Home Purchase Support Team

What is a mortgage broker?

When you are looking to purchase a home, you have the option of going straight to a Lender or using a Mortgage Broker to act on your behalf. A Mortgage Broker is someone who acts as an intermediary between you, the borrower, and a Lender. There are several advantages to using a Broker, some of which include:

  • The cost – In the vast majority of cases, Brokers are paid by way of a ‘finder’s fee’ from the Lender, and not by you.
  • Brokers offer you independent, objective mortgage advice. We are here to act in your best interest, not in the best interest of a Lender.
  • We do the research for you. Buying a home can sometimes be an overwhelming and complicated process. We use our expertise find out which Lender and mortgage product best suits your financial situation.
  • We have negotiating power with Lenders, because they compete to gain our business. We also have access to rate specials that may not necessarily be available to the public.

First Time Home Buyer

How do I qualify for a mortgage?

While the mortgage qualification process is unique to every financial situation, there are common factors that all Lenders look at when determining your eligibility for a mortgage:

Credit

Your current credit score and a detailed examination of your credit history are key components that are reviewed during the mortgage approval process. Typically, Lenders prefer to see credit scores of 640 or higher. However, in some cases, a client may have an excellent credit score but their credit history shows flaws and raises too many risks for the Lender. Conversely, individuals with a lower credit score may still be approved for a mortgage through an alternative Lender. If you are worried about your credit, contact our office today to discuss how you can qualify for a mortgage and whether alternative lending is an option for you.

Debts and Income

There are two ratios that Lenders use to determine if a client is pre-approved; and if so, for how much. The allowable ratios that Lenders are looking for are dependent upon factors such as your credit score, and are subject to change at the discretion of the Lender. 

Ratio 1: Gross Debt Service
This ratio determines how much of your Gross Annual Income can be used to cover payments associated with housing. These payments include mortgage principal & interest, property taxes, heating, condominium fees and occasionally, secondary financing. 

Ratio 2: Total Debt Service
This ratio determines the percentage of Gross Annual Income required to cover payments associated with housing as well as any other outstanding debts. These items can include car loans, credit cards and unsecured lines of credit. Most Lenders use a figure no higher than 40 percent of your annual income to factor into their decision.

For help calculating your ratios to determine your eligibility for mortgage financing, contact us today!

How much do I qualify for?

To calculate how much you could potentially qualify for, check out our mortgage affordability calculator.

Please be advised that all mortgage applications depend solely on the applicant’s information upon the Lenders review. Each Lender has guidelines and requirements that are specific to them. Before you start house hunting, we recommend obtaining a mortgage pre-approval.

If you would like to discuss the pre-approval process in further detail, feel free to contact one of our certified Mortgage Brokers today!

What is a pre-approval?

We are committed to providing in depth pre-approvals. By meeting with you on a one-to-one basis, we are able to examine your individual financial position and goals and review all of the preliminary mortgage options and details. We collect documentation up front, and we have the ability to pull your credit information and review it directly with you at our initial meeting.

Because we take the time to do our homework up front, we are able to get your mortgage approved and completed faster and easier once you find that perfect home.

Through our comprehensive process, you will find out exactly how much a Lender is willing to lend to you. With this information, your Broker can help you look at different payment schedules and scenarios to determine how much your payments will be and how long it will take to pay off your mortgage.

Your Realtor will also be better equipped to locate homes in your price range when they know the amount you have been pre-approved for. And of course, you can feel comfortable knowing that an excellent interest rate will be locked in place for up to 120 days.

How much can I afford to pay for a home?

Your ability to afford a home is dependent upon the following two ratios:

Ratio 1: Gross Debt Service 
This ratio determines how much of your Gross Annual Income can be used to cover payments associated with housing. These payments include mortgage principal & interest, property taxes, heating, condominium fees and occasionally, secondary financing. 

Ratio 2: Total Debt Service 
This ratio determines the percentage of Gross Annual Income required to cover payments associated with housing as well as any other outstanding debts. These items can include car loans, credit cards and unsecured lines of credit. Most Lenders use a figure no higher than 40 percent of your annual income to factor into their decision.

For help calculating your ratios to determine your eligibility for mortgage financing, contact us today!

Visit our mortgage affordability calculator for a general idea of what you may qualify for.

What are the costs associated with buying a home?

Aside from your down payment and mortgage payments (whether those are weekly, bi-weekly or monthly), there are additional costs associated with purchasing a home that can be easy to overlook. 

  1. Closing Costs - These costs are estimated to be between 1.5 percent and 3 percent of your total purchase price, and include costs such as legal fees, appraisals, home inspections and insurance. More details of the types of closing costs you can expect to pay can be found here.
  2. Moving Costs - These are the costs associated with moving into your new home, and include items such as professional movers (if applicable), new appliances and furniture for your new home.

Our clients are given access to special resources to help them ensure they are fully prepared for the total cost of moving - not just the cost of their down payment and subsequent mortgage payments. Contact our office today to discuss budgeting ahead for your future home.

What are the monthly costs of owning a home?

Monthly expenses associated with owning a home include the following:

  • Mortgage Payments
  • Water & Sewer
  • Property Tax
  • Natural Gas
  • Home Insurance
  • Internet/Cable & Telephone (if applicable)
  • Maintenance/Condo fees (If applicable)
  • Groceries
  • Power/Electricity
 

For a detailed budgeting worksheet, clients can access our first time home buyers guide. If you would like to discuss becoming a client, contact our office today to get started.

How much do I need for a down payment?

The amount you put down on the initial purchase of your home can affect both your short-term monthly budgeting and long-term financial planning. Planning ahead and deciding which down payment option is for you is a key factor to a successful mortgage plan.

In most cases, the minimum required down payment is 5 percent of the property price. On homes over $500,000, additional down payment is required. You should also be prepared to factor in any mortgage default insurance premiums if you are making a down payment of less than 20 percent. 

One of our certified Mortgage Brokers can help you evaluate your down payment options and set a plan to reach your future mortgage goals. Contact us today to get started!

Mortgage Process

What is the home buying process?

The home buying process and obtaining mortgage financing involves several steps. It is important to stay organized throughout your mortgage transaction so as not to miss any deadlines set forth by your Lender. Your Broker can help keep you updated and informed throughout the process.

  1. Pre-Approval - Getting pre-approved for your mortgage is always a great idea. Not only does it secure an interest rate for up to 120 days, it also gives you the peace of mind that comes with knowing what you can afford and allows you to shop within your price range.
  2. House hunting - When you meet with your REALTOR ® for the first time, it is a good idea to let them know your price range and provide them with a list of must haves for your future home. 
  3. Offer in and accepted - Once you have found your dream home, you will make an offer. This offer will be considered "subject to financing," which means that the offer depends on whether or not you are able to obtain mortgage financing from a Lender. There may also be other conditions involved. Once your offer is accepted, you will need to provide a copy of the purchase agreement to your Mortgage Broker. Your Broker will also request additional documentation at this time to proceed with the mortgage approval.
  4. Lender, Insurer and appraisal - Your Mortgage Broker will work with your Lender, Insurer and Appraiser (if necessary) to get you the final approval on your mortgage financing. 
  5. Firm sale - Once you have met all of your financing conditions, your Broker will instruct you to remove the "subject to financing" condition from your purchase contact. This is done with your REALTOR®. You may also remove any other conditions that have been met at this time (such as a satisfactory home inspection and/or appraisal). Once all of the conditions are satisfied, you have a firm sale. Your Lender will then send your mortgage instructions to your lawyer for preparation of your mortgage documents.
  6. Moving details - While your lawyer is preparing your mortgage documents, you can use this time to get ready for your move. We have a handy moving checklist and budgeting worksheet available to our clients through our client resources page.
  7. Lawyers - Your lawyer’s office will call you to make an appointment for you to sign your prepared mortgage documents. The appointment is usually scheduled within a week of the completion date (which is the day the money is given to the sellers and the property title is transferred to your name).
  8. Move in - Your possession date usually falls on the day after the completion date. You will receive the keys and are now free to move into your new home!
  9. First Mortgage Payment - Unlike other monthly expenses, your mortgage payments are made at the end of each period as opposed to the beginning. For example: if the purchase of your home was completed on June 1, and you chose monthly payments, your first mortgage payment would not come out of your account until the end of June. If you chose weekly payments, they would come out of your account at the end of every week. The details of your mortgage repayment are chosen when you sign your mortgage approval, and can be adjusted by contacting your Lender.

 For more information about what you can expect as a home buyer, contact our office today.

What documents do I need?

The documents you will need to provide depend on a number of factors, including

  • Whether you are an employee or if you are self-employed
  • Whether you are paid by way of a salary or if your position is commission-based
  • If you are currently receiving a pension
  • If you are new to Canada; and
  • How long you have been employed with your current organization

In general, you will be required to supply proof of your income, verification of the funds for your down payment, and additional documentation as required by the Lender.

Visit our section on  required documentation for more details about what you will need to provide according to your employment status. Contact our office today to discuss your particular employment situation and how it affects your mortgage financing process.

Down Payment

What can I use as a down payment?

Down payments can come from a variety of sources, including:

  • Savings
  • Investments
  • As a gift from a family member

It is important to note that if you are paying less than 20 percent down on your mortgage, that means your mortgage is considered ’high ratio’ and will need default mortgage insurance. The three main mortgage insurance providers generally do not allow a down payment to be borrowed. 

If you are a first time home buyer, you can also withdraw up to $25,000 per person from your RRSPs for a down payment. Keep in mind that these funds have to be vested in your RRSP account for 90 days or more. Using RRSP contributions without being taxed is something only a first time home buyer can do!

We can help you take a look at your finances to ensure you have explored all of your down payment options. Contact our office today, and one of our certified Mortgage Brokers will be happy to help with a free mortgage consultation!

What is the minimum down payment?

Down payment is a very important factor in the mortgage qualification process for both you and your Lender. If you can pay 20 percent or more down on your mortgage, you will not be required to pay any mortgage default insurance premiums. In terms of financial planning, a higher down payment also means you will be paying significantly less interest over the course of your mortgage.

There are many down payment options out there for Canadians. Typically, a minimum of 5% down is required on a mortgage - however, there are other options available that vary depending on current programs Lenders and mortgage insurers are providing at the time of your mortgage. Check out our section on down payment options for further details, and feel free to contact our office with any questions you may have. 

What is the savings difference between 5%, 10% and a 20% down payment?

Consider the following scenario:

If you purchase a home for $300,000, and secure an interest rate of 2.79% over a five year term, there are significant differences in the amount of interest you will pay over the next 5 years.

  5% Down Payment 10% Down Payment 20% Down Payment
Total Loan $295,260.00 $276,480.00 $240,000.00
Monthly Payment $1,365.68 $1,278.82 $1,110.09
Total Interest Paid $37,480.79 $35,096.84 $30,465.96
Balance Remaining $243,971.59 $228,453.54 $198,310.76


Over just 5 years, a 20% down payment would save you over $7000 in interest! Not to mention the money you would save without having to pay CMHC premiums.

To discuss your down payment options, contact our office today.

Payment

Do accelerated payments really save me money?

Increasing your mortgage payment frequency is an excellent means of paying your mortgage off faster and saving yourself money in the long run. For example:

If you had a $350,000 mortgage and made a 10 percent down payment, chose a 25 year amortization and secured an interest rate of 3 percent, you would end up paying $135,390 in interest if you made regular bi-weekly payments. By switching your payments to accelerated bi-weekly for the same mortgage, you would be paying $118,755 in interest and have your mortgage paid off in 22 years.

By increasing the payments from regular bi-weekly to accelerated bi-weekly for this particular mortgage scenario, there is a whopping $16,635 of savings and the ability to be mortgage free almost 3 whole years sooner.

For more details on payment frequency and what your best options are, contact us today.

Amortization period vs. Mortgage Term

The amortization period on your mortgage is the total length of time it will take you to pay off your mortgage. The standard amortization period has historically been 25 years, but it can be longer if you are putting down more than 20 percent on your mortgage, and it can be shorter as well. Some people choose a longer amortization period because it lowers their mortgage payments. Simply put, the longer the amortization, the lower the mortgage payments. 

By comparison, the mortgage term represents the length of time for which your mortgage agreement with a Lender is valid. Your mortgage term can range from 6 months to 10 years, although the 5 year fixed rate option is by far the most popular option. When your mortgage term ends, you are required to renew your mortgage. At this point, you will need to secure a new interest rate and re-evaluate whether a fixed or variable interest rate works better for you.

An upcoming mortgage renewal is a great time to discuss your options with your Broker, as there may be a product available that is better suited to your needs than your current mortgage. 

How can I pay my mortgage off sooner?

There are several strategies you can use to reduce your total interest costs over the long run and pay off your mortgage sooner:

  • Increase the frequency of your payments. Consider making accelerated bi-weekly payments rather than monthly payments.
  • Know and use the prepayment privileges on your mortgage. Most mortgage Lenders will let you prepay a certain amount as a lump sum every year, without penalty. Lenders often also allow you to make larger individual mortgage payments from time to time. Making prepayments as often as possible helps you lower the principal balance outstanding on your mortgage and therefore save you money in interest charges.
  • At renewal time, review all aspects of your financial picture to make sure you still have the right mortgage for your needs. Consider the interest rate, prepayment privileges, payment frequency, and other options that best suit your particular needs.

Your Mortgage Broker can help you take a look at your current mortgage and discuss your options for becoming mortgage-free sooner. For more information please contact our office today!

General

What is a HELOC?

A HELOC can be a great option for those wishing to access the equity they have in their home.

A HELOC is a sum of money borrowed by the property owner against the equity in their property. Unlike alternate options, a HELOC is not borrowed in one lump sum. Similar to a credit card, the HELOC can be borrowed in smaller amounts until a previously agreed upon limit is reached and repaid with no penalties. A HELOC is best used for short term borrowing and is often used for “emergencies” such as replacing hot water heaters or furnaces, home renovations and other surprise circumstances.

We can help you evaluate the different avenues for accessing the equity in your home to determine the best option according to your own personal situation. Contact us today to get started!

What is mortgage loan/default insurance?

Many Canadians feel that mortgage default insurance offers more value to Lenders than it does the individuals actually purchasing it. While this is true to an extent, we must acknowledge that without Mortgage Default Insurance providers (such as CMHC, Genworth and Canada Guaranty), home ownership would be out of reach for many. Under the financing programs provided by these integral companies, Canadians have access to Mortgage Loan Insurance products that make Mortgage refinances, renovation loans and most importantly, home purchases possible.

CMHC, Genworth and Canada Guaranty have all dedicated a significant amount of their resources to educating Canadians on the topic of homeownership in Canada.

We welcome you to contact us for further information on mortgage default insurance and how it can help you become a home owner.

Should I get a home inspection?

We encourage all first time home buyers to have a professional inspection done on their future home.

Home inspectors can provide a wealth of knowledge and might save you from buying the wrong home. When you choose to have an inspection done, you will receive your inspection report on-site at the time of inspection, as well as a personal consultation with the inspector to discuss what, if anything, needs to be repaired and/or replaced in the home you are looking to purchase.

In some cases, satisfactory home inspections are part of the financing conditions required by your Lender. Contact us today for more detailed information about inspections and other requirements you may need to meet throughout the mortgage process.

Refinancing

Can I consolidate my debts with my mortgage?

With the average credit card company charging 10 to 29 percent in interest, car dealerships charging up to 16 percent, and personal loans charging 6 to 10 percent, it is easy to see how paying off debts can be overwhelming and financially burdensome. Having debt can create barriers in financial planning and make individuals vulnerable to an economic downturn. However, there are options available to you through the equity you have in your home and one valuable option is to refinance your mortgage.

Refinancing your existing mortgage and consolidating your debt into your mortgage can be beneficial in many ways. With the lower interest rates that the mortgage industry can offer in comparison with other creditors, you can save thousands by utilizing the equity in your home to pay off other high-interest debts. There are also added benefits such as one convenient payment and longer amortization periods to help make your monthly payments more manageable if your monthly debt obligations are too tight for your current budget.

When setting up a mortgage and combining all of your debts, we can also create a structured payment plan making it easy to show what your balance is at every step of the way. Another added bonus is that we can also show you how to accelerate your payments and save even more by using your pre-payment privileges if you wish.

Taking charge and conquering your debts does not have to be difficult. If you are carrying a burden of significant debt and you own a home, one of our Mortgage Brokers will be happy to help you analyze your situation and further discuss your financial options.

How can I use the equity in my home?

There are several options for consolidating your debt using the equity you have built in your home, including:

  • Equity Take-Out
  • Home Equity Line of Credit (HELOC); and
  • A Home Equity Investment Loan

Visit our section on debt consolidation for more information on each of these options, and contact our office to discuss whether debt consolidation is the right plan for you.

How can I take advantage of the lower interest rates?

Many of our clients are interested in obtaining a lower rate for their mortgage when they notice a drop in advertised interest rates. While it can be financially beneficial to break your current mortgage in order to rework the arrangements and achieve a lower interest rate, this is completely dependent upon the details of your current mortgage and is unique to each personal situation.

Consider the results of a past mortgage review completed for one of our clients. Based on their $250,000 mortgage with an interest rate of 5.09 percent, these clients came out ahead by over $5000 in interest and $1600 on their principal within three years (even after paying their early payout penalty).

By offering complimentary annual mortgage reviews to our clients, we are able to review your current mortgage arrangements and run calculations to determine whether or not you would benefit from breaking your current mortgage and refinancing.

Contact us today to evaluate whether obtaining a lower interest rate would be beneficial for you.

Mortgage Insurance

What does CMHC do?

CMHC plays an important role in the home buying process for many Canadians. A Crown Corporation originally established in 1945, CMHC provides default mortgage insurance that enables homebuyers to purchase property with as little as 5% down. The other two providers of mortgage default insurance in Canada are Genworth and Canada Guaranty

This type of insurance eliminates the risk to Mortgage Lenders, enabling them to provide financing at lower rates with smaller down payments than would be normally required. Without CMHC Insurance, a full 20% down payment is needed to purchase a home.

CMHC also provides an essential safety net to our financial system, ensuring mortgage funding is available during times of economic downturns and recession. For more information on CMHC and what mortgage default insurance is, check out our mortgage default insurance section.

Contact our office today to discuss CMHC premiums for your particular mortgage situation with a certified Mortgage Broker.

How much are CMHC insurance rates?

In order for a mortgage loan to be insured by companies such as CMHC, the borrower must pay a mortgage insurance premium. Any mortgage with less than 20% down requires this type of insurance. Premium rates are as follows:

  • 5% down payment – 3.60%
  • 10% down payment – 2.40%
  • 15% down payment – 1.80%
  • 20% or more down payment – Default mortgage insurance is not required

Your default mortgage insurance premium is generally amortized over the life span of your mortgage and is included in your mortgage payments.

Our mortgage payment calculator can show you what your mortgage payments will look like including CMHC premiums. If you have any further questions about CMHC and your down payment, feel free to contact our office today!

Mortgage Insurance vs. Life Insurance?

When it comes to mortgage insurance, many home owners are unaware that they do not have to accept the insurance offered by their Lender (keep in mind that this type of insurance differs from mortgage default insurance, which is required for some mortgages).

In fact, it is usually worth it to shop around for the option that best suits your needs.

The primary difference between a life insurance policy and mortgage insurance from your Lender is control. With a life insurance policy, you decide who the beneficiary will be. When it comes to mortgage insurance, however, the financial institution is the beneficiary. This means that instead of your insurance payout going to an individual of your choosing, it is applied directly to your mortgage to pay off the remaining balance.

With life insurance, your beneficiary chooses how to spend the tax free death benefit from your life insurance policy. That could be pay down the mortgage or other debts, use the funds to invest, cover living expenses, or make important purchases. These options do not exist when your mortgage lender controls the proceeds.

Many homeowners do not realize that mortgage insurance is often “decreasing term insurance”. This means that the amount you owe on your mortgage goes down as you make payments on the principal. At the same time, the death benefit (the amount required to pay off your mortgage) goes down by the same amount, but your mortgage insurance premiums stay the same, so you are actually getting less for your money with every mortgage payment.

Between home insurance, mortgage default insurance and general mortgage or life insurance, it can be difficult to understand what type of insurance covers what. We can help clarify this information for you and discuss the options that are in your best interest. 

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