If you are planning to search for a home in coming months, financial experts recommend approaching your bank or a mortgage broker to be pre-approved for a mortgage.

Getting a pre-approval, with a letter from a lender telling you how much you can spend and setting out the rate you will be offered, is always a good idea. It shows a seller that you are serious and qualified to buy.

But a pre-approval can also help protect you from interest rate increases as you search for a home. Many lenders will guarantee their offer for up to 120 days. So it’s best to get pre-approved when you have your finances in order and are ready to actually start looking and make an offer.

On March 2, in an effort to curb inflation, the Bank of Canada announced it was increasing its key rate from 0.25% to 0.5%. It was the first increase since 2018.  More increases are expected over the coming year.

In response, Canada’s major banks announced they were raising their prime interest rate from 2.45% to 2.70%.

When the Bank of Canada increases its benchmark rate, the cost of borrowing increases for loans that are linked to that rate.

Variable-rate mortgages, for example, are impacted.

The interest rates on fixed-rate mortgages, which are affected by Canadian bond yields, had already started to increase over the past year.

Getting a mortgage pre-approval can protect you from coming increases, as long as you find a property in the time frame you are given.

With a pre-approval, the lender looks at your financial situation and will tell you in writing how much you are approved to borrow.

If you choose a fixed-rate mortgage, it will include the interest rate and terms you will be offered. You will be guaranteed that interest rate even if rates increase while you are searching, as long as you purchase a property within the specified period. If rates go down, you can still get a lower rate.

If you choose a variable-rate mortgage, the lender will specify the discount you will receive on the lender’s prime rate. With a variable rate mortgage, the prime rate might change while you are searching, but you will still receive the discount you were promised.

You can then shop for a home with confidence, as long as your financial circumstances don’t change while you are searching. You should not, for example, quit your job or get a loan for a large purchase such as an automobile after you have been pre-approved for a mortgage. Your changed financial picture could affect how much the bank will lend you when you officially want to make an offer.

If you’re planning to purchase soon, feel free to get in touch. With more than 30 years of experience assisting clients in Ottawa in a wide range of market conditions, I can fill you in on the current market and we can plan a strategy for finding you a property that suits your needs and budget.

If you have not pre-qualified, I can refer you to mortgage brokers who can find the best rate and mortgage for your financial circumstances. With more than three decades of experience, I have a list of real estate professionals who have assisted my clients over the years.

You can read more about me on my site, www.nancybenson.com.

Feel free to give me a call, at 613-747-4747.