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FAQs - Frequently Asked Questions
Down Payment
* What is a down payment?
* How much do I need for a down payment?
* What is the minimum down payment needed for a home?
* Can I use gift funds as a down payment?
* How can you use your RRSP to help you buy your first home?
Affordability
* How much can I afford to pay for a home?
* How much mortgage can I afford?
* How does bankruptcy affect qualification for a mortgage?
* How will child support affect mortgage qualification?
Key Mortgage Terms
* What is mortgage loan insurance/CMHC?
* What is a Mortgage Agent?
* What is a Mortgage Broker?
* What is an Accredited Mortgage Professional (AMP)?
* What is a pre-approved mortgage?
* What is a fixed rate mortgage?
* What is a variable rate mortgage?
* What are closing costs?
* What is the difference between Pre-approval, Pre-qualification, and Mortgage Commitment?
* What is title insurance?
* What is a home inspection?
* What is an appraiser?
* What is a conventional mortgage?
* What is the difference between Term and Amortization?
Other Questions
* How can you pay off your mortgage sooner?
* What should the length of my mortgage term be?
* How can I save money on my mortgage?
* How does a mortgage agent/broker get paid?
What is a down payment?
A down payment is the money you contribute to the purchase of your house. The down payment together with the money borrowed through a mortgage equals the purchase price of your home. You should know how much you can contribute before you start house hunting.
The larger the down payment, the less your home costs in the end. With a smaller mortgage, interest costs will be lower and over time, this will add up to significant savings.
back to top
How much do I need for a down payment?
You need a minimum 5% down payment - that is 5% of the purchase price - and you must meet other rules, including a minimum credit score, in order toqualify for a mortgage.
With a down payment less than 20%, the mortgage is considered a "high-ratio" mortgage or insured mortgage - mium which means you will have to pay a one-time CMHC premium that varies based the percentage down payment and amortization chosen.
For example, a 5% down payment and a 25 year mortgage would result in a 2.75% CMHC premium being added to the principle balance of your mortgage. You do not have to pay for this up front.
With a down payment of 20% or greater, the mortgage becomes a "conventional mortgage". A conventional mortgage is not subject to any CMHC fees.
Therefore, a larger down payment has a double advantage. First, you avoid CMHC premiums with a 20% down payment or larger and secondly, the larger down payment means smaller monthly payments, or a shorter amortization; both of which lead to interest savings over the life of the mortgage.
Note there is an option to gain 100% financing - you need a higher credit score and the interest rate will be significantly higher.
back to top
What is the minimum down payment needed for a home?
A minimum down payment of 5% is typically required to purchase a home. This can come from a family gift or your own savings. Only in unique situations can it be borrowed.
back to top
Can I use gift funds as a down payment?
Yes, most lenders accept down payment that are gifted from family. A gift letter signed is required to confirm that the funds are true gift and not a loan.
back to top
How can you use your RRSP to help you buy your first home?
Under 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, at least 1/15th per year. Note that any additional contributions will first go to pay back the RRSP funds withdrawn - so you will get tax credits on RRSP contributions until these funds are repaid.
To qualify, the RRSP funds you are using must be on deposit for at least 90 days. You will also need a signed agreement to buy a qualifying home.
back to top
How much can I afford to pay for a home?
This is a personal budget question more than a policy question. The next question/answer describes how lenders determine how much they are prepared to lend you - for some, it makes you house poor - for others, it works with their lifestyle.
We will tell you what policy says you can qualify to borrow - and you will need to determine at what point the combination of mortgage payment, property taxes and utilities goes outside your comfort zone. Make sure you don't leave yourself house poor. Structure your payments so that you can still afford simple luxuries.
back to top
How much mortgage can I afford?
The amount of a mortgage for which one can qualify is generally founded in what are known as qualification ratios: Gross Debt Service ratio and Total Debt Service ratio, or "GDS" and "TDS". Lenders evaluate one's monthly income, as well as their monthly debt obligations, to determine a fair and feasible amount of mortgage available to the prospective borrower. This figure is calculated via their GDS and TDS guidelines.
Generally, lenders use a maximum Gross Debt Service ratio of 32%. In other words, your mortgage payment, property tax payment and heat (and condo fee) can not be greater than 32% of your gross monthly household income.
Second, most lenders use a Total Debt Service ratio of 40-42%. In other words, all debt obligations including mortgage payments, property taxes, loan and credit card payments can not be greater than 40% of your gross monthly household income.
So, to determine how much you could qualify for requires us to consider your gross income, your existing debt payments and current mortgage rates in order to complete this calculation. With this information, you can use any mortgage calculator on-line to estimate your borrowing potential - or you can simply call us.
back to top
How does bankruptcy affect qualification for a mortgage?
Different lenders treat bankruptcy (and consumer proposals) different ways. In general, lenders want the bankruptcy to be discharged - to have been discharged for 1-2 years and for you to have re-established credit.
There are few lenders that may work with you immediately after discharge but they are what we call transitional lenders. Their rates will be higher, there will be lender fees as well, in most cases, and the minimum down payment will be higher (15% or greater).
Depending on the circumstances surrounding your bankruptcy, some lenders will not consider providing mortgage financing at all.
back to top
How will child support affect mortgage qualification?
Child or spousal support is considered another financial obligation - just like a loan payment - and will reduce the potential borrowing or mortgage amount.
Where you receive child support and alimony from another person, generally the amount paid will be added to your gross income, increasing the borrowing potential or mortgage amount. Lenders will require proof of regular receipt per your separation agreement.
back to top
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 federal law to insure lenders against default on mortgages when you borrow more than 80% of the value of your property.
The insurance premiums is a one time payment varies based on your down payment percentage & amortization, are paid by you and usually are added directly onto the mortgage amount.
This is not the same as mortgage life insurance.
back to top
What is a Mortgage Agent?
A Mortgage Agent is an independent real estate financing professional who specializes in financing residential and/or commercial mortgages. Typically, they do not fund or service the loan itself, but instead, they act as an Agent for banks, institutional and private mortgage lenders.
A Mortgage Agent in Ontario is licensed by the Financial Services Commission of Ontario and is also an independent professional working many lenders at any one time. By combining professional expertise with direct access to hundreds of loan products, a agent provides consumers the most efficient and cost-effective method of finding suitable financing options tailored to their needs and goals.
back to top
What is a Mortgage Broker?
A Mortgage Broker is the same as a Mortgage Agent but with more training. A Mortgage Broker can operate a licensed mortgage brokerage whereas a Mortgage Agent must work for a mortgage brokerage.
back to top
What is an Accredited Mortgage Professional (AMP)?
An AMP is a licensed mortgage professional who has met the experience and education requirements to be awarded the AMP designation. An AMP agrees to perform at a high standard of ethics and professionalism as well as being committed to continuing education in the field of mortgages. Visit www.caamp.org
back to top
What is a pre-approved mortgage?
A pre-approved mortgage or pre-approval is a commitment from a lender to guarantee an interest rate for 90-120 days and an expressed intent to work with you, conditional on you purchasing a property acceptable to them.
This is not a guarantee of financing, as it is dependent on the actual property you intend to purchase, on CMHC where required and on you confirming things like your employment and down payment.
Most successful realtors will want to ensure you have a pre-approved mortgage in place before they take you out looking for a home. This is to ensure that they are showing you property within your affordable price range. It also is to avoid everyone embarrasment and the waste of time and emotion.
One of the key things a broker-arranged pre-approval involves is a review of your credit history. Occasionally things show up that no one knew were there and they can take time to resolve. Always better to know this up front then after negotiating to purchase a home and discovering that your financing is in jeopardy!
In summary, a pre-approved mortgage is one of the first steps a homebuyer should take before beginning the buying process.
back to top
What is a fixed rate mortgage?
A fixed rate mortgage is a mortgage where the interest rate is set for a certain period of time - usually 5 years. This is a common mortgage as the mortgage payment doesn't change should market interest rates go up. It makes budgeting easier.
back to top
What is a variable rate mortgage?
A variable rate mortgage is a mortgage where the interest rate changes as the Bank's prime rate changes. This means that your mortgage payment also changes with changes in the prime rate. Bank prime rates can fluctuate several times a year. Variable rate mortgages often offer lower rates but bring with them the risk that your mortgage payment could increase quickly with llittle notice.
back to top
What are closing costs?
Closing costs is a term used to describe your legal fees, land transfer tax, survey or title insurance costs and other costs associated with purchasing a home. In some cases your real estate transaction may be subject to HST as well - check with your real estate agent for this.
back to top
What is the difference between Pre-approval, Pre-qualification, and Mortgage Commitment?
If you are just getting started in the hunt for a new home, it is important to know the difference between pre-qualifying, pre-approval and a loan commitment.
A pre-qualification means that a mortgage professional has taken your application and provided you with the professional opinion on what you would qualify for in a mortgage. Note that it does not mean that you have been approved for a loan, but it is first step so you know what you can qualify for before a pre-approval is completed.
A pre-approval means that your mortgage professional has looked at your credit bureau and that a lender has reviewed your application and credit history and advised that they are prepared to work with you. A pre-approval is mostly an interest rate commitment (90-120 days).
While this is stronger than a pre-qualification, it is still conditional on the home that you decide to purchase, on verification of the information you have submitted and, where required, conditional on CMHC's willingness to insure. Therefore, even with a pre-approval, any offer you make to purchase will be conditional on financing.
If the seller knows that you are approved for the loan, already you may have more leverage. In fact, it is a good idea to plan to get pre-approved. Some real estate agents will not waste their time showing homes to potential buyers who do not have a pre-approval, especially in a hot market.
A Mortgage Commitment is a letter that is issued by the lender that states that they will fund your mortgage. This letter may include details of your interest rate and the maximum amount of loan they will offer. This is your approval and will be conditional on providing certain documents listed in the commitment letter.
Once you are approved, do not make any big changes to your finances. Changing jobs, banks and taking out other loans can lower your credit rating, change your debt-to-income ratio and ultimately keep you from getting the loan. Now is not the time to buy that new car, big screen television or to take an expensive vacation. The mortgage company may make one last credit check even if you have a loan commitment.
back to top
What is title insurance?
Title insurance is an insurance policy required by pretty much all lenders now. It protects you against issues that affect title or ownership - including many types of homeowner fraud affecting title.
It is a one time expense, at closing, of between $200 and $300 on average and remains in place for as long as you own your home.
Title insurance differs significantly from other forms of insurance. While the functions of most other forms of insurance is to guard against future events (such as death or accidents or in the case of property, fire or flood), the primary purpose of title insurance is to eliminate risks and prevent losses caused by events that have happened in the past.
back to top
What is a home inspection?
A home inspection is an inspection of the structure and systems: heating and air conditioning, plumbing and electrical, roof, attic, insulation, walls, floors, ceilings, windows, doors, foundation, and basement by a qualified home inspector. This is of value in determining what repairs may be required sooner than later - and in some cases may change your mind on purchasing a particular home.
back to top
What is an appraiser?
A real estate appraiser is an independent third party who provides an assessment of market value and condition of a house. They will visit a house, take pictures and compare the property to others that have sold recently to arrive at an objective assessment of market value. An appraisal will be a lender's condition when you are putting 20% or more as a down payment.
back to top
What is a conventional mortgage?
A conventional mortgage is mortgage when the down payment is equal to 20% or more of the purchase price.
back to top
What is the difference between Term and Amortization?
The amortization of the mortgage refers to the entire length of time that it will take for the mortgage to be paid.
The term is the period for which your current payment obligations are valid.
In other words, you may choose a five-year term and a 25-year amortization. This would mean that your interest rate, your payments, and your pre-payment options would be the same for the next five years. At the end of these five years, you would re-negotiate the term, and the amortization would now be 20 years.
back to top
How can you pay off your mortgage sooner?
There are many ways to reduce the number of years to pay down your mortgage. You'll enjoy significant savings by:
* choosing an accelerated biweekly payment schedule over a monthly schedule
* increasing your regular payment
* making lump sum prepayments
* making Double-Up Payments
* selecting a shorter amortization at renewal
back to top
What should the length of my mortgage term be?
Mortgage terms vary widely - from six months to 10 years. As a rule of thumb, the shorter the term, the lower the interest rate - and the longer the term, the higher the rate.
While four or five year mortgages are what most home buyers typically choose, you may consider a shorter-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:
1. 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.
2. Do you believe that interest rates have bottomed out and are not likely to drop more? If that is 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.
3. Are you looking for security as a first-time homebuyer? Then you may prefer a longer mortgage term, so that you can budget for and manage your monthly expenses.
4. Are you willing to follow interest rates closely and risk their being increased mortgage payments following a renewal? If that is the case, a short mortgage term may best suit your needs.
back to top
How can I save money on my mortgage?
You save interest costs by reducing the mortgage balance as quickly as you can.
Increase Payment Frequency - Instead of paying monthly, consider paying bi-weekly. This simple step is very feasible for most working Canadians who are paid bi-weekly. It can cut your mortgage amortization by up to five years, and can save you tens of thousands of dollars.
Prepay - Use every advantage that the term of your mortgage offers you to prepay your mortgage. One way to do this would be to use your RRSP tax refund to make a yearly pre-payment.
Increase Payments - Round up your bi-weekly payment. For example, if you have a bi-weekly payment of $531.59, round your payment to an even $550.00. This will have a profound effect on the interest paid, and the amortization of the mortgage.
back to top
How does a Mortgage Agent/Broker get paid?
In almost all cases, a commission is earned by the lender that earns your business - so typically there is no fee to you - on residential property purchases. If the agent/broker can only use a private lender or if you are purchasing a commercial property, then in most cases there will be a broker fee as well as a lender fee.
back to top
* What is a down payment?
* How much do I need for a down payment?
* What is the minimum down payment needed for a home?
* Can I use gift funds as a down payment?
* How can you use your RRSP to help you buy your first home?
Affordability
* How much can I afford to pay for a home?
* How much mortgage can I afford?
* How does bankruptcy affect qualification for a mortgage?
* How will child support affect mortgage qualification?
Key Mortgage Terms
* What is mortgage loan insurance/CMHC?
* What is a Mortgage Agent?
* What is a Mortgage Broker?
* What is an Accredited Mortgage Professional (AMP)?
* What is a pre-approved mortgage?
* What is a fixed rate mortgage?
* What is a variable rate mortgage?
* What are closing costs?
* What is the difference between Pre-approval, Pre-qualification, and Mortgage Commitment?
* What is title insurance?
* What is a home inspection?
* What is an appraiser?
* What is a conventional mortgage?
* What is the difference between Term and Amortization?
Other Questions
* How can you pay off your mortgage sooner?
* What should the length of my mortgage term be?
* How can I save money on my mortgage?
* How does a mortgage agent/broker get paid?
What is a down payment?
A down payment is the money you contribute to the purchase of your house. The down payment together with the money borrowed through a mortgage equals the purchase price of your home. You should know how much you can contribute before you start house hunting.
The larger the down payment, the less your home costs in the end. With a smaller mortgage, interest costs will be lower and over time, this will add up to significant savings.
back to top
How much do I need for a down payment?
You need a minimum 5% down payment - that is 5% of the purchase price - and you must meet other rules, including a minimum credit score, in order toqualify for a mortgage.
With a down payment less than 20%, the mortgage is considered a "high-ratio" mortgage or insured mortgage - mium which means you will have to pay a one-time CMHC premium that varies based the percentage down payment and amortization chosen.
For example, a 5% down payment and a 25 year mortgage would result in a 2.75% CMHC premium being added to the principle balance of your mortgage. You do not have to pay for this up front.
With a down payment of 20% or greater, the mortgage becomes a "conventional mortgage". A conventional mortgage is not subject to any CMHC fees.
Therefore, a larger down payment has a double advantage. First, you avoid CMHC premiums with a 20% down payment or larger and secondly, the larger down payment means smaller monthly payments, or a shorter amortization; both of which lead to interest savings over the life of the mortgage.
Note there is an option to gain 100% financing - you need a higher credit score and the interest rate will be significantly higher.
back to top
What is the minimum down payment needed for a home?
A minimum down payment of 5% is typically required to purchase a home. This can come from a family gift or your own savings. Only in unique situations can it be borrowed.
back to top
Can I use gift funds as a down payment?
Yes, most lenders accept down payment that are gifted from family. A gift letter signed is required to confirm that the funds are true gift and not a loan.
back to top
How can you use your RRSP to help you buy your first home?
Under 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, at least 1/15th per year. Note that any additional contributions will first go to pay back the RRSP funds withdrawn - so you will get tax credits on RRSP contributions until these funds are repaid.
To qualify, the RRSP funds you are using must be on deposit for at least 90 days. You will also need a signed agreement to buy a qualifying home.
back to top
How much can I afford to pay for a home?
This is a personal budget question more than a policy question. The next question/answer describes how lenders determine how much they are prepared to lend you - for some, it makes you house poor - for others, it works with their lifestyle.
We will tell you what policy says you can qualify to borrow - and you will need to determine at what point the combination of mortgage payment, property taxes and utilities goes outside your comfort zone. Make sure you don't leave yourself house poor. Structure your payments so that you can still afford simple luxuries.
back to top
How much mortgage can I afford?
The amount of a mortgage for which one can qualify is generally founded in what are known as qualification ratios: Gross Debt Service ratio and Total Debt Service ratio, or "GDS" and "TDS". Lenders evaluate one's monthly income, as well as their monthly debt obligations, to determine a fair and feasible amount of mortgage available to the prospective borrower. This figure is calculated via their GDS and TDS guidelines.
Generally, lenders use a maximum Gross Debt Service ratio of 32%. In other words, your mortgage payment, property tax payment and heat (and condo fee) can not be greater than 32% of your gross monthly household income.
Second, most lenders use a Total Debt Service ratio of 40-42%. In other words, all debt obligations including mortgage payments, property taxes, loan and credit card payments can not be greater than 40% of your gross monthly household income.
So, to determine how much you could qualify for requires us to consider your gross income, your existing debt payments and current mortgage rates in order to complete this calculation. With this information, you can use any mortgage calculator on-line to estimate your borrowing potential - or you can simply call us.
back to top
How does bankruptcy affect qualification for a mortgage?
Different lenders treat bankruptcy (and consumer proposals) different ways. In general, lenders want the bankruptcy to be discharged - to have been discharged for 1-2 years and for you to have re-established credit.
There are few lenders that may work with you immediately after discharge but they are what we call transitional lenders. Their rates will be higher, there will be lender fees as well, in most cases, and the minimum down payment will be higher (15% or greater).
Depending on the circumstances surrounding your bankruptcy, some lenders will not consider providing mortgage financing at all.
back to top
How will child support affect mortgage qualification?
Child or spousal support is considered another financial obligation - just like a loan payment - and will reduce the potential borrowing or mortgage amount.
Where you receive child support and alimony from another person, generally the amount paid will be added to your gross income, increasing the borrowing potential or mortgage amount. Lenders will require proof of regular receipt per your separation agreement.
back to top
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 federal law to insure lenders against default on mortgages when you borrow more than 80% of the value of your property.
The insurance premiums is a one time payment varies based on your down payment percentage & amortization, are paid by you and usually are added directly onto the mortgage amount.
This is not the same as mortgage life insurance.
back to top
What is a Mortgage Agent?
A Mortgage Agent is an independent real estate financing professional who specializes in financing residential and/or commercial mortgages. Typically, they do not fund or service the loan itself, but instead, they act as an Agent for banks, institutional and private mortgage lenders.
A Mortgage Agent in Ontario is licensed by the Financial Services Commission of Ontario and is also an independent professional working many lenders at any one time. By combining professional expertise with direct access to hundreds of loan products, a agent provides consumers the most efficient and cost-effective method of finding suitable financing options tailored to their needs and goals.
back to top
What is a Mortgage Broker?
A Mortgage Broker is the same as a Mortgage Agent but with more training. A Mortgage Broker can operate a licensed mortgage brokerage whereas a Mortgage Agent must work for a mortgage brokerage.
back to top
What is an Accredited Mortgage Professional (AMP)?
An AMP is a licensed mortgage professional who has met the experience and education requirements to be awarded the AMP designation. An AMP agrees to perform at a high standard of ethics and professionalism as well as being committed to continuing education in the field of mortgages. Visit www.caamp.org
back to top
What is a pre-approved mortgage?
A pre-approved mortgage or pre-approval is a commitment from a lender to guarantee an interest rate for 90-120 days and an expressed intent to work with you, conditional on you purchasing a property acceptable to them.
This is not a guarantee of financing, as it is dependent on the actual property you intend to purchase, on CMHC where required and on you confirming things like your employment and down payment.
Most successful realtors will want to ensure you have a pre-approved mortgage in place before they take you out looking for a home. This is to ensure that they are showing you property within your affordable price range. It also is to avoid everyone embarrasment and the waste of time and emotion.
One of the key things a broker-arranged pre-approval involves is a review of your credit history. Occasionally things show up that no one knew were there and they can take time to resolve. Always better to know this up front then after negotiating to purchase a home and discovering that your financing is in jeopardy!
In summary, a pre-approved mortgage is one of the first steps a homebuyer should take before beginning the buying process.
back to top
What is a fixed rate mortgage?
A fixed rate mortgage is a mortgage where the interest rate is set for a certain period of time - usually 5 years. This is a common mortgage as the mortgage payment doesn't change should market interest rates go up. It makes budgeting easier.
back to top
What is a variable rate mortgage?
A variable rate mortgage is a mortgage where the interest rate changes as the Bank's prime rate changes. This means that your mortgage payment also changes with changes in the prime rate. Bank prime rates can fluctuate several times a year. Variable rate mortgages often offer lower rates but bring with them the risk that your mortgage payment could increase quickly with llittle notice.
back to top
What are closing costs?
Closing costs is a term used to describe your legal fees, land transfer tax, survey or title insurance costs and other costs associated with purchasing a home. In some cases your real estate transaction may be subject to HST as well - check with your real estate agent for this.
back to top
What is the difference between Pre-approval, Pre-qualification, and Mortgage Commitment?
If you are just getting started in the hunt for a new home, it is important to know the difference between pre-qualifying, pre-approval and a loan commitment.
A pre-qualification means that a mortgage professional has taken your application and provided you with the professional opinion on what you would qualify for in a mortgage. Note that it does not mean that you have been approved for a loan, but it is first step so you know what you can qualify for before a pre-approval is completed.
A pre-approval means that your mortgage professional has looked at your credit bureau and that a lender has reviewed your application and credit history and advised that they are prepared to work with you. A pre-approval is mostly an interest rate commitment (90-120 days).
While this is stronger than a pre-qualification, it is still conditional on the home that you decide to purchase, on verification of the information you have submitted and, where required, conditional on CMHC's willingness to insure. Therefore, even with a pre-approval, any offer you make to purchase will be conditional on financing.
If the seller knows that you are approved for the loan, already you may have more leverage. In fact, it is a good idea to plan to get pre-approved. Some real estate agents will not waste their time showing homes to potential buyers who do not have a pre-approval, especially in a hot market.
A Mortgage Commitment is a letter that is issued by the lender that states that they will fund your mortgage. This letter may include details of your interest rate and the maximum amount of loan they will offer. This is your approval and will be conditional on providing certain documents listed in the commitment letter.
Once you are approved, do not make any big changes to your finances. Changing jobs, banks and taking out other loans can lower your credit rating, change your debt-to-income ratio and ultimately keep you from getting the loan. Now is not the time to buy that new car, big screen television or to take an expensive vacation. The mortgage company may make one last credit check even if you have a loan commitment.
back to top
What is title insurance?
Title insurance is an insurance policy required by pretty much all lenders now. It protects you against issues that affect title or ownership - including many types of homeowner fraud affecting title.
It is a one time expense, at closing, of between $200 and $300 on average and remains in place for as long as you own your home.
Title insurance differs significantly from other forms of insurance. While the functions of most other forms of insurance is to guard against future events (such as death or accidents or in the case of property, fire or flood), the primary purpose of title insurance is to eliminate risks and prevent losses caused by events that have happened in the past.
back to top
What is a home inspection?
A home inspection is an inspection of the structure and systems: heating and air conditioning, plumbing and electrical, roof, attic, insulation, walls, floors, ceilings, windows, doors, foundation, and basement by a qualified home inspector. This is of value in determining what repairs may be required sooner than later - and in some cases may change your mind on purchasing a particular home.
back to top
What is an appraiser?
A real estate appraiser is an independent third party who provides an assessment of market value and condition of a house. They will visit a house, take pictures and compare the property to others that have sold recently to arrive at an objective assessment of market value. An appraisal will be a lender's condition when you are putting 20% or more as a down payment.
back to top
What is a conventional mortgage?
A conventional mortgage is mortgage when the down payment is equal to 20% or more of the purchase price.
back to top
What is the difference between Term and Amortization?
The amortization of the mortgage refers to the entire length of time that it will take for the mortgage to be paid.
The term is the period for which your current payment obligations are valid.
In other words, you may choose a five-year term and a 25-year amortization. This would mean that your interest rate, your payments, and your pre-payment options would be the same for the next five years. At the end of these five years, you would re-negotiate the term, and the amortization would now be 20 years.
back to top
How can you pay off your mortgage sooner?
There are many ways to reduce the number of years to pay down your mortgage. You'll enjoy significant savings by:
* choosing an accelerated biweekly payment schedule over a monthly schedule
* increasing your regular payment
* making lump sum prepayments
* making Double-Up Payments
* selecting a shorter amortization at renewal
back to top
What should the length of my mortgage term be?
Mortgage terms vary widely - from six months to 10 years. As a rule of thumb, the shorter the term, the lower the interest rate - and the longer the term, the higher the rate.
While four or five year mortgages are what most home buyers typically choose, you may consider a shorter-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:
1. 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.
2. Do you believe that interest rates have bottomed out and are not likely to drop more? If that is 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.
3. Are you looking for security as a first-time homebuyer? Then you may prefer a longer mortgage term, so that you can budget for and manage your monthly expenses.
4. Are you willing to follow interest rates closely and risk their being increased mortgage payments following a renewal? If that is the case, a short mortgage term may best suit your needs.
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How can I save money on my mortgage?
You save interest costs by reducing the mortgage balance as quickly as you can.
Increase Payment Frequency - Instead of paying monthly, consider paying bi-weekly. This simple step is very feasible for most working Canadians who are paid bi-weekly. It can cut your mortgage amortization by up to five years, and can save you tens of thousands of dollars.
Prepay - Use every advantage that the term of your mortgage offers you to prepay your mortgage. One way to do this would be to use your RRSP tax refund to make a yearly pre-payment.
Increase Payments - Round up your bi-weekly payment. For example, if you have a bi-weekly payment of $531.59, round your payment to an even $550.00. This will have a profound effect on the interest paid, and the amortization of the mortgage.
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How does a Mortgage Agent/Broker get paid?
In almost all cases, a commission is earned by the lender that earns your business - so typically there is no fee to you - on residential property purchases. If the agent/broker can only use a private lender or if you are purchasing a commercial property, then in most cases there will be a broker fee as well as a lender fee.
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Tony Antaya
AMP
Mortgage Agent
905.689.3213
tony.antaya@migroup.ca
138 Brian Boulevard, Waterdown
AMP
Mortgage Agent
905.689.3213
tony.antaya@migroup.ca
138 Brian Boulevard, Waterdown
Jim Cook
MBA, CMA, AMP
Mortgage Broker
519.396.6800
1-877-587-6800
james.cook@migroup.ca
819 Queen St., Kincardine
MBA, CMA, AMP
Mortgage Broker
519.396.6800
1-877-587-6800
james.cook@migroup.ca
819 Queen St., Kincardine
Registered trademark of Mortgage Intelligence Inc. 2009, Mortgage Intelligence Central Office 5770 Hurontario Street, Suite 600, Mississauga, ON L5R 3G5 FSCO 10428
Jim Cook Broker Lic. M08001302 Tony Antaya Agent Lic. M08001243
Jim Cook Broker Lic. M08001302 Tony Antaya Agent Lic. M08001243
The MyMortgagePlace team has locations in Kincardine and Waterdown serving all of Ontario.
