FAQ
These are the frequently asked questions from clients and peers that want to widen their knowledge in the mortgage world.
What is a mortgage?
When you buy a home, you may only be able to pay for part of the purchase price. The amount you pay is a down payment. To cover the remaining costs of the home purchase, you may need help from a lender. The loan you get from a lender to help pay for your home is a mortgage.
A mortgage is a legal contract between you and your lender. It specifies the details of your loan and it’s secured on a property, like a house or a condo.
With a secured loan, the lender has a legal right to take your property. They can do so if you don’t respect the conditions of your mortgage. This includes paying on time and maintaining your home.
Unlike most types of loans, with a mortgage:
- your loan is secured by a property
- you may have a balance owing at the end of your contract
- you normally need to renew your contract multiple times until you finish paying your balance in full
- you may have to meet qualification requirements including passing a stress test
- you need a down payment
- you may need to break your contract and pay a penalty
- your loan is typically for an amount in the hundreds of thousands of dollars
How your mortgage amount is calculated?
The amount you borrow from a lender for the purchase of a home is the principal amount.
This amount usually includes the:
- purchase price of the home minus your down payment
- mortgage loan insurance if your down payment is less than 20% or if it’s required by your lender
Types of interest
When you apply for a mortgage, your lender may offer different interest options.
Fixed interest rate
A fixed interest rate stays the same for the entire term. They are usually higher than variable interest rates. With a fixed interest rate, your payments will stay the same for the entire term.
Variable interest rate
A variable interest rate can increase and decrease during the term. Typically, the interest rate is lower with a variable interest rate than a fixed interest rate.
With a variable interest rate, you can keep your payments the same for the duration of your term. Lenders call this a fix payment with a variable interest rate. You also have the option to opt for an adjustable payment with a variable rate. With adjustable payments, the amount of your payment will change if the rate changes.
Property taxes
As a homeowner, you have to pay property taxes on your home. The amount you pay depends on the value of your home and where you live.
Some financial institutions collect and pay your property taxes for you. This may also be a condition of financing. If that’s the case, your lender adds the property tax amount to your regular payments.
Down payment
The minimum down payment based on the purchase price of your home
|
Purchase price of your home |
Minimum amount of down payment |
|---|---|
|
$500,000 or less |
|
|
$500,000 to $999,999 |
|
|
$1 million or more |
|
What is the minimum down payment needed to buy a home?
If your credit is strong enough, the minimum down payment required to buy a home is 5% of the purchase price of the property.
Why choose a mortgage brokerage?
- Saves time – its a one stop shop, we take care of everything the minute you walk into our door. You don’t have to waste time by contacting various banks looking best rate, product and a trustworthy broker you feel comfortable with.
- More product options – we have many products within our network of lenders that traditional banks don’t have. They can only offer what they provide whereas we have over 55+ lenders that offer various types of mortgage products that suit your financial lifestyle
- Unbiased advice – Brokerages do not have any sort of allegiance with lenders, our main goal is to find the right product that suits you. Just remember when we advise you its always in your best INTEREST.
- Protecting your credit score – Every application that you fill out when you are shopping around with banks will hurt your credit rating. Brokers eliminate that by checking your credit once and using that credit report to speak to numerous lenders. This gives us a higher success rate in getting you approved while keeping your credit score stable.
- Helping you every step of the way – When you make the decision to seek advice from a mortgage brokerage, we will take care of everything every step of the way. When dealing with us, we tend to make life stress-free, by handling everything that is needed to close the mortgage. We will be advocating on your behalf to our lenders to secure your a mortgage.
What are Closing costs?
Closing costs are all the fees involved before you get your keys. A good rule of thumb to estimate your closing cost is knowing it is usually 1.5% of the purchase price of your home, you need to set aside this amount on-top of your down payment. Your mortgage agent and lawyer will help guide you on how to allocate all the necessary costs needed for the mortgage transaction to close.
Credit Score
The usual score to obtain a mortgage is 680+, however there are situations where few lenders will provide assistance to lower scores. There will always be one credit check when handling your file, which means your score will not be as affected versus going to multiple banks. We perpetually provide tips and other strategies on how to improve your credit score to get the best rate possible.
Will child support affect my mortgage qualifications?
Child support and alimony paid by you to another person is usually deducted from your total income, it is deemed as an ongoing debt which determiesthe size of mortgage you can qualify for.
