Frequently Asked Questions
Benefits of Using a Mortgage Professional
While a bank only offers the products from their particular institution, licensed mortgage professionals send millions of dollars in mortgage business each year to Canada’s largest banks, credit unions, trust companies, and financial institutions; offering their clients more choice, and access to hundreds of mortgage products!
As a result, clients benefit from the trust, confidence, and security of knowing they are getting the best mortgage for their needs.
Whether you’re purchasing a home for the first time, taking out equity from your home for investment or pleasure, or your current mortgage is simply up for renewal, it’s important that you are making an educated buying decision with professional unbiased advice.
How much does it cost to use a Mortgage Professional?
From the first consultation to the signing of your mortgage, our services are free.
A fee is charged only for the most challenging credit solutions, and it’s especially under those circumstances that a mortgage professional can do for you what your bank cannot.
Should I chose a fixed or variable interest rate?
Fixed rate mortgages often appeal to clients who want stability in their payments, manage a tight monthly budget, or are generally more conservative. For example, young couples with large mortgages relative to their income might be better off opting for the peace of mind that a fixed-rate brings.
A variable rate mortgage often allows the borrower to take advantage of lower rates – the interest rate is calculated on an ongoing basis at a lenders’ prime rate minus or plus a set percentage. For example, if the current prime mortgage rate is 5.5 percent, the holder of a prime minus 0.5 percent mortgage would pay a 5.00 percent variable interest rate.
As a consumer, the best option is to have a candid discussion with your mortgage professional to ensure you have a full understanding of the risks and rewards of each type of mortgage.
What is the Stress Test?
The government of Canada introduced the stress test a couple of years ago to ensure Canadians were able to absorb any increase in mortgage rates when they came up for renewal, should rates have increased. You have to qualify on the higher of the two:
a) the rate on your contract plus a 2% cushion or;
b) the Bank of Canada 5-year rate at the time of application referred to as the Benchmark rate.
What are closing costs?
Closing costs include the lawyer’s fees, land transfer taxes, appraisal fees, disbursements, title insurance, and adjustments of previously paid bills such as water, hydro, or property taxes.
A minimum of 1.5% of the purchase price – over and above your down payment must be readily available, and some lenders may require proof of these available funds upon approval. Keep in mind the GTA and GVA are double the land transfer taxes, so 1.5% may not be enough, always confirm the amount required with your solicitor.
What if I don’t have great credit or a high beacon score?
We have lenders for all types of deals, you may have to pay a bit of a higher rate, but I’m sure we can find you a home. We won’t know until I put your application together and pull your credit bureau.
How much money do I have to put down?
The minimum down payment when purchasing a property is 5%; however, the property must be owner-occupied, and you will be required to pay mortgage insurance. If you don’t want to pay mortgage insurance, then you need to put 20% down. Some lenders require a larger down payment for business for self applicants or rental properties.
How much money can I take out of my property?
You cannot exceed 80% of the value of your home and remember, if you originally qualified for your mortgage under the old rules, you would now be subject to the stress test when applying for a refinance.
If you have accumulated debt, a refinance will help to get rid of high-interest payments and, in most cases, increase cash flow. With low rates, a refinance can be used for other investments, which would provide a higher return than the interest you are paying on your mortgage.
What is Bridge Financing? Do I need that?
Bridge Financing is when the property you bought is closing before the property you sold, and you need to pay for the new property in full on closing. Not all lenders offer bridge financing, so if you require a bridge, we will ensure you go with a lender that offers that. Bridge financing fees are anywhere from $250 – $500, and most lenders charge prime plus 2%. Lenders will also look to register a lien on both the purchased property and the property you are selling.
Should I take a 25-year amortization or shorter to pay down my mortgage faster?
In most cases you should always take a 25-year amortization even if you want to pay down your mortgage. You will have access to prepayment options, and you can take advantage of these to pay your mortgage down quicker. However, if there is ever a change to your financial situation, you can always go back to your regular payments. If you have a shorter amortization registered at funding, you remove your “safety net.” If you have a problem in the future, you cannot increase your amortization back, reducing your payments.
I am business for self, and I don’t show a lot of income on my taxes, but I make a lot of money, will I still qualify for a mortgage?
We have access to various stated income products; every lender uses different qualifying matrix’s outside of supplying your NOA. Alternative lenders offer a lower barrier of income confirmation; however, you will still need to provide some proof of cash flow by way of six months of bank accounts statements and financial statements.
I have claimed bankruptcy in the past, will that affect me now?
Depending on how long you were discharged from the bankruptcy and if a property was included in the previous bankruptcy will determine if you can qualify with an A-Lender or if you’ll need to go with an Alternative lender.