How to shop for a mortgage and maximize your savings in an uncertain housing market

Before you begin house hunting, you’ll need to know how much you can afford to borrow. That's where pre-qualification comes in, which helps you determine how much you can borrow based on your income, debts and other financial factors.

Pre-qualification isn’t the same as pre-approval — which is where you can actually lock in an interest rate — but it's still a helpful first step in the home buying process. You’ll want to get pre-qualified so you can have a better picture of what you can afford and don’t waste time falling in love with a property that's way out of your budget. Find out how much you pre-qualify for using a digital calculator Opens in a new window..

Once you’ve pre-qualified for a mortgage, you’ll want to consider the types of mortgages available. Two of the most common options are fixed-rate and variable-rate mortgages.

Fixed-rate mortgages have a set interest rate that stays the same for the duration of the term, which is typically up to 5 years. This is a great option for homeowners who don’t like surprises, since your monthly mortgage payments stay consistent. That said, fixed-rate mortgages sometimes have less flexible prepayment options, and there may be prepayment fees associated with it.

In contrast, variable-rate mortgages have interest rates that fluctuate based on changes in the prime lending rate. For some variable-rate mortgages, this means that your monthly payments may change over time, which can make budget planning more difficult. Variable-rate mortgages also typically offer more flexible prepayment options, and often come with lower interest rates, meaning you could end up paying less interest in the long run.

In a market where interest rates are high, fixed-rate mortgages can be appealing for their stability and protection against rising interest rates, although if rates drop, borrowers may be stuck paying more than those who chose a variable-rate mortgage. On the flip side, in an uncertain market, variable-rate mortgage borrowers may find themselves riding an emotional rollercoaster, holding their breath waiting for the drop as rates continue to climb.

So, how do you know which type of mortgage is right for you? It really depends on your personal financial situation. This is a great time to speak to a dedicated mortgage advisor, who can walk you through each type of mortgage and give tailored advice based on your unique situation.

House hunting can be stressful even at the best of times. Today's buyers face unique obstacles that can make the experience seem even more daunting. With careful planning and the right advice, you can take the first step towards building the future you’ve envisioned.

Whether you’re a first-time homebuyer or looking to make a move to a new property or new city, having a knowledgeable mortgage advisor in your corner is key. Connect with an advisor to address any questions or concerns you may have about the current market, and how you can prepare for uncertainty without sacrificing your home ownership goals.

Article originally posted on Yahoo Canada April 25, 2023.