Frequently asked mortgage questions
- What is a mortgage?
- What is CMHC insurance and why
do I need it?
- What are the various mortgage
options I can choose?
- What are the advantages of using
a mortgage broker?
- Why should I consider a pre
approval?
- What documents are need for a
pre approved mortgage?
- What are the costs associated
with closing a mortgage?
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May I
use my RRSP to make a down payment?
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What
is the minimum acceptable down payment?
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What are the sources of acceptable down payment?
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In
what province can you arrange a mortgage in?
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How
quickly will someone get back to me?
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A
mortgage is simply a loan that is secured by real estate and is
used for the purpose of buying the home or refinancing it.
The mortgage or loan amount is typically paid back with
principal and interest payments, principal being the amount you
borrow. Although title is transferred to the borrower, the
property can be reclaimed by the lender if payments are
defaulted.
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Whenever you take a new mortgage, purchase or refinance, you
will require by law, to have the mortgage insured against
default if you require more than 75% of the appraised value of
selling price of the, whichever is less. In Canada, there
are 2 sources of mandatory insurance: CMCH and Gen Worth.
There is only 2 ways you can avoid this cost. One is put
at least 25% of the purchase price if buying, or refinance up to
75% if you are refinancing. The second way is to use a
piggyback loan such as a second mortgage to cover the difference
between your down payment and the 25%.
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In deciding the type of mortgage to choose from you will have to
decide among the following: Open or closed mortgage, fixed
or variable rate, term of the mortgage, amortization period, and
the pre payment facility or options, and frequency of payments.
You can review these option in more
detail here.
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Mortgage brokers are professionals just like your lawyer, doctor
and accountant. They do nothing else but mortgages all day
long and so they are up to date with all the products and
options available. They are also well connected to major
lenders and receive special wholesale rates which they pass on
to their clients. There more advantages you will receive
and you can read about them in more
detail here.
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A
pre approval is needed in order to ensure you qualify and how
much of a loan you are entitled to considering both your credit,
and your family income. Having a pre approved mortgage
allows you to shop for you new home more confidently, removes
stress, and also protects your approved rates if rates go up.
If they come lower, you will receive the lower rate instead.
Either way, you will benefit, and it is especially recommended
for first time buyers and for those people who do not have a
good credit rating.
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Generally all you need is a completely filled out application.
However a good mortgage broker will also ask documentation with
respect to income confirmation by way of employment letters, T4
slips, tax assessments and proof of your down payment.
This is important because when you do find and purchase the
home, it will be required and best if these documents are
verified before.
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What documents are needed for a pre approved mortgage?
The other costs associated with the purchase of a home may include the
following:
Inspection fee-required if a professional is to inspect the house prior to the
completion of the purchase
Appraisal fee-required to ensure the property is acceptable security for the
mortgage
Legal fees-includes lawyer's or notary's fees plus any disbursements required to
transfer the property and register the mortgage
Survey certificate fee-required to ensure the house is positioned on the lot
within legal restrictions
Tax adjustments-you will be responsible for paying the taxes for the portion of
the first year that you own the property
Mortgage insurance-if the down payment is less than 25% of the purchase price,
an insurance premium on the mortgage amount is required (it may be added to the
mortgage amount)
Home insurance-arranged to cover the property in the event of fire or other
damage
Mortgage protection insurance-optional, but is available to cover the mortgage
amount in the event of death, disability, loss of employment, or critical
illness
Moving costs-vary depending on how far you're going and who is helping you move
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A federal government plan allows first-time
homebuyers to use their RRSPs to help finance their
home purchase. This money can be used as a down
payment, or to help with other closing costs. RRSP
home ownership withdrawal forms are available from
your RRSP holder. The criteria are as follows:
- Each applicant can withdraw up to $20,000
- Applicants cannot have owned a principal
residence within the past 5 years, unless it was
a revenue property
- You must reside in the home for at least one
year
- The RRSP funds must have been invested for
more than 90 days before withdrawal to qualify
- The withdrawn amount must be repaid, over an
interest-free repayment period that can be as
long as 15 years
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The minimum down payment required to qualify for an insured
mortgage is 5% for single residential, owner occupied homes, and
10% for multi units from 1 - to 4 units provided you occupy one
of the units yourself. Alternatively the amount of
down payment depends entirely on your credit worthiness and your
ability to service the new mortgage payment along with all your
other debt. Generally the amount of down payment needs to
be increased when you credit is too low and cannot be approved
by many of the larger banks.
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A down payment must come from
your own non borrowed source. You may also use money that
is gifted to you from immediate family and provide a gift letter
to state the money will not have to be repaid. You may
also qualify for a Flex down mortgage and use money you can
borrow against other assets you have or use the money through
lenders special programs.
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We can arrange mortgages in every province through our banks'
broker departments. Rates will not be affected and you
will qualify for our best rates regardless of where you live.
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Depending on the time of day you submit your application, you
should expect a call from one of our mortgage specialists within
30 minutes of your submission provided it is submitted during
regular business hours. If you submit you application
during the evening or week end, you can expect a call or an
email the next business day. It is important to provide
proper telephone numbers for you work, home and cellular, and a
properly spelled email address.
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