 Frequently
Asked Questions and Answers
1.
Why is a mortgage pre-approval important?
Mortgage
pre-approval is important for a number of reasons:
-
It determines
the maximum mortgage loan for which you qualify.
-
It allows
your realtor to show you a range of properties in your price range.
-
It allows
your realtor to make a realistic offer on your purchase, and saves time
in the negotiation process.
-
It holds
the interest rate for a period of up to 120 days, guarding you against
rate fluctuations.
-
It provides
peace of mind during the home-buying process.
2.
May I use my RRSP to make a downpayment?
A federal
government plan allows first-time homebuyers to use their RRSP's to help
finance their home purchase. This money can be used as a downpayment, or
to help with other closing costs. The 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 principle residence within the past 5 years.
-
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The withdrawn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.
3.
What is an open mortgage?
An open
mortgage gives you the most flexibility in making extra payments towards
your mortgage principle and even lets you pay off your mortgage entirely
whenever you wish to. If you have uncertainty in your life such as serious
illness, a looming separation or a possible job transfer to another city,
it is better to have an open mortgage. This way if you have to move, you
can pay off your mortgage without penalty. This could save you thousands
in prepayment penalties.
Warning!
Not all open mortgages are created equal. Check to see just how ‘open'
your mortgage is!
4.
What is a closed mortgage?
Compared
to open a closed mortgage offers little to no privileges in paying off
your mortgage early. You cannot pay off your mortgage without attracting
penalties, called prepayment penalties, from the lender. Often though,
you do have the ability to prepay up to 15-20% of the original mortgage
balance, each year.
Warning!
Not all closed mortgages are created equal check with your mortgage specialist
as to how your prepayment penalties are calculated. The difference between
one lender's definition of penalty to another lender is enormous.
5.
What is a fixed rate mortgage?
It simply
means that for the term of your mortgage the interest rate charged is a
fixed amount and does not change during the term of your mortgage. If you
look at our rate comparisons you will see this distinction between fixed
and variable rates.
6.
What is a Variable Rate mortgage?
Compared
to a fixed rate mortgage a variable interest rate 'floats'. Although the
mortgage payment amount may stay the same the actual interest charged may
change on a monthly basis. A drop in interest rates is great news for you
and it will mean that more of your mortgage payment will go towards reducing
your mortgage principle. If interest rates rise then less money will be
used for reducing your principle and will instead be used for paying higher
interest costs. If you think interest rates will fall over the next 3 to
5 years then purchasing a variable mortgage makes a lot of sense.
With mortgages
you pay a price for certainty. You generally pay more for a fixed rate
mortgage because the lender is taking the risk as to what the rates will
do by fixing the rate for you. You generally pay less for a variable rate
mortgage because it is you that is taking the risk of uncertainty as to
how interest rates will move - up or down.
With low
interest rates variable interest rate mortgages have become popular. Often
it is possible to get a rate just over or under the bank prime rate!
7.
Should I pay my mortgage payment weekly, bi-weekly, or monthly?
Paying
weekly or biweekly gets more money onto your mortgage over the year. This
will add up to paying your mortgage down faster over the long term.
If your
mortgage payment was a $1000 a month, and you paid it weekly at $250/week,
at the end of the year you would have paid $13,000 towards your mortgage
as opposed to $12,000 paying monthly.
If it
fits your paydays, then take a weekly or biweekly payment. If it doesn't,
pay monthly, and put an extra payment on once a year...you will get almost
the same benefit!
8.
What is amortization? And what is the best amortization period to seek?
Your
amortization is the total length of time it will take you to pay off your
mortgage. Often when you first get a mortgage it is amortized over 25 years.
If you make your mortgage payments over 25 years your mortgage will be
paid off. However, your amortization period will not stay constant because
different borrowing terms at each renewal vary the amount of interest charged
over your amortization period. The length of time to pay off your mortgage
will be determined by the interest charge, the loan amount and the amount
of payment you make. You should first qualify for a 25-year amortization
and then change the amortization down to 15 years by making a larger monthly
payment. A 15-year amortization is a great goal for everyone. A good rule
of thumb is to pay down your mortgage by at least 1% each year from the
original amount. Make your monthly payment and add in this "top up" amount.
It is the amount of 'extra' payments that you make that reduces your principal,
which saves you, interest charges. Another rule of thumb, when interest
rates are low, is to make your mortgage payments as large as possible in
your monthly budget. If interest rates rise by next renewal keep your mortgage
payments the same and ride out the high rates by taking shorter renewal
terms. This way you will get in the habit of making the same larger mortgage
payment over time and by doing so will save thousands in interest charges.
9.
What is a high ratio or insured mortgage?
Whenever
you need a mortgage loan that is greater than 76% of the current market
appraised value of your home it is considered a high ratio or insured mortgage.
In certain situations, and depending on the property and your credit, you
can borrow up to 100% of the value of your home. The Canada Mortgage and
Housing Corporation (CMHC), insures the lender in case you default on your
loan. You must pay for this insurance premium, which is usually included
on top of your loan. CMHC fees are as follows: for 0% down 2.90% of the
mortgage balance, 5-9% down 2.75%, for 10-14% down 2.00%, for 15-19% down
1.75%, and for 21-24% down it is 1.00%. Rates for high ratio mortgages
should be the same as a conventional mortgage, check with your expert for
your situation.
10.
What is the best term to consider?
Usually
the shorter the term, the lower the rate. However many people prefer the
comfort of a longer-term mortgage for it's stability. We always recommend
a longer term for First Time Buyers. Variable rate mortgages are also a
very attractive product that may be right for you!
11.
Can I have my property taxes included with my mortgage payment?
Yes,
most institutions will allow the option of paying your own taxes, or having
them included with your mortgage payments. However, some lenders may insist
that they be included with the mortgage due to the loan to value ratio!
12.
What is the penalty if I sell my house before the term expires
All lenders
will charge a penalty if you pay your mortgage out prior to the end of
the term. Usually the penalty is the greater of three months interest,
or the interest rate differential, however, this does vary from lender
to lender, so be sure to ask your mortgage specialist for more information!
13.Hard
to prove income
Here’s a tip: I make home financing
easier.
Whether you’re self-employed,
work on commission or have complex income data, I can help you secure the
financing for your home.
Consider the benefits I can
offer you:
AFFORDABILITY– Lower
down payment requirements reduce your upfront costs.
FLEXIBILITY– Limited
documentation needs give you more room for options.
REDUCED PAYMENTS– Longer
40-year amortization periods lower your monthly mortgage payment.
Count on me to find the right
solution for you. My market knowledge and expertise will ensure a
comfortable financing experience.
Contact me today!
14.
No Down Payment
A home is not only an investment,
it’s also a place to live and can be a security blanket for you and your
family. However, down payment requirements can get in the way of home ownership.
Even if you’ve had credit setbacks, you have an opportunity to own a home
with little or no down payment.
Low and No Down Payment Mortgages
allow you to:
Purchase Sooner
The biggest obstacle to owning
a home, the down payment, is no longer a requirement. Even with no down
payment, you may still be able to own a home.
Lower Cash Requirements
Flexible approval guidelines
eliminate the need for high-ratio mortgage insurance.
Save Your Money For Other
Expenses
Keep some or all of the money
you have saved for your down payment to use for other important purchases
such as furniture or emergency expenses.
I have access to mortgage options
that make it affordable for you to own, allowing you to start building
your nest egg right now.
Contact me today!
15.
Self-Employed Mortgages
Many financial institutions
won’t offer mortgages to Canadian entrepreneurs because of income documentation
difficulties or a lack of formally registered ‘personal’ income. Past credit
issues can make things even more difficult. But, entrepreneurs now have
access to more mortgage options!
I can help you with mortgage
options specifically designed for entrepreneurs looking to purchase a home
or refinance their current one.
Low & No Down Payment
Mortgages – You can own a home sooner than you think, often with no
down payment required.
Income Verification Made
Easier - Multiple options for verifying your income, not just through
your Revenue Canada Notice of Assessment.
Easier Approvals – I
have alternatives for entrepreneurs who already have existing debt or may
have experienced credit setbacks in the past.
Just because you’re building
a business, doesn’t mean you can’t own a home.
Call me today!
16.
Rent V Own
Getting the right mortgage for
your specific financing needs can be a challenge. Here are just a few of
the reasons why it makes sense for you to partner with a me:
1. Product Selection
- I have access to many different mortgage products as well as access to
a variety of mortgage options for customers with previous credit issues,
recently discharged bankruptcies and self-employed individuals.
2. I Represent You –
As your representative, I find the deal that’s best for you, not the lender.
3. Market Knowledge -
I have the training, experience and local market knowledge that will help
you find the right mortgage solution as well as an understanding of the
mortgage process, which can be complicated for some.
4. Mortgage Focus – I
search for the best combination of pricing, rates, discounts, conditions
and overall value for you.
5. It’s FREE! – I’m not
paid by you; I’m compensated for my services by receiving a commission
from the lender (on approved credit).
Whatever your home financing
needs, let me help you with a broad range of programs, money-saving options
and personalized service.
Call me today!
17.
Equity Takeouts
Tap into the equity in your
home for immediate access to cash. Large scale projects and purchases have
special financing requirements. I can access flexible home equity and refinancing
loans to help you reach the money stored in your home to help you:
Renovate & Expand Your
Home – Fix a roof, build your dream kitchen or renovate to meet the
needs of your growing family.
Finance Your Child’s Education
– Give your children the financial support they need to go further in school.
Make A Large Purchase
– A wedding? A new boat? A recreational vehicle? Make your dream come true.
Save Money – Consolidate
your debts, reduce your payments or increase your disposable income immediately.
If saving on monthly expenses,
reducing your payments and increasing your disposable income are your goals,
ask me whether a home equity loan might be your answer.
Call me today!
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