Mortgage FAQs
Q. Why use a mortgage consultant as opposed to a bank? When
dealing with a bank, you are limited to their product line, which
may not be the best product for you. But they won't tell you that,
because it's their job to sell you their products. As well, the
bank has to look out for their bottom line and at times clients
suffer by getting much higher rates than they deserve. When
dealing with mortgage consultants like us, it's much different - a
consultant can provide you with a wider range of mortgages
designed to fit your needs, and you can benefit from lower rates
without the haggling. You can also rest assured that we will be
fully looking out for your best interests, and you can expect the
highest level of customer service from us, as a result of our long
experience in the financial industry.
Q. Are there any fees involved with a mortgage consultant?
In most instances, there are no fees involved. Mortgage
consultants receive a commission from the lending institution that
receives and funds your mortgage application. If you do not
qualify normally due to bad credit, job instability or other
unseen factors there may be a brokerage fee, but it will be
disclosed to you prior to proceeding.
Q. Should I wait for my mortgage to mature? No. Allow us to
to begin shopping around for an interest rate at least 120 days
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 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 since the application was
submitted,
Q. What is mortgage loan insurance? Mortgage loan insurance
is provided by Canada Mortgage and Housing Corporation (CMHC), a
crown corporation, AIG and Genworth, approved private
corporations. This insurance is required by law to ensure lenders
against defaults on mortgages with a loan to value ration of more
than 80%. The insurance premiums, ranging from .50% to 2.75% are
paid by the borrower and can be added directly into the mortgage
amount. This is not the same as mortgage life insurance.
Q. 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 less than 80%; and does not
normally require mortgage insurance.
Q. What is a high-ratio mortgage? A high-ratio mortgage is
one where the amount to be borrowed is greater than 80% of the
purchase price or appraised value. High-ratio mortgages generally
require mortgage loan insurance provided by either CMHC, a crown
corporation or Genworth, a private insurer. The mortgage loan
insurance premium paid to CMHC or Genworth protects the lender in
case of default in the event the mortgage is not repaid, and the
bank has to take back the property. The benefit to the borrower is
that they can purchase a home with less than 20% down, to as low
as 5% down. The insurance premium is paid by the borrower and can
be added directly into the mortgage amount. This is not the same
as mortgage life insurance.
Q. What can I use for a down payment? In most cases:
Registered Retirement Savings Plans (RRSP's) may be used as a down
payment up to a maximum of $25,000 and is not subject to income
tax if repaid within 15 years. Gift from immediate family
Accumulated savings Sale of existing home Equity
Q. What is the minimum down payment needed to buy a home? A
minimum down payment of 5% is usually required to purchase a home,
but there are exceptions. For instance at Invis we have
relationships with lenders that will actually lend you 100% of the
purchase price or appraisal value of your home. However 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? To determine
'affordability' you will first need to know your taxable income
along with the amount of any debt outstanding and the monthly
payments. Assuming it is your principal residence you are
purchasing, calculate 32% of your income for use toward a mortgage
payment, property taxes and heating costs. If applicable, half the
monthly condominium maintenance fees will also be included in this
calculation. Second, calculate 40% of your taxable income and
deduct all of your monthly debt payments, including car loans,
credit cards, lines of credit payments. 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 than
stretch yourself financially. Make sure you don't leave yourself
house poor. Structure your payments so you can still afford simple
luxuries.
Q. How does bankruptcy affect my ability to qualify for a
mortgage? Depending on the circumstances surrounding your
bankruptcy, generally some lenders will consider providing
mortgage financing.
Q. What do I need to bring to my initial consultation?
Employment and income documents proving income such as recent
paystub, letter of employment. For self employed, commissioned or
seasonal workers (such as oilfield, construction, truck driving
etc), you will need to provide 2-3 years of Revenue Canada Notice
of Assessments.
Q. What paperwork do I need to provide for approval of my
application? While documentation requirements can vary depending
on your circumstances and the lender who will be doing the
financing, the following lists the most commonly requested
documents: * Employment Income Documents:
* Letter of employment
* Recent paystub
* OR 2-3 years Revenue Canada Notice of Assessments for self
employed, commissioned or seasonal workers
* (if purchasing) Confirmation of Downpayment & Closing Costs:
From Own Resources
* 90 days Bank Transaction History and current balance (must show
name & account number)
* Confirmation of source of any large deposits (ie. Paystubs)
* RRSP statements if using RRSP funds
Gifted Funds
* Gift letter signed by Giftor & Giftee stating funds are a
gift and non-repayable
From Sale of existing home (or other asset)
* Contract of Sale
* Current mortgage statement showing balance to be paid out
If purchasing:
* Copy of Contract to purchase & listing sheet
For refinance/equity take out transations:
* Copy of Current mortgage statement showing balance & payment
information
