MB Mortgages Faqs
A pre-approved mortgage suggests an interest rate guarantee from a lender for a particular period of time usually 60 to 90 days and for a fixed amount of money. The pre-approval is calculated based on information provided by you and is usually subject to certain conditions being met before the mortgage is finalized. Conditions would typically be things like written employment, income evidence and down payment from your own capital. Majority real estate professionals will make sure you have a pre-approved mortgage before they show you properties available for purchase. This confirms that they are showing you a property within a given price range. A pre-approved mortgage is one of the first steps a homebuyer should take before commencing the buying process.
For buying a home, the minimum requirement for a down payment is 5%, depending on certain maximum price limits. Despite of the down payment amount, at least 5% of it must be from your own cash funds or a gift from a family member. The down payment cannot be borrowed.
A down payment of at least 5% of the total cost of the probable property is a must for a home buyer as per the rule of the Canadian Mortgage and Housing Corporation (CMHC). With a down payment between 5 - 19.99%, the mortgage is considered "high-ratio". The high ratio mortgage is subject to a CMHC premium in agreement with the following schedule:
The mortgage is considered "conventional" if a down payment is 20% or more. A conventional mortgage is not conditional on any CMHC fees. Hence, a larger down payment indicates a two-fold advantage to the potential homebuyer. Firstly, the potential homebuyer will avoid CMHC premiums with 20% down payment. Secondly, a larger down payment will lead to smaller monthly payments, or a shorter amortization; both of which lead to interest savings over the period of the mortgage.
Gifts from family in the form of down payment money will be accepted by most of the lenders. A donor is usually required to provide a gift letter to confirm that the money is a proper gift and not a loan. For mortgages with less than 20% down payment, the home buyer must have a mortgage loan insurance provided by CMHC, Genworth, or Canada Guaranty.
The day on which one actually purchases their new home they are required to pay certain costs related with this investment. In addition to one's down payment, along with the prepaid property tax and homeowner's insurance premiums, there will be other fees to regard are as follows: Survey Charges, Land Transfer Taxes, Attorney Fees and Disbursements, Garbage Disposal Fees, Title Insurance and Fire Insurance. GST will be charged on your real estate transaction. You will need to check this with your real estate agent.
The amortization of a mortgage is the number of years it will take to pay down the principal balance. The maximum amortization currently is 35 years.
The whole length of time taken to get the house mortgage free from the payments is known as amortization whereas a period of time where your mortgage payments are still applicable and your current responsibility for that particular time is known as the term in mortgage. Also, it means you have the option to go for a 5 year term and a 25 year amortization where your interest rate, your mortgage payments, and your prepayment options would be the same for these five years. When these five years come to an end, the term will be renegotiated and the amortization will be 20 years instead of 25 now.
A mortgage broker deals with large numbers of lenders and can find you the best rate and terms for your mortgage. A bank lender only has a duty of care to you when a mortgage broker has to put your interests before their own. Most times you do not pay for this service as a mortgage broker is compensated by the lender.
In order to pay your mortgage, there are multiple ways to cut down the no. of years in your mortgage term. You will be able to benefit from considerable savings by:
- Choosing a non-monthly or speedy payment plan
- Increasing your mortgage payment frequency plan
- Making key prepayments
- Making huge Payments
- Choosing a shorter amortization at renewal
Interest rates will go up and down with the amount of risk the lender is willing to take. The lender will look at the whole deal (borrower, property, current market conditions etc...) to assess the amount of risk involved. If your credit rating is lower you could pay a higher rate because there is a greater chance of default. On the other hand if your credit is good you will most likely enjoy a lower or best interest rate available.
At MB Mortgages, we follow Personal Information Protection and Electronic Documents Act (PIPEDA). We keep our clients personal information in a secure and confidential way and do not sell it to the third party under any circumstances.
The answer depends on how many, and the time between credit checks. Try to have your credit checks done within a week or two because credit reporting companies should take this as you shopping around. Applying consistently throughout the year could mean you are searching for credit and that will raise concern. Limit yourself to 3 checks per year, pick the credit lines you are feeling comfortable and stick with them.
Most private mortgage lenders will not report to credit reporting companies but can provide information on your payment history with them. This could be helpful depending on who you are considering as a new lender. It is best to talk with a mortgage professional regarding this situation.
A variable rate mortgage moves up and down with a lenders prime rate. Prime rates usually follow the Bank of Canada interest rate movements.
A fixed rate mortgage has the interest rate fixed for a certain period of time, generally the length of the mortgage term.
If you are sure you are getting the best rate from your lender and are happy with the service, then yes. But; if you wonder about the interest rate your lender is offering you or don't know the best rates, it would be wise for you to check with an Accredited Mortgage Professional to ensure you are in fact getting the best mortgage for your situation. A good rule of thumb is to never sign any renewal until you are sure and to start checking about 3 to 4 months before your mortgage renewal.
If a lender has asked you to provide a co-signer to secure a mortgage you may be lacking enough credit (history or amount) or your income is near or over debt service ratios. The lender is feeling a co-signer will strengthen your application enough to be approved. Some lenders will re-look at the mortgage in a year just for the purpose of removing the co-signer.
A co-signer will be liable for the mortgage and also must be able to pay the payments along with their monthly commitments if you default on the loan.
A mortgage amount that is greater than 80% of the value of the property is considered high ratio and is normally insured with default insurance through either CMHC or Genworth. These insurance premiums are a percentage of the mortgage and should be discussed before closing.
There are many options available to pay off mortgage faster. One of them is to able to reduce the principal and accordingly to cut down the interest obligation. There are a number of ways to achieve this: Firstly Increase Payment Frequency i.e. Consider paying bi-weekly instead of paying monthly. This step is very practical for most Canadians employees who are paid bi-weekly. This can cut down your mortgage amortization by five years and can save you thousands of dollars. Secondly, use the prepay option. In this option, use all the benefits that the mortgage term offers you to prepay the mortgage. You can also use your RRSP tax refund to make a prepayment in a year. Thirdly, increase the mortgage payments by paying a round figure bi-weekly. For e.g. a bi-weekly payment of $431.59, should be a round figure payment of $450.00. This will have a deep outcome on the interest and the mortgage amortization.
A good credit history is a minimum of 1 year with credit line over $1,000 but this also depends on the lender. A well rounded credit profile is experience with revolving credit (credit cards) and installment loans (a loan that has repayment terms and declining balance). Because lenders differ, if you have a short history or none at all you may still qualify for a mortgage and it is best to talk to a mortgage professional about your situation.