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Questions & Answers

What are the sources for mortgage financing?

There are a wide range of financial institutions that are involved in the mortgage industry in Canada. Some of these include:

  • Chartered banks, loan corporations
  • Trust companies, credit unions
  • Finance companies, pension funds
  • Life insurance companies, private individuals

What is required to obtain a first mortgage?

In most cases:

  • Income verification
  • Credit report
  • Verifiable down-payment

What can I use for a down-payment?

In most cases:

  • Accumulated savings
  • Registered Retirement Savings Plan
  • Gift from immediate family
  • Sale of existing home

How long does it take to complete a mortgage transaction?

If all information requested by the lender (i.e. Income verification, down payment verification and property details) is given to the broker in a timely matter than the transaction can be completed in as little as 5 days.

Can I get pre-approved before I find the home I want to purchase?

Yes. Our lenders offer preapprovals from 60 days to 120 days.

How much can I qualify for?

Qualifying guidelines vary depending on the lenders criteria and products available. To find out exactly what you can qualify for, please submit your online application, call, or visit us for a pre-approval.

What if I have had poor credit or have been discharged from bankruptcy within the last 3 years? Can I apply for a mortgage?

Yes you can! Most conventional banking institutions put restrictions on who they lend money to for a mortgage, but we have the resources to secure mortgage solutions regardless of any credit situation.

What is CMHC?

Canada Mortgage and Housing Corporation is a federally owned and operated institution that evaluates the client and property to allow the borrower to purchase a home with a lower down payment requirement. This corporation insures the mortgage on behalf of the bank, through a premium added to your mortgage. This way the banks are obligated to provide a mortgage for those with less than a 20% down-payment.

What is amortization?

Amortization is the estimated number of years it will take to pay off your mortgage entirely. Amortization periods range up to 35 years. The longer your amortization is, the lower your mortgage payments will be, but the higher the total amount of interest you’ll pay over the life of the mortgage. An amortization is made up of a number of mortgage terms.

What is a mortgage term?

A mortgage term is the length of time you have agreed to a certain interest rate and a specified payment schedule. A term can range from as short as 6 months to as long as 10 years. At the end of your term, also known as renewal, you can agree to a new interest rate and payment schedule, or you can pay off your mortgage.

What's the difference between a fixed rate mortgage and a variable rate mortgage?

A fixed rate mortgage allows you to lock in a specific annual interest rate for a certain period of time, known as the term. Terms range from 6 months to 10 years. The interest rate and the payments on the mortgage remain the same for the length of your term. As you make payments and the principal amount is reduced, more of the mortgage payment is applied to the principal and less of the payment is applied to the interest. Because the interest rate does not change throughout the term, you know in advance the amount of interest you will pay and how much principal you will owe at the end of your term.

With a variable rate mortgage, the annual interest rate is based on the Bank’s Prime Rate plus or minus a specified percentage. The interest rate changes with the Bank’s Prime Rate. Variable mortgage terms range from 3 or 5 years. The regular mortgage payment is a fixed amount. As interest rates fall, more of the payment is applied to the principal, and as rates rise, more of the payment is applied to the interest. The regular mortgage payment may be adjusted if the amount of your payment is not enough to cover the interest portion of the payment. Because the interest rate changes, it is not possible to know in advance how much interest you will pay and how much principal you will owe at the end of your term. You can convert a variable rate mortgage into a fixed rate mortgage of the same or longer term at any time during your term without additional cost.

What's the difference between a closed term mortgage and an open term mortgage?

A closed mortgage contains certain restrictions on the amount you can prepay on your mortgage balance. If you pay off your mortgage before the end of the term, or prepay more than is allowable according to the mortgage prepayment options set out in your Mortgage Loan Agreement, you may have to pay a prepayment charge.

An open mortgage term can be repaid in part or in full any time without paying a prepayment charge.

What are debt ratios?

Lenders have long relied on two standard measures of one’s “ability to pay” their mortgage:

Gross Debt Service (GDS): The percentage of the borrower’s income that is needed to pay all required monthly housing costs (mortgage payments, property taxes, heat and 50% of condo fees).

Total Debt Service (TDS): The percentage of the borrower’s income that is needed to cover housing costs (GDS) plus any other monthly obligations that an individual has, such as credit card payments and car payments.

The acceptable ratios for both have generally been 32% and 40% respectively.

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 frequency schedule
  • Making principal prepayments
  • Making double-up payments
  • Selecting a shorter amortization

 

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