mortgage pre-approval is only for first time buyers, but that’s not the case. At The Mortgage Centre, we’ve trained our customers to call us first if they plan to move. Regardless if they decide to port their existing mortgage or discharge their old mortgage for a new loan. If you’re selling you can work out the details of the new mortgage, even before you put your house on the market with a mortgage broker.
Why get pre-approved for a mortgage even if you’re selling your house and currently have a mortgage? Here are three important things to consider:
- Credit and income changes may make it difficult for you to qualify for a new mortgage, under the tighter mortgage regulations even if you’re downsizing.
In these economic times, people move jobs regularly and contract or commissioned-based employment tends to be more common. Brokers have good options to help borrowers with income variability – even if they are self-employed.
Also, with changes family dynamics such as separations or divorces, we often find that credit repayment issues can occur. If a borrower has had lapses (even small ones) in paying credit cards, lines of credit or even mortgages this will affect their ability to qualify for a new mortgage at their bank.
- People underestimate their costs of selling.
We regularly help sellers estimate and confirm their costs, so they understand exactly how much equity they have when they sell. We find most people underestimate their costs such as the closing costs and bridge financing costs, in addition to the real estate commissions and applicable taxes. Brokers can walk you through different scenarios because they have access to multiple lenders that a bank would not have. This can help you determine the best possible financial outcome that will save you money.
- You could qualify for a better rate with another lender.
With your bank, you only have one mortgage option, but through mortgage brokers (at often no cost to you) brokers can give multiple mortgage options. We find that 50% of the time it makes sense to port your existing mortgage to your new house; while in the other 50% it makes sense to pay the penalty to discharge your old mortgage and get a completely new one at a better rate or with different re-payment terms.
Working through your financial scenarios before you put your house on the market or even decide to move, will ensure you end up with more money in your pocket. Be pro-active!