Frequently Asked Questions
What Is the Purpose of a Mortgage Broker?
Mortgage brokers work as a facilitator between borrowers and lenders. They are not employed by lenders. A mortgage broker has the expertise and network to obtain the best mortgage solution for a borrowers unique circumstances. They search for the mortgage product that will best suit your needs and obtain the best mortgage rate for you based upon your specific situation. Brokers have access to most bank-based lending institutions, as well as specific non-bank mortgage lenders.
What Is the Difference Between Fixed, Variable, And Adjustable Rate Mortgages?
With a fixed rate mortgage (FRM), the interest rate is locked-in providing a consistent payment for a set term which typically ranges from 6 months to 10 years. An FRM is often selected for peace of mind and certainty of interest rate over a certain period of time. A variable rate mortgage (VRM) is similar to a FRM in that the payments are fixed for the term of the mortgage but because the interest rate is subject to change, the amortization period (total number of years to pay off) will increase or decrease. If interest rates drop, more of the payment goes towards reducing the principal and if the rates go up, a larger portion of the payment goes towards covering the interest. Deciding on the right mortgage is best done in consultation with your trusted Hosper Mortgage Agent.
What Is the Minimum Down Payment on Purchasing with A Mortgage?
In most cases, you will need to pay a minimum of 5% of the house value as a down payment. In addition to the down payment, you must also be able to show that you have the capacity to cover other closing costs such as the legal fees, appraisal fees and a survey certificate. As a rule, at least 5% of the down payment must be from your own cash resources or a bona fide gift from a family member. Talk to Hosper Mortgage for details. Mortgage loan insurance is required whenever the down payment is less than 20% of the lesser of the purchase price or appraised value.
How Much Can I Afford to Pay for A Home?
To find out how much you will be able to pay for your new home, you need to analyze your taxable income along with the amount of debt that you must pay off through monthly payments. If you are planning to purchase a primary residence, calculate approximately 39% of your income to make the mortgage payment, property taxes and heating costs. Next, you need to ensure that all your other monthly payments such as car loans, credit card bills and other such debts does not exceed 39% of your taxable income. The lesser of these two calculations will be used to determine how much of your income may be used towards housing related payments, including your mortgage. Apart from what the ratios tell you, you should make calculations of your own to determine how much you can afford. If the payment amount you are comfortable with is less than 39% of your income you may want to settle for the lower amount rather than stretch yourself financially. Make sure you take all other expenses into consideration too so that you can maintain your lifestyle.
What Is A Pre-Approved Mortgage and What Are Its Benefits?
A pre-approved mortgage is one that provides an interest rate guarantee from a lender for a specified period of time (usually 60 to 90 days) and for a set amount of money. The pre-approval is calculated based on information provided by the borrower and is subject to certain conditions being fulfilled before the mortgage if finalized. These conditions usually include factors such as a written confirmation of employment and income among other things. Many brokers recommend their clients have a pre-approval as this gives a clear idea of the affordable price range when hunting for a new home. There are many benefits of getting a pre-approval. First, a pre-approval gives you an idea of what you can afford, helping you narrow your search for a new home. It also provides clarity on what your monthly payments will be for the term of the mortgage, and it allows you to lock in an interest rate.
What Is Mortgage Loan Insurance?
There are three mortgage default insurance providers in Canada: the Canada Mortgage and Housing Corporation (CMHC), Genworth Financial, and Canada Guaranty Mortgage loan insurance protects the lender in the event of default on mortgage payments and is required whenever the down payment is less than 20%. The premium is payable by the borrower and typically ranges between 0.5% to 3.75%, depending on factors including the amount of down payment and length of amortization.
What Is A Conventional Mortgage?
A conventional mortgage is one in which the down payment amount is equal to more than 20% of the purchase price (or where the loan value is less than 80%). Conventional mortgages do not require mortgage loan insurance.
What Is A High-Ratio Mortgage?
When a lender provides a loan for more than 80% of the property value, this is known as a High-Ratio mortgage. A High-Ratio Mortgage requires mortgage loan insurance. Premiums for a mortgage loan insurance can range from 0.5% to 3.75%, depending on the value of the mortgage.
What Documentation Is Required to Obtain A Mortgage?
To make your mortgage application process as simple as possible, it is advisable that you collect and prepare all these documents up front: – Personal information and identification such as your drivers license or passport. – Job details, including employment confirmation and proof of income. – Your sources of income. – Proof of financial assets. – Information and details of all your bank accounts, loans and other debts. – Source and amount of down payment. – Proof of source of funds for the closing costs (usually about 2.5% of purchase price)
Can I Get A Mortgage to Pay Off Debt Or Renovate My Home?
Yes! Mortgages can be obtained for several purposes, including financing home renovations or to consolidate credit card debt. You can also borrow against the equity in your home to invest in the stock market or your own business. There are hundreds of possibilities!
Will I Need to Include A Lawyer?
Yes, a lawyer will represent you because mortgages must be registered by lawyers in Ontario. It is the lawyers job to ensure you understand the terms of the mortgage. Lawyers also take care of things such as land title transfers, hold money in trust, and distribute funds to the appropriate parties.
Will I Need an Appraisal?
The requirement of an appraisal is a standard condition for any conventional mortgage (more than 20% down payment). Lenders require appraisals to make sure you are paying the fair market price for the property you are purchasing. The appraisal also allows the lender to understand the property they are accepting as collateral for the mortgage loan.
If I Sell My Home, Can I Take My Mortgage with Me?
It depends on the mortgage lender. Most lenders now offer portability options, which allow you to take your mortgage with you. Generally, if you take possession of your new home within 60 days of giving up possession of your old home, no extra fees or penalties apply.