Mortgage
FAQs
Q.Why
use a mortgage consultant as opposed to a bank?
Q.
Are there any fees involved with a mortgage consultant?
Q.
Should I wait for my mortgage to mature?
Q.
What is mortgage loan insurance?
Q.
What is a conventional mortgage?
Q.
What is a high-ratio mortgage?
Q.
What can I use for a down payment?
Q.
What is the minimum down payment needed to buy a home?
Q.
How much can I afford to pay for a home?
Q.
How does bankruptcy affect my ability to qualify for a mortgage?
Q,
What do I need to bring to my initial consultation?
Q.
What paperwork do I need to provide for approval of my application?
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Q.
Why use a mortgage consultant as opposed to a bank?
A.
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 a mortgage consultant like me, 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 I will be fully looking out for your best interests,
and you can expect the highest level of customer service from me, as a
result of my long experience in the financial industry.
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Q.
Are there any fees involved with a mortgage consultant?
A.
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.
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Q.
Should I wait for my mortgage to mature?
A.
No. Allow me 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,
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Q.
What is mortgage loan insurance?
A.
Mortgage loan insurance is provided by Canada Mortgage and Housing Corporation
(CMHC), a crown corporation, and Genworth and AIG United, 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.
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Q.
What is a conventional mortgage?
A.
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.
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Q.
What is a high-ratio mortgage?
A.
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, AIG 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.
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Q.
What can I use for a down payment?
A.
In most cases:
-
Registered
Retirement Savings Plans (RRSP's) may be used as a down payment up to a
maximum of $20,000 and is not subject to income tax if repaid within 15
years.
-
Gift from
immediate family
-
Accumulated
savings
-
Sale of existing
home
-
Equity
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Q.
What is the minimum down payment needed to buy a home?
A.
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).
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Q.
How much can I afford to pay for a home?
A.
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.
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Q.
How does bankruptcy affect my ability to qualify for a mortgage?
A.
Depending
on the circumstances surrounding your bankruptcy, generally some lenders
will consider providing mortgage financing.
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Q.
What do I need to bring to my initial consultation?
A.
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.
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Q.
What paperwork do I need to provide for approval of my application?
A. 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
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