- How rising rates can affect my mortgage?
- Which mortgage features are the most important?
- Should I get a Mortgage Pre-approval?
- Should I get a mortgage from a broker or a bank?
- How can I get myself mortgage-ready well in advance?
- How can I improve my credit score?
- What can I use as a downpayment source?
- What advice can I get as a First-Time Homebuyer?
- How to be prepared for the next mortgage renewal?
- Which renovations add the most value to my home?
- What is a stress test?
- How do I get a copy of my NOA Notice of Assessment?
- What is included in the 1.5% of closing costs?
- What is the difference between Good Debt and Bad Debt?
- What is the difference between Appraisal and Home Inspection?
- When I find the condo or house of my dreams and want to make an offer, do I need a financing condition?
- What is Bridge Financing? Do I need that?
- What is Reverse Mortgage?
- Are there any penalties when switching mortgage lenders?
- I am new to Canada, can I get a mortgage?
For homeowners with variable-rate mortgages, the effects of recent policy rate hikes will have an immediate impact as lenders increase their prime lending rate in response. Depending on the terms of your variable-rate mortgage, you may see an increase in your payment or find that a higher portion of your fixed payment is going toward interest rather than principal.
Also, keep in mind that many homeowners will likely hit the trigger rate unless they adjust their monthly payments. Generally speaking, the trigger rate is when your interest payments exceed your total payments. The quickest way to determine your trigger rate is to review your mortgage documents referring to the initial contract you signed. Your trigger rate will be clearly displayed, so you’ll know when to expect a call from your bank.
It’s easy to look online for lower mortgage rates and they are definitely used as a lure to attract your attention. But the reality is once the fine print is read, many will find they don’t qualify for that rate, and often there are restrictions that could really cost homeowners in the long run. Rate is only one aspect of saving money on your mortgage over the long term, so it is essential that you also consider mortgage features like Early Payout Penalties, Prepayment Privileges, Collateral charge mortgage, Porting Flexibility, Blended Mortgage, etc.
A mortgage pre approval will tell you how much you qualify for (you may be pleasantly surprised), what your mortgage payments will be, and you’ll get an interest rate that will be held for a specific time period (90-120 days). If you are purchasing a new home, then you’ll be shopping with a full wallet! You’ll know exactly what you can afford as you want to avoid reaching too far financially for a house you’ve fallen in love with.
One of the most compelling reasons to work with a mortgage broker is a choice - access to a wide range of lending sources, making it significantly easier to get a mortgage that best suits your needs. When you’re dealing directly with one financial institution, you just don’t know if you’re getting the best deal because they’ve only got their own menu of products to offer you. While securing your financing, your broker will be with you every step of the way, to answer all your questions, outline your best options, and efficiently guide you through the process. Everything relating to your mortgage can be managed around your busy schedule.
Whether you are a first-time buyer or looking to renew or refinance your mortgage with a new lender, getting a new mortgage can be stressful. That’s why you should get yourself mortgage ready well in advance. Start by polishing your credit score! Also, plan to go into homeownership with the maximum down payment possible. Get a boost from family and start a dialogue early! Get in touch early to talk about your purchase, refinance, or renewal plans, don't wait until the last minute!
You can boost your score by several points quickly with continual good credit habits. Most importantly, pay your bills on time, every time. Don’t let your credit accounts exceed 30% of the credit available. Before you cancel any credit cards, get advice. And don’t apply for a store card just to save on your purchase that day. Make a habit of checking your credit score regularly and watch how those good credit habits push your credit score skywards!
New mortgage rules might mean that you need a bigger downpayment than you expected. Here are some of the sources that can be used:
- Savings. Provide a 3-month history of any bank account(s) where you have been assembling your downpayment. It’s critical that your name is linked to the account; some internet printouts don’t show a name.
- RRSPs (up to $25,000 per applicant). If using RRSP money, provide a 3-month history of the account. If you are withdrawing under the Homebuyer’s Plan, the funds must have been in the account for 90 days.
- A financial gift (or loan) from a parent/blood relative. You'll need to document in writing that the funds are a gift and that you are not required to pay the money back at any time. If all or part of your downpayment will be a gift, a gift letter must be signed. A bank statement from the giver will verify the funds. Be prepared to show the funds deposited to your account no later than 15 days prior to closing. Gifted funds are only acceptable from immediate family members (parents, grandparents, siblings).
- TFSA / Investments OR If you had any large deposits, show its source i.e. if you sold your car, show a copy of the bill of sale. If you transferred money in from another account, bring the records for that account too.
- Inheritance, Sale of an asset. If your downpayment is coming from the sale of your home, provide a firm contract of purchase and sale and the current mortgage statement. If you are getting money from outside the country, get the money into Canada at least 30 days before funding, and provide a 90 day confirmation from that location.
Determine what you can afford before you start shopping for a new home. Consider opportunities that will help you manage your housing costs. Perhaps you could rent out part of your home, or have a roommate to help offset expenses. Or if you are in a condo, possibly rent out an extra parking space if you have one. Plan for closing costs – lawyer fees, reimbursements, land transfer or similar tax, appraisal, home inspection, title insurance – so you’ll need to have some extra funds set aside to cover these costs. Generally, you can expect to pay between 1.5% and 4% of the home’s selling price in total closing costs. And most importantly, get expert advice -work with a mortgage broker to sort through all of the mortgage options and get the right combination of mortgage features, privileges and rates that is best matched to your needs!
Many homeowners accept whatever their lender offers without any negotiation to shave a few points off. While it's tempting to choose what is easiest, it's so important to have a mortgage expert give you a second opinion and start working for you as early as 9 months prior to renewal. Renewal is also a good time to decide whether you should consider a fixed or variable-rate mortgage, increase or decrease your payments, or take advantage of prepayment privileges to pay your mortgage off faster. Bring your renewal notice to your mortgage broker six months prior to your renewal date. Many lenders provide a 120-day rate guarantee for pre-approved clients to protect them against a rise in mortgage rates.
According to the Appraisal Institute of Canada (AIC), the top four renovations with the highest return on investment (ROI) include: Updated kitchen, A sparkly bathroom, Fresh painting, Refreshed décor. Keep in mind that you don’t want to do renovations that will price your house right out of your neighborhood. And when you plan to sell, focus on updates that have wide-ranging appeal, and showcase the features of your home with a good declutter.
The Government of Canada introduced the stress test several years ago to ensure Canadians were able to absorb any increase in mortgage rates. With Canadians experiencing high levels of household debt, the goal was to create a financial buffer for buyers facing a greater risk of not being able to make their mortgage payments in the future.
The mortgage qualifying rate refers to the rate at which you need to pass the stress test. As of June 1, 2021, the minimum qualifying rate for both uninsured mortgages (homes purchased with at least a 20% down payment, which includes all homes worth $1 million or more) and insured mortgages (homes purchased with less than a 20% down payment) is the higher of the following: the mortgage rate plus a 2% cushion or the Bank of Canada 5-year rate at the time of application referred to as the Benchmark rate – 5.25% as of right now. Canada’s big banks are mandated to enforce these rules for all mortgage borrowers.
There are few options to get a copy of your NOA. The easiest way is to set up direct online access through the CRA portal and retrieve your NOAs from there: log into your online account with CRA https://www.canada.ca/en/revenueagency/services/e-services/e-servicesindividuals/account-individuals.html. Another option is to call the Canada Revenue Agency at 1-800-959-8281 and request a copy by mail. Additionally, you can ask your accountant - and they will also have your T4s and Full T1 Generals in PDF format.
A minimum of 1.5% of the purchase price (in addition to the downpayment verification) must be readily available to show the lender, and some lenders may require proof of these available funds upon approval. Some of the potential costs included are legal fees and disbursements, land transfer tax, title insurance, prorated costs, other. Keep in mind that in the GTA the land transfer tax is double, so 1.5% may not be enough. It is always better to confirm the amount required with your solicitor.
There is such a thing as good debt. Good debt is temporary, manageable debt that can bring you closer to your financial goals. It includes a well-structured mortgage, or borrowing to invest when it is designed to improve your overall financial position. Bad debt gets in the way of building long-term wealth, and creates an ongoing burden. It includes credit cards, high-interest loans, and any of the dreaded “buy now/pay later” purchases. If you have some bad debt behavior, call us for some professional mortgage advice. A mortgage is still the lowest-rate loan.
Often in a home purchase, home inspections and appraisals are both common practice. A home inspection is often a condition of purchase and is usually done to protect the homebuyer. A qualified home inspector will assess the physical condition of the home and all of its major systems to help you determine if everything is in good working order. You typically receive a schedule outlining what repairs are needed and by when. An appraisal is an impartial assessment of the home’s value to confirm that the property is suitable as security for the mortgage. This is rarely a problem, but lenders and insurers take on their own financial risk, and they want to feel confident in the property before they approve the mortgage.
Unless you can pay cash for the home, then yes you do. That little phrase – “conditional on financing” – is an important protection for buyers. When an offer to purchase is made “conditional on financing”, we gain the time needed i.e. 3 to 5 days to ensure that you are fully approved for the necessary funds. Your lender needs to feel as comfortable about the property as you do and will likely conduct an assessment. After all, the property is the lender’s security if something goes wrong.
Bridge Financing allows you to purchase and move into your dream home before your current home’s closing date, bridging the gap between the two. Bridge financing when buying a house is typically fairly short-term. Most bridge loans in Canada have to be paid back within six to 12 months. A key advantage of bridging finance to buy property, compared to say a line of credit, is that you don’t have to make any regular loan payments. A bridge loan in Canada only needs to be paid off once you sell your old home, so you don’t need to find the money to make interest payments while waiting for your house sale to close. Bridging financing rates in Canada tend to be higher than regular mortgage rates because they are only short-term loans. The main advantage of bridge financing in Canada is that it gives you more time to sell your old home. Using a bridge loan to buy a house can prevent you from having to accept a lower offer on your old home. Keep in mind that not all lenders offer bridge financing, so it is always better to consult with your broker.
It is important to understand your options when it comes to financial security. Seniors who are at least 55 years of age, and who own a home are eligible for a reverse mortgage. With a reverse mortgage, you can access up to 55 percent of the value of your home, while maintaining the ownership, never having to move or sell. There are no payments required and you can receive your tax-free cash in monthly installments, in a lump sum, or a combination of both. The best part is, the loan from the reverse mortgage does not have to be repaid until the borrower passes away or moves/sells their home. As you plan and save for your retirement, know that this is an option for you. If you want to find out now what you can access from your most secure investment, your home, get in touch at any time.
There are no fees or payout penalties if you switch at mortgage renewal. Once you are qualified, your current mortgage balance and remaining amortization period are transferred to your new lender at the new rate, which your mortgage payment will be based on. However, when you transfer your mortgage in the middle there likely be penalties to it. Generally, you can expect to pay the greater of either a) three months’ interest, or b) the interest-rate differential (IRD). With the IRD, your lender will expect you to pay the equivalent of what they will lose by releasing you from your mortgage and lending the money at current rates. Often penalties can be rolled into the new mortgage so you don’t have to be out of pocket. A common myth is that switching your mortgage for a better rate is difficult. It’s actually an easy mortgage transaction. Let me show you how!
New Canadians are making significant numbers in the housing market, as they get settled and transitioned from renter to owner. For newcomers, ownership may prove harder than anticipated, as they face some unforeseen obstacles. The biggest challenge for new immigrants is establishing credit because they do not have a financial history in Canada.
So, first of, it is a good idea to start working on your credit in Canada as soon as you can. Another home ownership struggle immigrants have faced is that many financial institutions traditionally have insisted that new immigrants provide a down payment of at least 25 to 35 percent. The great news is that mortgage brokers can streamline the mortgage process for new immigrants, from counseling on credit in Canada to obtaining credit references from foreign banks and confirming foreign income. We offer several mortgages for newcomers with great rates.