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Questions
Answers
How much does it cost to use a mortgage consultant?
The vast majority of mortgage clients do not pay a fee for the services of a mortgage broker. Most financial institutions pay a finder's fee to mortgage brokers and at the same time offer them their best discounted rates and quick turnaround times in order to gain their business. This allows the mortgage broker to shop among the various financial institutions for the mortgage rate and product that best suits the needs of the client and, in almost all cases, at no cost to the client.
In situations where traditional lenders will not approve a mortgage because of poor credit, and where the application must be placed with a private or non-traditional lender, a brokerage fee may be charged to the client. This cost must always be disclosed to the client up front and must be authorized in writing by the client before it can be charged.
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What is a pre-approval and how do I get one?
A pre-approval provides an interest rate guarantee from a lender for a specified period of time (up to 120 days) and for a set amount of money. The pre-approval is calculated based on information provided by you and is generally subject to certain conditions being met before the mortgage is finalized. Conditions would usually be things like 'written employment and income confirmation' and 'down payment from your own resources', for example.
The easiest way to get a pre-approved mortgage is by contacting a Crescent Mortgage Corp. agent. You will be asked some questions to determine your financial situation and this combined with your authorization to perform a credit check will allow your mortgage agent to calculate the size of mortgage you qualify for. With this information you will then be in a position to make intelligent choices about your home purchase. Furthermore, most real estate professionals will want to ensure you have a pre-approval in place before they take you out looking for a home. This is to ensure that they are showing you property within your affordable price range.
A pre-approved mortgage is one of the first steps any potential home buyer should take.
Please contact any of our mortgage agents to get the process started.
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What is the minimum down payment needed for a home?
Typically, a minimum down payment of 5% is required to purchase a home. In addition to the down payment, you must also be able to show that you can cover the applicable closing costs (i.e. legal fees and disbursements, appraisal fees and a survey certificate, where applicable) which are usually estimated to be about 1.5% of the purchase price.
Mortgages with less than 20% down must have mortgage loan insurance provided by either CMHC or Genworth.
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What is mortgage loan insurance?
Mortgage loan insurance is insurance provided by Canada Mortgage and Housing Corporation (CMHC), a crown corporation, and Genworth, an approved private corporation. This insurance is required by law to insure lenders against default on mortgages with a loan to value ratio greater than 80%. The insurance premiums, ranging from .50% to 2.75%, are paid by the borrower and can be added directly onto the mortgage amount. This is not the same as mortgage life insurance.
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What is a conventional mortgage?
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 or less than 80%, and does not normally require mortgage loan insurance.
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How does bankruptcy affect qualification for a mortgage?
Depending on the circumstances surrounding your bankruptcy, some institutional lenders would consider providing mortgage financing. Private funds may however be a more attractive option.
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How will child support affect mortgage qualification?
Where child support and alimony are paid by you to another person, generally the amount paid out is deducted from your total income before determining the size of mortgage you will qualify for.
Where child support and alimony are received by you from another person, generally the amount paid may be added to your total income before determining the size of mortgage you will qualify for, provided proof of regular receipt is available for a period of time determined by the lender.
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Can I use gift funds as a down payment?
Most lenders will accept down payment funds that are a gift from an immediate family member as an acceptable down payment. A gift letter signed by the donor is required to confirm that the funds are a true gift and not a loan.
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How much can I afford to pay for a property?
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 of the estimated 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. The lesser of the first or second calculation will be used to help determine how much of your income may be used towards housing related payments, including your mortgage payment. These 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 rather than stretch yourself financially. Make sure you don't leave yourself house poor. Structure your payments so that you can still afford simple luxuries.
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Should I wait for my mortgage to mature before contacting you?
Lenders will often guarantee an interest rate for a month or two before your mortgage matures. However, most lenders send out their mortgage renewal notices offering existing clients their posted interest rates. The rate you are being offered is usually not the best on the market. Always investigate the possibility of a lower interest rate with your mortgage agent. If you don't you may end up paying a much higher interest rate on your renewing mortgage than necessary.
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How can you pay off your mortgage sooner?
There are ways to reduce the number of years to pay down your mortgage. You'll enjoy significant savings by:
Selecting an accelerated payment schedule (bi-weekly or weekly)
Making principal prepayments
Making Double-Up Payments
Selecting a shorter amortization at renewal
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How can you use your RRSP to help you buy your first home?
Today, about 50% of first-time home buyers use their RRSP savings to help finance a down payment. With the federal government's Home Buyers' Plan, you can use up to $25,000 in RRSP savings ($50,000 for a couple) to help pay for your down payment on your first home. You then have 15 years to repay your RRSP.
To qualify, the RRSP funds you're using must be on deposit for at least 90 days. You'll also need a signed agreement to buy a qualifying home.
Even if you have already saved for your down payment, it may make good financial sense to access your savings through the Home Buyers' Plan. For example, if you had already saved $25,000 for a down payment - and assuming you still had enough "contribution room" in your RRSP for a contribution of that amount you could move your savings into a registered investment at least 90 days before your closing date. Then, simply withdraw the money through the Home Buyers' Plan.
The advantage? Your $25,000 RRSP contribution will count as a tax deduction this year. Use any tax refund you receive to repay the RRSP or other expenses related to buying your home.
While using your RRSP for a down payment may help you buy a home sooner, it can also mean missing out on some tax-sheltered growth. So be sure to ask your financial planner whether this strategy makes sense for you, given your personal financial situation. For more information, please visit the “Links” section of our website.
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What are the costs associated with buying a home?
First and foremost, you have to make sure you have enough money for a down payment - the portion of the purchase price that you furnish yourself.
Secondly, you will require money for closing costs (typically 1.5% of the basic purchase price).
If you want to have the home inspected by a professional building inspector - which we highly recommend - you will need to pay an inspection fee. The inspection may bring to light areas where repairs or maintenance are required and will assure you that the house is structurally sound. Usually the inspector will provide you with a written report. If they don't, then ask for one.
You will be responsible for paying the fees and disbursements for the lawyer or notary acting for you in the purchase of your home. We suggest you shop around before making your decision on who you are going to use, because fees for these services may vary significantly.
There are closing and adjustment costs, interest adjustment costs between buyer and seller and (depending on where you live) land transfer tax - a one-time tax based on a percentage of the purchase price of the property and/or mortgage amount.
Finally, you will be required to have property insurance in place by the closing date. And you will be responsible for the cost of moving.
Remember, there will be all kinds of things you'll have to purchase early on - appliances, garden tools, cleaning materials etc. So factor these expenses into your initial costs.
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What should the length of my mortgage term be?
There is no definitive answer to this question, as each purchaser’s situation is unique. It is best to have a discussion with your mortgage agent who can provide you with the information necessary to make the best decision for you.
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What is a fixed rate mortgage?
The interest rate on a fixed-rate mortgage is set for a pre-determined term - usually between 6 months to 25 years. This offers the security of knowing what your payment will be for the entire term selected.
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What is a variable rate mortgage?
Variable rate mortgages have become very popular over the last couple of years due to the deep discounts available, and the flexibility to convert to a fixed rate mortgage at any time. The interest rate charged on this type of mortgage fluctuates in accordance with some base rate (typically prime rate +/-). Depending on the lender, this would result in either a payment change or an amortization change. For example, if prime rate was to increase, either your payment would increase or your payment would remain the same but less of it would go towards reducing the principal.
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Should I go fixed or variable?
Again, there is no right answer to this question. Given the number of different mortgage products offered these days, this can become a tough decision. There are also now products that allow you to split your mortgage balance so that 50% is variable and 50% is fixed. Your best bet is to talk to one of our mortgage agents who can help make this decision much easier for you.
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Crescent Mortgage Corp. is a Canadian owned and operated mortgage brokering company that has been in operation for over 14 years. We arrange over 400 million dollars in mortgage financing a year through some of Canada’s largest chartered banks, life insurance companies and Trust Companies. We provide a full range of mortgage services to not only purchasers but also existing homeowners and real estate investors throughout Ontario.
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Some of the lenders we deal with:
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