FAQ

What Does a Mortgage Broker Do?

 

A mortgage broker acts as an intermediary between a lender and a borrower. In other words, they facilitate the transaction between you (the borrower) and your bank/mortgage lender. We take care of the legwork and search for the best mortgage product and interest rate by utilizing our network of lenders and financial institutions.

Do mortgage brokers work for the bank or a financial lender?

While the term “mortgage broker” is tossed around a lot when it comes to someone helping you search for the best mortgage, it specifically refers to an individual who DOES NOT work for a specific bank. I have a special license that allows me to act on many banks behalf to source the right mortgage for you. Which means at the end of the day I work for you, not the bank.

What is mortgage loan insurance?

 

Mortgage loan insurance is insurance provided by Canada Mortgage and Housing Corporation (CMHC), a crown corporation, and Genworth, an approved private corporation. This insurance is required by law to insure lenders against default on mortgages with a loan to value ratio greater than 80%. The insurance premiums, ranging from 0.50% to 7.0%, are paid by the borrower and can be added directly onto the mortgage amount. This is not the same as mortgage life insurance.

What is a conventional mortgage?

 

A conventional mortgage is usually one where the down payment is equal to 20% or more of the purchase price; a loan to value of or less than 80%, and does not normally require mortgage loan insurance.

How does bankruptcy affect qualification for a mortgage?

 

Depending on the circumstances surrounding your bankruptcy, generally, some lenders will consider providing mortgage financing.

Can I use gift funds as a down payment?

 

Most lender will accept down payment funds that are a gift from family as an acceptable down payment. A gift letter signed by the donor is usually required to confirm that the funds are a true gift and not a loan.

What is a mortgage pre-approval?

 

A mortgage pre-approval provides and interest rate guarantee from a lender for a specified period of time (usually 60-120 days) and for a set amount of money. The pre-approval is calculated based on information provided by you and is generally subject to certain conditions being met before the mortgage is finalized. Conditions would usually be the things like ‘written employment and income confirmation’ and ‘down payment from your own resources’, for example.

Most successful real estate professionals will want to ensure you have a pre-approved mortgage in place before taking you out looking for a home. This is to ensure that they are showing you property within your affordable price range. In summary, a pre-approved mortgage is one of the first steps a home buyer should take before beginning the buying process.

How can you pay off your mortgage sooner?

 

There are ways to reduce the number of years to pay down your mortgage. You'll enjoy significant savings by:

  • Selecting a non-monthly or accelerated payment schedule

  • Increasing your payment frequency schedule

  • Making principal prepayments

  • Making Double-Up Payments

  • Selecting a shorter amortization at renewal

For a review of your specific mortgage, click here to book a mortgage review.

Can I use my RRSPs to help buy my first home?

 

Today, about 50% of first-time home buyers use their RRSP savings to help finance a down payment. With the federal government’s Home Buyers’ Plan, you can use up to $25,000 in RRSP savings ($50,000 for a couple) to help pay for your down payment on your first home. You then have 15 years to repay your RRSP.

To qualify, the RRSP funds you're using must be on deposit for at least 90 days. You'll also need a signed agreement to buy a qualifying home.

Even if you have already saved for your down payment, it may make good financial sense to access your savings through the Home Buyers' Plan. For example, if you had already saved $20,000 for a down payment - and assuming you still had enough "contribution room" in your RRSP for a contribution of that amount, you could move your savings into a registered investment at least 90 days before your closing date. Then, simply withdraw the money through the Home Buyers' Plan.

What’s the advantage? Your $35,000 RRSP contribution will count as a tax deduction this year. Use any tax refund you receive to repay the RRSP or other expenses related to buying your home.

While using your RRSP for a down payment may help you buy a home sooner, it can also mean missing out on some tax-sheltered growth. So be sure to ask your financial planner whether this strategy makes sense for you, given your personal financial situation.

You can check out the Government of Canada website here to check out the program details.

What should the length of my mortgage term be?

The length of mortgage terms varies widely - from six months right up to 10 years. As a rule of thumb, the shorter the term, the lower the interest rate; the longer the term, the higher the interest rate.

While four or five year mortgages are what most home buyers typically choose, you may consider a short-term mortgage if you have a higher tolerance for risk, if you have time to watch rates or are not prepared to make a long-term commitment right now.

Before selecting your mortgage term, we suggest you answer the following questions:

Do you plan to sell your house in the short-term without buying another? If so, a short mortgage term may be the best option.

Do you believe that interest rates have bottomed out and are not likely to drop more? If that's the case, a long mortgage term may be the right choice for you. Similarly, if you think rates are currently high, you may want to opt for a short to medium length mortgage term hoping that rates drop by the time your term expires.

Are you looking for security as a first-time home buyer? Then you may prefer a longer mortgage term, so that you can budget for and manage your monthly expenses.

Are you willing to follow interest rates closely and risk there being increased mortgage payments following a renewal? If that's the case, a short mortgage term may best suit your needs.

What are the monthly costs of owning a home?

 

Needless to say, you'll have financial responsibilities as a home owner. Some of them, like taxes, may not be billed monthly, so do the calculations to break them down into monthly costs. Below you will find a list of these expenses.

The Mortgage Payment

For most home buyers, this is the largest monthly expense. The actual amount of the mortgage payment can vary widely since it is based on a number of variables, such as mortgage term and amortization.

Property Taxes

Property tax can be paid in two ways - remitted directly to the municipality by you, in which case you may be required to periodically show proof of payment to your financial institution; or paid as part of your monthly mortgage payment.

Utilities

As a home owner, you'll be responsible for all utility bills including heating, gas, electricity, water, telephone and cable.

Maintenance and Upkeep

You will also have to cover the cost of painting, roof repairs, electrical and plumbing, walks and driveway, lawn care and snow removal. A well-maintained property helps to preserve your home's market value, enhances the neighbourhood and, depending on the kind of renovations you make, could add to the value of your property.

Should you go with a short or long-term mortgage?

 

A longer-term mortgage is worth considering if you have a busy life and don't have time to watch mortgage rates. Our 4, 5, 7 and 10-year mortgages let you take advantage of today's rates, while enjoying long-term security knowing the rate you sign up for is a sure thing. If you want to keep your mortgage flexible right now, you can explore a shorter-term mortgage that usually allows you to take advantage of lower rates and save.

What is a fixed rate mortgage?

 

The interest rate on a fixed-rate mortgage is set for a pre-determined term - usually between 6 months to 10 years. This offers the security of knowing what you will be paying for the term selected.

What is a variable rate mortgage?

 

A mortgage in which payments will fluctuate month to month depending on prime. If prime goes up so does your payment.