Frequently Asked Questions
The most important things regarding a mortgage, that should be carefully reviewed are the interest you will pay and the payment conditions. The best deal for your mortgage means manageable payment terms and affordable lower interest rate.
To choose among the offers you obtain you should compare the conditions they are offering you.
Mortgage brokers work for you. You are their client and it’s their job to get you the best deal in the marketplace. If you are a first time home buyer, having a professional to guide you through the process, to help you get the loan and a correct estimation of the total cost of buying your home is important.
Your mortgage broker will identify the right lender for your particular case and will negotiate better conditions for loans, including rates, pre-payment options and flexible payment types that match your lifestyle. His role is to reduce your efforts.
Mortgage brokers have a network of lending institutions and banks and have the odds to obtain better mortgages in your name.
Your Mortgage Guide is not your typical mortgage broker, we are providing tailored mortgage solutions for your exact needs in the best conditions possible. We aim to support you in building your future financial wealth.
Our mission is to teach you how to pay your mortgage faster and improve your life standard. We also, offer free mortgage management in Canada to help you obtain more advantages on your mortgage.
Zero. You do not pay anything for Your Mortgage Guide services. It’s the lenders who will pay us, not you. In normal circumstances we do not charge our clients for mortgages, just in more particular situations like commercial mortgage, the second mortgage or in special cases.
The truth is your bank has just one offer, its own and cannot cover all types of needs in most favourable conditions. The mortgage industry is a world of diversity and reducing your option to one provider it’s probably not the best idea.
A broker works with dozens of lenders or more, and obviously can present a range of more competitive offers. Plus the offers will be previously selected and only the most suitable will be taken into consideration. And that’s the brokers’ job to reduce hassle and time consumption on your end.
As a general idea, you have to know that you can allocate 32% of your monthly income for mortgage payments and 40% to your overall debts. More recent guidelines indicate 44% as maximum income level dedicated to debts and loans.
But, first, is probably better to decide on the amount of money you are comfortable paying for your mortgage on a monthly basis. To have an exact idea concerning the amount you can spend on your mortgage you should review your monthly income and expenses. Once you have this information your mortgage broker can tell you the sum you can invest in your new home.
Check out our mortgage calculator to find out.
Yes, mortgages are used for debt consolidation purposes quite often. There are several advantages of a home equity line of credit or debt consolidation:
- Interest rate reduction
- Monthly payments reduction
- Interest paid just on used funds
- Pay your mortgage faster
- Reusable credit
- Tax deductions
Before starting to hunt for the right property, it is recommended to have your mortgage pre-approved for several reasons:
- You know exactly your budget for your new home purchase.
- Your interest rate will be held for 90 to 120 days. Which means you are protected from rising interest rates.
- Having the mortgage pre-approved will speed up the closing process.
- You will be perceived as more serious by sellers and this could be a condition requested by realtors to work with you.
In short the pre-approved mortgage is among the first conditions to be accomplished when starting a real estate buying process.
Fixed Mortgage Rate refers to the fact that the interest rate remains unchanged for the whole period of the mortgage, no matter the economic conditions. If you fear uncertainty and want to know exactly what you have to pay, this is your option. You will pay more toward the principal of the loan and less for interests along the time.
Variable Mortgage Rate means that the monthly payments remain the same as amount but the interest will fluctuate according to the modifications of the Prime Rate. So, when interest rates increase, you will pay a smaller amount for the principal and more for the interest. And vice-versa.
In general short term mortgages tend to have lower rates while long term mortgages have higher rates. Which is best for you depends on your particular situation. It is worth taking into consideration the general economic climate, if interest rates are low, it might be a good idea to go for the long term mortgage. If interest rates are high, choose the short term.
Anyway, here at Your Mortgage Guide we offer you free mortgage management in Canada, which means we review your mortgage every year and send you a report, showing you ways to pay off your mortgage faster.
Obviously closing costs vary largely on a case by case basis.
In general, closing costs include:
- Appraisal fees
- Legal fees – lawyer/notary
- Survey fees in particular circumstances
- Land transfer tax
- Property insurance
- Property tax adjustments
The time needed to finalize the mortgage process relies heavily on how fast you provide us the necessary documents. On average it takes about two weeks, but it can take a couple of days or even one day if you move fast.
Most borrowers have concerns related to their mortgage in case they lose their job. What happens if a person having a mortgage lose his/her job? Is it possible to have a loan modification in this situation? The correct answer to this question will be found after your lender reviews your new level of income. The purpose of this review is to find out if you will be able to pay your mortgage payments. If you are in this situation, simply give us a call and we will guide you through how to best navigate this. Often at renewal, you can simply sign the mortgage renewal and avoid this topic altogether.
An insurance premium is required to be paid when your down payment is less than 20%. Why? Because lenders consider there is a higher risk of default when the amount of down payment is smaller. Consequently this insurance premium has the purpose to protect the lender in case you are not able to pay your mortgage.
This insurance is very important because it offers you the possibility to buy a home with as little as a 5% down payment. It allows you to get into the housing market with only 5% down payment, instead of having to save for 20%.
In general, yes, if the funds are provided by a family member.
In Canada lenders will accept gifted money for the down payment, if the money comes from a close relative. But you will need a letter indicating that the respective funds are a gift and a proof that the money was deposited in a bank account in your name.
Most probably you can’t. If you don’t have a job letter and pay stub it’s not possible to qualify for a mortgage. Exception to this rule are the self employed persons and those working on commission for a period of at least two years or if you have a large down payment.
If you are in one of the above mentioned situations you should provide a series of documents like articles of incorporation, business license, statements of business activities and latest Notices of Assessment from Revenue Canada.
When buying a property you need to have a minimum of 5% of the total purchase price. This 5% should be your own funds or gifted funds from a family member. If you are a non resident or a newcomer to Canada, your down payment should be of minimum 10%. Plus you must demonstrate that you can pay the closing costs.
The documents for down payment might be:
- If the source of down payment are your savings, you need to provide your bank statements for three months showing your name and account number
- If the source of down payment is the sale of another property, you need to provide the Contract of Sale and a mortgage statement
- If the source of down payment are your investments, you need to provide investment statements that include your name and account number
- If the source of down payment is a gift, a copy of a gift letter is needed together with proof that money were transferred to your bank account
The larger the amount paid as a down payment, the smaller the costs associated with the mortgage in the long run.
Pre-payments bring in some benefits like the possibility to pay more each month, like 15-20% percent.
To pay your mortgage faster and reduce its costs you can:
- Choose an accelerated payment schedule and not a monthly one
- Make more principal prepayments
- Make more Double-Up Payments
- Choose a shorter Amortization at renewal
The governmental program called Home Buyers’ Plan aims to support interested persons to finance the down payment for their first home. You can use an amount of maximum $25,000 in RRSP savings or double for a couple and you have 15 years to return the RRSP.
You must have RRSP funds on deposit for a minimum of 90 days to accomplish the qualification criteria and an agreement to purchase a corresponding house.
An appraisal of the property you want to buy is a must for all mortgages having a downpayment of 20% or more. Why? Because these are uninsured mortgages and the lender wants to make sure that the price you pay for the property is competitive on the market and in case of default the loan can be fully recuperated.
A secondary reason for appraisal is that the lender wants to check on the quality of the property you are buying.