Intro

If You’re a First Time Home Buyer or revisiting the mortgage market to Upgrade, it helps to gain as much understanding as possible about mortgages – that is without making your head explode… Educated mortgage shoppers have a more comfortable financing experience, are confident in their decision and end up saving more money over time. This guide is designed to give you key pieces of information and a good foundation of mortgage knowledge. From here you’ll probably have questions of which we are happy to go into as much detail and explanation as needed!

The Home Financing Process: 3 Easy Steps

A pre approval is an important first step that will help you search in the right price range, and protect you against an increase in rates wile shopping. Along with the pre approval, you’ll learn about what mortgage options are available, and get customised information on rates, payments and mortgage strategies. Its important to get all documentation needed at this step to ensure a sound pre approval and smooth closing of your property. Happy Hunting!

Once you’ve found that perfect place – its time to make an Offer to Purchase the property that is Conditional on Financing. The ‘Financing Condition’ typically lasts a few days, and gives us time to go from a pre-approval to a FULL approval. You may also have a condition for a Home Inspection. Once the lender has approved your mortgage and accepted the required documents, you will be able to waive the financing condition. Congrats your a new owner!

Your lawyer will finalise the purchase, and handle all required closing costs. Your down payment money, weather from the sale of an existing property or an account, is provided to the lawyer along with the mortgage money from the lender. This money is combined and then sent to the sellers lawyer. Once the final documents are signed, the keys will be made ready for you.

Price Range and Affordability

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Understanding Mortgage Basics

Understanding some of the basic mortgage lingo will help with our discussion.

Term Vs. Amortization

A mortgage term is the length of time that the RATE is set for. The most common term is a 5 Year term, which is then re negotiated after 5 years is up on the ‘renewal date’. The Amortization is the time that the PAYMENT is based on. The longer the amortization, the smaller the payment. A typical amortization is 25 years, but can be as little as a few years or as long as 35 years.

Fixed Vs. Variable Rate

A fixed rate mortgage will guarantee your rate for the length of the term -‘set it an forget it!’. Fixed will usually carry less risk than a Variable rate wish can be lower for a period of time, but may float higher when the Bank of Canada eventually increases interest rates.

Down Payment and the CMHC

In Canada, the minimum down payment is 5% – however this can be gifted by family or loaned if needed. Any down payment under 20% must be ‘insured’ by the Canadian Mortgage and Housing Corporation (CMHC) and this requires a fee that is built into the mortgage, not paid up front.

Credit Score

To get the lowest rates in the market, the credit score should be above 680 points (out of 850). If any credit lines are maxed out or if several payments have been made late – this can negatively affect your score. If unsure of your score talk to us for more information.

Mortgage Fine Print: What to Look For

While Rate is certainly a huge factor in looking at mortgage – it helps to understand what restrictive features in the fine print can cost you Thousands of dollars more.

High Penalties

Lower Your Penalty Cost

Do you know what your penalty costs are? There are major variations in mortgage penalty calculations, with major Banks among the highest. Considering that most Canadians experience major life changes during a mortgage term, having a closed mortgage with a very high penalty calculation can prove financially damaging.

Collateral Charge

Avoid 'client lock-in' mortgages...

Can you easily re-shop your mortgage on term renewal? The ‘collateral charge’ contract makes it very difficult to move lenders at renewal to a better rate or product, without paying for a lawyer and refinancing the mortgage. This feature is widespread in the market, and is often not well explained upfront. We think you should always get the lowest rates in the open market without trouble or cost on Renewal.

Pre Payment Flexibility

Pre Payments on Your Terms Save You More

How flexible and open is your mortgage? When planned properly, a flexible pre-payment privilege can go far in saving on interest and becoming Mortgage Free Sooner. Some pre-payment privileges are smaller and limited to one or two occasions per year, and on specified dates. This limitation can be costly if relied on over the long term.

Variable Rate Features

Get Lower Lock-in Rates

If locking your variable mortgage into a fixed rate, are you locking in to high bank posted rates, or discounted wholesale rates? This difference in lock in rate can be big, and can potentially change wise decisions to lock in variable mortgages to a fixed product.

Mortgage Broker FAQ

Whereas a bank can offer you their line of mortgage rates and products, a mortgage broker works for you and offers you the entire mortgage market of lenders, rates and products. We believe this aligns better with your best interest. And we continue to look for ways to save you money over the life of your mortgage – at renewal time or before. Banks just don’t do this.

Altrua has access to over 200 lenders across Canada – but tends to work with about 15 core lenders including the big banks. If it makes sense, we can even go to your own bank and help you negotiate a lower rate.

Because all mortgage lenders in Canada follow the same government rules for protecting themselves and clients – there is little to no risk from one lender to the next. All ‘A’ low rate mortgage lenders are in very stable conditions. The only risk you could face is by working with just one Bank, and paying more for your mortgage.

For the vast majority of our mortgages we are paid a ‘placement fee’ or commission from the lender, and do not charge our clients any fees. Unlike most mortgage brokers – we use much of this lender fee to help lower your rate even further – while ensuring superior advise and service standards.

Questions?

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