A mortgage broker is a licensed mortgage professional who has access to multiple lenders and mortgage rates (some with exclusive interest rates). Mortgage brokers act as an intermediary and compares mortgages from a variety of lenders to find the best mortgage option for their clients.
Expertise To Meet Your NeedsA mortgage broker offers a wide range of mortgage loans from a number of different lenders and is able to navigate the client through any situation. They will handle the process and smooth any bumps in the road. For borrowers who may have credit issues or income challenges, the mortgage broker will be able to find a lender that offers the best product to meet their needs.Finds The Most Advantageous DealA mortgage broker represents your interests rather than the interests of a lending institution. With access to a wide range of mortgage products, a broker is able to offer you the greatest value in terms of interest rate, repayment amounts, and loan products.Saves You TimeWith a mortgage broker, you only need one application rather than completing forms for each individual lender. Your mortgage broker can provide a formal comparison of any loans recommended, guiding you to the information that accurately portrays cost differences with current rates, points, and closing costs for each loan reflected.Saves You Money With No Hidden CostsA mortgage broker is offered loans on a wholesale basis from lenders, and therefore can offer the best rates available in the market. There are no fees required from the borrower for using a mortgage broker, except in very complicated cases of challenging speciality loans. Should this happen, any fee would be disclosed and discussed before any work is commenced. A mortgage broker is compensated by a referral fee from the lender, and is calculated on the amount that you borrow and for what term, not the interest rate that we negotiate on your behalf.Delivers Personalized ServicePersonalized service is the differentiating factor when selecting a mortgage broker. They are your mortgage consultant and are available to you throughout the mortgage application process. More importantly, they are often able to tailor meetings and communications around your needs in a relaxed and easy to understand manner.
The main difference is a bank mortgage officer represents only the products their institution offers, while a mortgage broker is an intermediary who works with multiple lenders, from conventional lenders (banks, credit unions) to alternative lenders (trust companies, private lenders).
A mortgage is a loan used to buy a home or other property. It is a contract that includes rights and obligations of both parties. The property is the security for the loan and a mortgage allows the lender to take possession of the property if you don't repay the loan on time.When you get a mortgage loan, you are called the mortgagor. The lender is called the mortgagee.Under a mortgage, you are responsible for making regular payments to the lender. The payments cover the interest on the loan plus part of the principal (the amount of the loan).When you make a mortgage payment, the lender uses it first to cover the interest. Then anything left goes to the principal. At the beginning, only a small amount goes to the principal, but gradually more of the payment goes to the principal until it is fully paid off. The part of the property that is paid for—both through the down payment and through your mortgage payments—is called your equity in the property.
There is two types mortgages: open and closed.Open mortgagesWith an open mortgage agreement, you can make extra payments (known as prepayments) at any time. You may even be able to pay the mortgage off completely before the end of the term without having to pay any penalty charges.The interest rate on an open mortgage is usually higher than on a closed mortgage with similar terms. Open mortgages may be available only for short terms such as six months or a year.Closed mortgagesWith a closed mortgage, if you want to change your mortgage agreement during the term (for example, to take advantage of lower interest rates), you will usually have to pay a penalty charge. The mortgage lender may let you make extra payments (known as prepayments) at any time, without charge but usually with limitations. For example, you may be able to make a 10% lump sum payment every year, or increase your scheduled payments by 10%. The specific terms will vary from one lender to another.The interest rate on a closed mortgage is usually lower than the rate on an open mortgage with similar terms.
The mortgage term is the length of time your mortgage agreement and interest rate will be in effect (for example, a 25-year mortgage may have a term of five years). However, you don't necessarily pay off the mortgage fully at the end of the term. You may need to renew or renegotiate your mortgage to extend it to a new term and continue making payments.The term of the contract fixes your agreement for a period of time. Mortgage terms from six months to five years are common, although seven- or ten-year terms are often available. The term simply means that at the end of the period, you will have to negotiate a new mortgage term based on your personal and financial conditions at the time. Usually, your mortgage holder will offer to renew the mortgage at then-current market terms or better. However, it's an opportunity to negotiate with your financial institution or meet with a mortgage broker to find the best deal in the market for you.
The amortization period is the length of time it would take to pay off a mortgage in full, based on regular payments at a certain interest rate.A longer amortization period means you will pay more interest than if you got the same loan with a shorter amortization period. However, the mortgage payments will be lower, so some buyers prefer a longer amortization to make the payments more affordable. Usually, the amortization period is 15, 20 or 25 years. The longest term permitted if you require mortgage insurance is 25 years. If you do not require mortgage insurance, some lenders may offer up to 30 years.It's often to your advantage to choose the shortest amortization—that is, the largest mortgage payments—that you can afford. You will pay off your mortgage faster and will save thousands or even tens of thousands of dollars in interest.An alternative approach is to choose a mortgage that allows you to change your payment each year, double up payments, or make a payment directly on the principal each year. This way, even if you started with a longer amortization period, you can review your financial situation each year and speed up the amortization with extra payments.
There are two basic types of mortgage loans:A conventional mortgage loan allows you to borrow up to 80% of the purchase price or the appraised value of the home, whichever is less.A high-ratio mortgage loan allows you to borrow more than 80% of the purchase price or the appraised value of the home, whichever is less. But the borrower must pay a mortgage default insurance premium to protect the lender if payments are not made.
Mortgage default insurance, which is commonly referred to as CMHC insurance, is mandatory in Canada for down payments between 5% (the minimum in Canada) and 19.99%. Mortgage default insurance protects lenders, in the event a borrower ever stopped making payments and defaulted on their mortgage loan.The mortgage default insurance costs homebuyers 2.80% - 4.00% of their mortgage amount. Lenders are able to offer lower mortgage rates when mortgages are protected by mortgage loan insurance, because the risk of default is passed along to the mortgage insurer.For more information about CMHC insurance, please visit www.cmhc-schl.gc.ca
The interest rate you negotiate may be Fixed or Variable. Each has its own advantages and disadvantages.Fixed Interest RateWith a fixed interest rate mortgage, you agree to a certain "fixed" rate of interest in the mortgage contract. This interest rate is set for the entire term, and the amount of your payments is also fixed. Because the interest rate does not change, you know how much interest you will have to pay and how much of the original loan amount will be paid off during the term. A fixed term gives you security and a predictable budget.Variable Interest RateWith a variable interest rate mortgage, the interest rate can change during the term. It is adjusted to reflect market interest rates, which generally follow the Bank of Canada Bank Rate. The interest rates on variable-rate mortgages are often lower than on fixed interest rate mortgages with the same term length, so variable interest rate mortgages may be attractive and save you interest in the long term. But it's very difficult to predict which will be the lower-cost option over the term of the mortgage.With a variable-rate mortgage, the mortgage payments can be fixed or variable or a combination of both.
Fixed paymentsWith fixed payments, you pay one agreed amount with each payment, regardless of changes in the interest rate. If the interest rate goes down, more of the payment applies to the principal and you pay off the mortgage faster. However, if the interest rate goes up, more of the payment applies to interest, and less to the principal. This extends the length of time it will take to pay off your mortgage. You don't know in advance how much of the principal will be paid off at the end of the term.Variable paymentsWith variable payments, your payment changes if the interest rate changes. If the interest rate rises, your payments also rise. It's more difficult to plan your mortgage payments over the term of the agreement, so you need to be sure you can adjust your budget to make higher payments. However, the amortization period stays the same. You can tell in advance how much of the mortgage will be paid off at the end of the term, because you pay whatever amount is needed to add up to the agreed amount.
Step 1: Decide if Homeownership is Right for youBuying a home is a big decision and requires thorough planning. Weigh out the pros and cons of owning versus renting.Step 2: Check if you are financially ready to own a homeMeet with a Financial Advisor to review your finances. Get informed of all the potential upfront costs and possible unforeseen expenses of buying a home.Step 3: Finance your homeMeet with a broker or lender to start the mortgage pre-approval process. This will provide you a guide of how much you are able to borrow for your home purchase based on your financial situation.Step 4: Find your right homeMake your list of criteria and connect with a realtor to help you search for your home.Step 5: Make an offer and close the dealWhen you find a home you want to purchase, you will make an offer to the seller. While the process may be stressful, your realtor will be there to assist you with the transaction. Once the offer has been accepted, the purchase sales agreement will then be provided to your mortgage broker or lender to proceed with the mortgage application process.Step 6: Maintain your home and protect your investmentManage your budget and allocate funds for emergencies or home expenses. Speak with your broker or insurance specialist on how you can protect your mortgage with mortgage protection insurance.
If you decide to buy a home using a mortgage, you need a down payment. The down payment is the amount of money that you pay up front toward the price of your home (your mortgage loan covers the rest). As set by the “Canada Mortgage and Housing Corporation”, the minimum down payment in Canada is 5% for properties up to $500,000. When the purchase price is above $500,000, the minimum down payment is 5% for the first $500,000 and 10% for the remaining portion up to a purchase price of $999,999. With that said, there may be situation where you are required to provide a larger down payment.When your down payment is 20% or more, you are not required to pay the mortgage default insurance (insurance to protect the lender in case you can’t make the payments).
Closing costs, ranging from 1.5 to 4% of selling price, are the legal and administrative costs you will need to pay when your house closes. Below are some of the costs borrowers should budget for when purchasing a property. Property Transfer Tax – The British Columbia Provincial Government imposes a property transfer tax, which must be paid before any home can be legally transferred to a new owner. Some buyers may be exempt from this tax. For further information, please visit https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax Goods & Services Tax – If you purchase a newly constructed home, you may be subject to GST on the purchase price. There may be some rebates available depending on the value of the home. For further information, contact the Canada Revenue Agency at www.cra-arc.gc.ca.Property Tax – If the current owners have already paid the full year’s property taxes to the municipality, you will have to reimburse them for your share of the year’s taxes.Appraisal Fee – When the lending institution requires an appraisal of the home before approving your loan, it may be your responsibility to pay the appraiser’s fee.Survey Fee – The lending institution may also require that a survey certificate be presented to them. The purpose of the survey is to formally establish the boundaries of the property and to ensure that all buildings are within those boundaries.Title Insurance - Today, most lenders require title insurance to protect against losses in the event of a property ownership dispute. This is purchased through your lawyer/notary.Mortgage Application Fee – Lending institutions may charge a mortgage application fee. This application fee may vary between lending institutions.Mortgage Default Insurance – This type of insurance is required on most mortgage loans in excess of 80% of the appraised home value. Its purpose is to ensure that the lender will not lose any money if you cannot make your mortgage payments and the value of your home is not sufficient to repay your mortgage debt. The insurance premium is paid to the lender and, in most cases, is added to the loan amount and paid for over the term of the loan.Life & Disability Mortgage Insurance – At your option, you may purchase insurance which will ensure that your outstanding mortgage balance is paid if you die or become disabled.Fire & Liability Insurance – The mortgage lender will insist that you purchase an insurance policy which guarantees that, in the event of fire, the lender will receive the balance owing on the mortgage loan before you receive any insurance proceeds.Legal Fees – The transfer of home ownership from the seller to the buyer must be recorded in the Land Title and Survey Authority Office in order to protect the new owner’s interests. You will need to engage a lawyer or notary public to act on your behalf during the completion of your purchase. The lawyer or notary public will charge a fee for this service, plus disbursements, including the Land Title Registration fee. If you are financing your purchase with a new mortgage loan, there will be a further fee and disbursements to prepare and register the mortgage documents.
Some common reasons borrowers would consider refinancing is: accessing home equity, secure lower mortgage rates, and debt consolidation.Access to home equity Your home equity – your home’s value minus the balance of your mortgage – is available for you to withdraw and invest in a number of ways, including home renovations, additional real estate, post-secondary education and much more. You can access up to 80% of your home equity by increasing the value of your mortgage through a refinance.Lower mortgage ratesOne great reason to refinance your mortgage is to secure a lower mortgage rate, saving yourself money over time. The major cost of refinancing is your mortgage penalty, which basically covers the lost revenue to your lender when you terminate your mortgage contract. On a fixed rate mortgage you will pay the greater of three months interest or interest rate differential. On a variable mortgage you will only pay three months’ interest. Just ensure that your refinance penalty doesn’t exceed your potential savings.Debt ConsolidationYou can combine all of your high-interest debt – including debt from credit cards, auto loans and personal lines of credit – into one low-rate mortgage loan. By consolidating debt in a secured loan, backed by the equity in your property, you can access interest rates lower than even a personal line of credit would allow. Debt consolidation is helpful to people who can’t make their full monthly payments on time. With this option, you only make one reduced payment per month. By consolidating multiple payments into one, payments are made on time and in full, which will help improve your credit score. This will give you greater options with lenders in the future.
At the end of your mortgage term, as long as you still owe a balance, you will need to renew your mortgage for another term. With each mortgage renewal comes the opportunity to assess your current mortgage and compare it to any new financial goals you may have, as well as what other lenders are offering in the market. Your existing mortgage provider will generally mail you an early mortgage renewal agreement (120 days prior to maturity date), meaning you could renew early with your current lender without having to pay a penalty for breaking your term early.In the course of the 120 days period, it would be the most ideal time to meet with a mortgage broker for a review of your mortgage. They will be able to provide you with all the options available to you, so that you can make an informed decision when you are ready to renew.
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