Mortgage FAQs (Frequently Asked Questions) and Advice

What is a Mortgage Broker?
Answer

A Mortgage Broker is a licensed professional who is trained to provide you with expert advice on mortgages. They search for the best mortgage products and interest rates by utilizing their network of lenders and financial institutions.

Why deal with a Mortgage Broker?
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Mortgage Brokers work for you. A financial institution does not employ us and Brokers are not limited or restricted in the type of mortgage products that they can offer you unlike banks.

When should I obtain a pre-approval?
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If you plan on finding a mortgage to buy a house in the near future, it’s a wise idea to know that you actually qualify and what you can afford. The pre-approval is based on the information you provide to us in your application and is subject to verification of conditions such as employment and down payment verification. Most real estate professionals will want to ensure you have a pre-approved mortgage in place before they take you out looking for a home. This is to ensure that they are showing you property within your affordable price range.

What minimum down payment do I need?
Answer

You can provide as little as 5% of the total price of the home if you have good credit. Even if you have poor credit, we have a network of lenders that are willing to work with poor credit buyers, providing you have a 15-35% down payment.

Can I use gifted money for a down payment?
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Yes. Most lenders will accept down payment funds that are a gift from an immediate family member.  A gift letter is signed by both parties to confirm that the funds are a true gift and not a loan.

Can I purchase a home and also include renovation costs into the mortgage?
Answer

Yes. For high-ratio financing, insured mortgages are available to cover the purchase price of a home as well as an amount/percentage of the purchase price to pay for immediate major renovations or improvements.

Why is a mortgage insurance premium necessary?
Answer

If your down payment is less than 20% of the property value, you’re required to pay an insurance premium. This is also considered a higher risk mortgage which in turn is insured by a mortgage insurer. A conventional mortgage is usually one where the down payment is equal to 20% or more of the purchase price or also referred to a loan to value of or less than 80%, and does not normally require mortgage loan insurance.

What is mortgage life insurance?
Answer

This is insurance coverage that you could purchase in the event of death or disability of the homeowner. In all cases we as brokers and agents are mandated to discuss and provide you with options to purchase. You can also go to a Financial Advisor to discuss further and get quotes.

What are Fixed and Variable rates?
Answer

In a Fixed Rate Mortgage, the interest rate is fixed for a specific amount of time. This period of time (the mortgage term) can range anywhere from 6 months to 10 years.

Variable Rate mortgage products are based on the prime lending rate. A variable rate will be quoted as Prime plus/minus a specified amount by your lender. Though the prime lending rate may fluctuate, the relationship to prime will stay constant over your term. For example if the prime rate as set by the BoC (Bank of Canada) is 3.0% today and a lender is offering Prime -.50% – your rate at signing will be 3.0% – .50% = 2.5%. As the Prime rate might fluctuate so will your interest payment of your mortgage.

Over the course of your mortgage, more of the payment will go towards the principal and less towards the interest.

How long does the mortgage process normally take?
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Once all requested information (i.e. income verification, down payment verification and property details) is provided, the transaction may be completed in as little as 2-4 weeks.

What costs are involved with obtaining a mortgage?
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Usually we determine your closing costs to be 1.5% of the purchase price. This includes legal fees, Land Transfer Tax, Title insurance, the PST payable on the mortgage insurance, etc.. Even if you are a first-time home buyer and you are eligible to the Land Transfer Tax rebate, most lenders require confirmation that you have the 1.5% in your bank account.

Am I eligible for the Land Transfer Tax Rebate?
Answer

This is a tax payable to the provincial government by the purchaser of a home upon the transfer of title. This is without a doubt the biggest fee that will be attached to your closing costs. It is calculated by taking your purchase price and multiplying it by defined percentages. First-time home buyers are eligible for the rebate – see this link here. http://www.fin.gov.on.ca/en/tax/ltt/faq_newhome.html#q7

Should I consider a mortgage to help with debt?
Answer

Yes. Many of our clients obtain a mortgage to consolidate high interest credit card debt, renovate their homes, invest, help to put a child through college or university. There are many reasons to refinance.

Why is an appraisal necessary?
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Every conventional mortgage that includes a minimum 20% down payment requires an appraisal because the mortgage is uninsured. The lender wants to see that your purchase price is in line with the property’s fair market value.

Can I transfer my mortgage if I buy another home?
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Yes. Most lenders are now offering options that allow you to take your mortgage with you.

What’s the difference between a Cosigner and a Guarantor?
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A guarantor is someone who guarantees that payments will be made on a mortgage. They can apply to be removed from the title at a later point if the owners become able to qualify on their own. A Cosigner is registered on the title on the property, making them a co-owner of the property.

What are the costs involved in dealing with a Mortgage Broker?
Answer

With a traditional mortgage, the lender pays us a finder fee for providing your business to them. However, for private mortgages or with some lenders, a fee might be warranted, it is negotiated up front and documented.