Frequently Asked Questions

Q: What is a mortgage?

A: A mortgage is a loan that is secured by real estate and is used for the purpose of buying the home or refinancing it. The mortgage or loan amount is typically paid back with principal and interest payments, principal being the amount you borrow. Although title is transferred to the borrower, the property can be reclaimed by the lender if payments are defaulted.

Q: What is CMHC insurance and why do I need to purchase it?

A: Whenever you take a new mortgage, purchase or refinance, you will require by law, to have the mortgage insured against default if you require more than 80% of the appraised value of selling price of the, whichever is less. In Canada, there are 2 sources of mandatory insurance: CMCH and Gen Worth. There is only 2 ways you can avoid this cost. One is put at least 20% of the purchase price if buying, or refinance up to 80% if you are refinancing. The second way is to use a piggyback loan such as a second mortgage to cover the difference between your down payment and the 20%.

Q: What are the different mortgage options I can choose?

A: In deciding the type of mortgage to choose from you will have to decide among the following: Open or closed mortgage, fixed or variable rate, term of the mortgage, amortization period, and the pre payment facility or options, and frequency of payments. You can review these options in more detail here.

Q: Why should I consider a pre approval?

A: A pre approval is needed in order to ensure you qualify and how much of a loan you are entitled to considering both your credit, and your family income. Having a pre approved mortgage allows you to shop for your new home more confidently, removes stress, and also protects your approved rates if rates go up. If they come lower, you will receive the lower rate instead. Either way, you will benefit, and it is especially recommended for first time buyers and for those people who do not have a good credit rating.

Q: Why documents are needed for a pre approved mortgage?

A: Generally all you need is a completely filled out application. However a good mortgage broker will also ask documentation with respect to income confirmation by way of employment letters, T4 slips, tax assessments and proof of your down payment. This is important because when you do find and purchase the home, it will be required and best if these documents are verified before.

Q: What costs can I expect?

A: The other costs associated with the purchase of a home may include the following: Inspection fee-required if a professional is to inspect the house prior to the completion of the purchase. Appraisal fee-required to ensure the property is acceptable security for the mortgage. Legal fees-includes lawyer's or notary's fees plus any disbursements required to transfer the property and register the mortgage. Survey certificate fee-required to ensure the house is positioned on the lot within legal restrictions. Tax adjustments-you will be responsible for paying the taxes for the portion of the first year that you own the property. Mortgage insurance-if the down payment is less than 25% of the purchase price, an insurance premium on the mortgage amount is required (it may be added to the mortgage amount). Home insurance-arranged to cover the property in the event of fire or other damage. Mortgage protection insurance-optional, but is available to cover the mortgage amount in the event of death, disability, loss of employment, or critical illness. Moving costs-vary depending on how far you're going and who is helping you move.

Q: May I use my RRSP to make a down payment?

A: A federal government plan allows first-time homebuyers to use their RRSPs to help finance their home purchase. This money can be used as a down payment, or to help with other closing costs. RRSP home ownership withdrawal forms are available from your RRSP holder (link to form). The criteria are as follows:

  • Each applicant can withdraw up to $25,000.
  • Applicants cannot have owned a principal residence within the past 5 years, unless it was a revenue property.
  • You must reside in the home for at least one year.
  • The RRSP funds must have been invested for more than 89 days before withdrawal to qualify.
  • The withdrawn amount must be repaid, over an interest-free repayment period that can be as long as 15 years.

 

Q: What is the minimum acceptable down payment?

A: The minimum down payment required to qualify for an insured mortgage is 5% for single residential, owner occupied homes, and 10% for multi units from 1 - to 4 units provided you occupy one of the units yourself. Alternatively the amount of down payment depends entirely on your credit worthiness and your ability to service the new mortgage payment along with all your other debt. Generally the amount of down payment needs to be increased when you credit is too low and cannot be approved by many of the larger banks.

Q: What are the sources of acceptable down payment?

A: A down payment must come from your own non borrowed source. You may also use money that is gifted to you from immediate family and provide a gift letter to state the money will not have to be repaid. You may also qualify for a Flex down mortgage and use money you can borrow against other assets you have or use the money through lenders special programs.

Q: How do I know if I qualify?

A: There are many ways to qualify for a mortgage. Some mortgages are based on the equity of your home with no income qualification needed, while others are based on salary and credit worthiness.

Each mortgage application is treated differently and can be approved subject to your specific needs and qualifications. We are experts in determining the route to process your application in order to obtain the best mortgage rate in the marketplace on your behalf.

Q: How does bankruptcy affect my qualifications?

A: In order to purchase a home, depending on your down payment, we can get you a mortgage provided, you are discharged from bankruptcy. Most banks require you to have reestablished your credit with at least two trades within 24 months.

Q: I am in business for myself and can't prove income; can I still get a mortgage?

A: Yes, we can still get you approved for a mortgage. The qualifying process is different as rates and terms may vary depending upon the credit and equity in your property or your down payment towards your purchase. You will need to answer 4 simple questions:

  1. How is your credit?
  2. How much are you putting down, if it is a purchase?
  3. What is your income?
  4. How long have you been in your job?

 

Q: How long can you hold a rate?

A: Rates can be held between 90 to 120 days. Rates can drop if rates in the marketplace fall.

Q: What is Bridge Financing?

A: Bridge Financing is a short term loan that enables you to maintain the property you¿re currently selling, as well as purchase the property you wish to purchase. This option is available if there is a time gap between your sale and purchase.

Q: Can we arrange bridge financing?

A: Bridge financing can be arranged depending on the closing date and is usually no more than 6 weeks of the new purchase.

Q: Can we switch from a variable to a fixed rate?

A: Depending on the terms of your mortgage, you can switch to a fixed rate term from a variable rate mortgage at anytime.

Q: I have bad credit, can I still get a mortgage?

A: As long as you have equity in your property, we may be able to get you approved for mortgage financing with bad credit.

Q: Can I buy with no money down?

A: With good credit, job stability and proof of income, you can arrange for a mortgage with no money down up to 95% of the property value or new purchase amount (subject to availability).

Back to Top