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Getting ready to apply for a mortgage

Has the time come for you to meet a financial advisor or mortgage broker to apply for a mortgage? If so, you’ll need to provide certain information so they can assess your credit file and learn more about your financial situation.

First, you’ll have to tell your advisor/broker what your annual income is. To speed up the process, take your tax returns for the last two years, as well as a letter from your employer confirming your annual income and your years of service at the company.

Your assets and liabilities

The advisor will then have to look at everything you own (assets): bank accounts (with their balances), various investments (term deposits, government bonds, shares, mutual investment funds and RRSPs, for instance), car(s) and immovables. We strongly recommend updating your bank accounts, bringing the last few investment statements and writing everything down on paper to make sure you don’t forget anything.

You’ll also need to mention your debts (liabilities). This includes credit card balances, personal loans, lines of credit and student loans. Once again, remember to write it all down.

Your debt ratio

Once you’ve put all these documents together, your advisor/broker will assess your net worth. To do so, he or she will calculate the difference between your assets and liabilities, and then determine your debt ratio.

Your borrowing capacity

Your advisor or broker will use these results, as well as the quality of your credit file and your annual income to work out the maximum amount he or she is willing to lend you. If you intend to buy a property by borrowing more than this amount, your mortgage application will be refused and you’ll have to start the process again.

You can also find out your mortgage borrowing capacity and calculate monthly mortgage repayments under different scenarios by consulting the websites of financial institutions.

Remember that when you visit a financial institution, you can reserve your mortgage rate. It’s completely free and protects you against a hike in interest rates. If rates drop, yours will too. You can usually reserve your rate for 90 days, and sometimes until your visit to the notary.