Q. Why use a Mortgage Consultant as opposed to a Bank?
A. When you deal with a bank, you are limited to the product line that they offer, which may not have the best product for you. But, the banks won’t tell you that, because it’s their job to sell you their products. The banks also have to look out for their profit margin and this means that they will offer you the highest rate that they think you will accept – dealing with a mortgage consultant is different. With access to more than 40 lenders I offer a wider range of mortgages to suit your needs, and you can benefit from lower rates without the haggling. As a result of my 18 years of experience in the financial services industry you can also expect the highest level of customer service from me.
Q. Are there any fees involved with a mortgage consultant?
A. In most instances, there are no fees involved. Mortgage consultants receive a commission from the lender that receives and funds your mortgage application. If you do not qualify, traditionally, due to bad credit, job instability or other unseen factors there may be a brokerage fee, but it would be fully disclosed to you prior to proceeding.
Q. Should I wait for my mortgage to mature?
A. No. Allow me to begin shopping for an interest rate at least 4 months before your mortgage matures. Lenders will often guarantee you an interest rate as much as 120 days before your mortgage matures. As long as you are not increasing your mortgage, they will often cover the costs of transferring your mortgage as well. This means a rate promised well in advance of your maturity date, which eliminates any worries about higher rates and if rates drop before the actual maturity date, the lender will adjust your interest rate to the lowest it has been during the 120 days snce the application was submitted.
Q. What is mortgage loan insurance?
A. Mortgage loan insurance is provided by one of three major insurance companies: Canada Mortgage and Housing Corporation (CMHC), a crown corporation, Genworth Financial Canada and AIG Insurance, both approved private corporations. This insurance is required by law to ensure lenders against default on mortgages with a loan to value ratio of more than 80%. The insurance premiums, ranging from .50% to 3.7% are paid by the borrower and are usually be added directly into the mortgage amount. This is not the same as mortgage life insurance.
Q. What is a conventional mortgage?
A. A conventional mortgage is where the down payment is equal to 20% or more of the purchase price of a property and does not normally require mortgage insurance.
Q. What is a high-ratio mortgage?
A. A high-ratio mortgage is one where the amount to be borrowed is greater than 80% of the purchase price or appraised value of the property. High-ratio mortgages generally require mortgage loan insurance provided by one of CMHC, Genworth Financial or AIG Insurance.
The mortgage loan insurance premium paid to the insurer protects the lender in case of default in the event the mortgage is not repaid by the borrower. The benefit to the borrower is that they can purchase a home with less than 20% down, to as low as 0% down. The insurance premium is paid by the borrower and is usually added directly into the mortgage amount. This is not the same as mortgage life insurance.
Q. What can I use for a down payment?
A. In most cases:
- Registered Retirement Savings Plans (RRSP’s) may be used as a down payment up to a maximum of $20,000 and is not subject to income tax if repaid within 15 years.
- Gift from immediate family
- Accumulated savings
- Non-registered investments (such as GIC’s, Mutual Funds, Stocks or Bonds)
- Sale proceeds from an existing home
- Borrowed from an unsecured Line of credit
Q. What is the minimum down payment needed to buy a home?
A. Recent changes in mortgage insurance policy allow for financing of up to 100% of the purchase price of a home for qualified borrowers. To qualify for this your credit must be clean and in good standing. Regardless of the down payment chosen you must be able to show that you can cover the applicable closing costs (Legal fees, appraisal fees and a survey certificate when appropriate).
Q. How much can I afford to pay for a home?
A. To determine ‘affordability’ you will first need to know your taxable income along with the amount of any debt outstanding (credit cards, loans, lines of credit and other personal debt) and the monthly payments on these debts. Traditional guidelines allow a maximum of 32% of your before-tax income for use toward a mortgage payment, property taxes and property heating costs. If applicable, half the monthly condominium maintenance fees will also be included in this calculation.
The second calculation includes all monthly debt payments, including car loans, credit cards, lines of credit payments and the housing costs from the first calculation. The total of all payments should not equal 40% of your pre-tax income. Both of these two calculations will be used to help determine how much of your income will be used towards housing payments, including your mortgage payment. The calculations are based on lenders’ usual guidelines.
In addition to considering what the ratios say you can afford, make sure you calculate how much you think you can afford. If the payment amount you are comfortable with is less than 32% of your income you may want to settle for the lower amount rather than enter into a payment that you are not comfortable with. It is important that you feel comfortable making the monthly payments.
Q. How does bankruptcy affect my ability to qualify for a mortgage?
A. Depending on the circumstances surrounding your bankruptcy, generally some lenders will consider providing mortgage financing. There are lenders that can provide financing for borrowers as quickly as one day after the bankruptcy is discharged, subject to conditions.