Author: Ben N.

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Mortgage Renewal/Switch

How to Pay Off Your Mortgage Faster

How to Pay Off Your Mortgage Faster

Whether it’s an essential milestone like retirement or a lasting legacy like leaving as much as possible as inheritance, everybody has their reasons for wanting to pay off the mortgage faster. You’ve probably heard mortgage debt in Canada is record-high – the average amount hit a record $355,000 in 2021 – so it’s time to start thinking about mortgage debt reduction.

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Why Pay Off Mortgage as Quick as Possible?

There are many reasons for paying off a mortgage debt as quickly as possible. First and foremost, of course, mortgage debt in Canada is at historic heights and growing fast: more than 20% of mortgage holders had amortization periods of 25 years or more. So if you’re looking to secure your financial future, putting extra effort towards mortgage debt reduction is an excellent place to start.

It can also make your retirement planning easier. Let’s say you have the traditional mortgage debt of $100,000 at 5% interest over 25 years. That means your mortgage payment would be about $582 – but that doesn’t include any interest. Now let’s say you switched that mortgage debt for an even $100,000 at 2.5% over ten years. Your mortgage payment is about $867 – but this time with interest. The interest payments are double the mortgage payments on the 25-year mortgage.

But mortgage debt is also mortgage stress. By signing the mortgage agreement with the maximum amortization period of 25 years or more, you may be putting yourself under unnecessary financial pressure. If your mortgage payment takes up most of your monthly income for two-and-a-half decades, it may be challenging to build retirement savings, especially if mortgage rates keep rising.

By trying to pay off your mortgage faster, you can free up money that may be better spent on other things – like retirement savings down the line. But how do you go about paying off the mortgage faster? It’s all in the math.

Calculating How Long it Will Take You to Pay Off Mortgage

The mortgage calculator is the first place to start when figuring out how long it will take for mortgage debt in Canada. For example, suppose you input all of your mortgage information – mortgage balance, interest rate and mortgage payment amount – into a mortgage calculator like this one. In that case, you can see exactly how much time and money it would take for you to pay off the mortgage.

You may be surprised at how much difference it makes if you try to pay off the mortgage faster. For example, the mortgage calculator shows that paying $100 more per month on a mortgage amortized over 25 years saves about five years and gives you savings of over $35,000 in interest.

Trying to pay off your mortgage debt as quickly as possible means you should never take on more debt than you need. That’s why it’s important to understand mortgage qualification and refinancing, which means making sure that your mortgage payments will fit into your budget, even if mortgage rates rise.

3 Ways to Pay Off Your Mortgage Faster

Now that you understand mortgage qualification and refinancing, as well as mortgage debt reduction in Canada, it’s time to decide how you can start paying off your mortgage debt as quickly as possible. There are a variety of strategies people use to try and pay off their mortgage faster – some with more success than others.

  1. Increase the Amount You Pay Each Month

That is one of the easiest and most effective mortgage debt reduction strategies. Increasing the amount you pay each month over time will significantly reduce your mortgage balance – even if mortgage rates rise. For example, increasing the amount you pay by an extra $100 per month reduces your mortgage term by six months to 8 months on mortgage debt of $180,000 at 6%.

  1. Increase the Frequency of Your Payments

This strategy can be effective in many cases. But there are a few mortgage qualification considerations to keep in mind before you start paying your mortgage off faster using this method:

  • It would help if you had a mortgage payment schedule with a set due date. If your mortgage payment is due on the 15th of each month, for example, you’ll only be able to increase the frequency every other month – unless you pay two mortgage payments in one month.
  • You can’t change your mortgage payment schedule. So, for example, if your mortgage payment is due on the 1st of each year and there are 365 days to pay off your mortgage, you can’t increase the frequency every year – unless you pay more than 365 mortgage payments in a single year.
  • This strategy works best on mortgages amortized over 25 years or more that have little mortgage debt stress on borrowers.
  1. Finance Your Mortgage Debt Reduction

A few mortgage debt consolidation loans can help you pay off your mortgage faster. For example, you can consolidate all of your high-interest credit card debt and other high-interest debts into a mortgage loan on which you’ll make monthly payments with a lower interest rate.

One of the most common ways to reduce mortgage debt is taking a mortgage debt consolidation loan. However, mortgage debt consolidation loans may not be the best option for you if:

You have good credit and can get approved for other types of mortgage refinancing options, such as a line of credit mortgage or variable-rate mortgage, at similar interest rates. Then you can pay off your credit card debts without consolidating them into a mortgage.

You have a mortgage amortized over 25 years or more and can increase your mortgage payments to pay down the mortgage faster. However, you may be better off simply increasing the amount you pay each month since mortgage debt consolidation loans usually have higher interest rates than fixed-rate mortgages.

Closing Thoughts

That’s what you need to do. To recap, there are several ways to reduce mortgage debt, including:

  • Increasing the amount of money you pay monthly
  • Start paying more frequently
  • Financing your mortgage debt reduction

If it’s the right mortgage debt reduction strategy for your situation, mortgage debt reduction is a strategy that can save you mortgage interest and help you pay off your mortgage faster.

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New Purchase Mortgage

Mortgage Affordability in Canada – How Much Mortgage Can You Afford?

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With interest rates at historic lows, now is a great time to purchase a home, but it could also be a potentially dangerous situation. Stretching your mortgage debt service ratios beyond what is comfortable is tempting, but the risk of doing so will depend on mortgage interest rates. Canadians, in general, have mortgage debt service ratios that are well into the comfort zone, but for some consumers, it is a different story.

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Mortgage Debt Service Ratios in Canada: The National Picture

We have seen a sharp increase in mortgage lending due to lower interest rates over the last few years. As a result, mortgage credit has been growing at 5.5% per year on average, with mortgage debt service ratios in Canada remaining somewhat stable. The mortgage debt service ratio is the proportion of household income dedicated to mortgage payments or rent of a rental property. Banks want to ensure that mortgage borrowers can afford their mortgage payments before approving the loan.

The mortgage debt service ratio is a mortgage regulation. The government uses it to determine Canada’s maximum mortgage amount and mortgage qualification. It also plays a role when considering housing affordability in Canada for would-be home buyers, especially in today’s low mortgage interest rate environment.

Mortgage Debt Service Ratios: The Details

A couple of years ago, TD Bank researched mortgage debt service ratios in Canada. They found that most Canadians had mortgage debt service ratios within comfortable limits; however, there were some exceptions. 

For instance, the Bank said that many homeowners take on too much money relative to their income levels. That could be problematic if interest rates increase significantly over the next few years and mortgage payments become more and more un-affordable for consumers.

Gross Household Income vs Net Household Income

Banks consider total gross household income when determining mortgage affordability in Canada. That is because mortgage payments are a significant portion of an individual’s monthly spending.

Mortgage lenders use the net household income figure for mortgage affordability, but these two figures can be very different. Gross household income, for instance, does not include deductions such as RRSP contributions, charitable donations and other write-offs. For this reason, it may not accurately reflect what consumers spend at the end of the year on expenses like mortgage debt service ratios.

The minimum down payment required by various Canadian Provinces is another crucial factor in mortgage affordability. It determines how much money you will need before shopping for your new home or condo.

GDS Ratio and TDS Ratio

GDS (Gross Debt Service) and TDS (Total Debt Service) ratios are mortgage loan affordability metrics that lenders use to determine whether or not mortgage interest rates will be manageable for mortgage borrowers. In general, mortgage lenders want to know that your minimum monthly payments on housing costs, including mortgage principal and interest, property taxes and heating costs combined, won’t exceed 32% of household income. The Bank of Canada has also emphasized that the maximum affordable mortgage debt service ratio should be 40% when gross income is under $100,000.

Your Credit Score Will Affect Mortgage Rates

Your mortgage affordability or qualification will depend on your credit score and mortgage rates. As mortgage interest rates increase, your monthly mortgage payments will also increase. That means it’s even more critical to know Canada’s mortgage rules before starting your home or condo shopping process.

Down Payments in Canada

Down mortgage payment of at least 20% is typically what mortgage lenders require in Canada. However, some mortgage down payment assistance programs are available for first-time home buyers. Moreover, suppose you can’t afford the “mortgage debt service ratio” rule. In that case, your mortgage lender may still approve your mortgage loan request if you have vital compensating factors, such as excellent credit history and a long employment record.

It’s also important to note that mortgage guidelines vary across Canada. Therefore, it’s essential to know your province’s minimum mortgage down payment requirements before starting your home or condo shopping process. In addition, while interest rates play a role in housing affordability in Canada, not all consumers will qualify for the same mortgage interest rates or get approved for loans with the same terms and conditions.

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How to Make Your Mortgage More Affordable

A mortgage calculator helps determine your monthly payment based on the purchase price of the home you are interested in. In addition, this mortgage affordability calculator will ask about your gross household income and down payment, mortgage interest rate and amortization period to determine how much money you need to borrow.

Increased borrowing power may allow you to buy a bigger home or condo. However, it may also mean that mortgage rates in Canada become unaffordable for mortgage borrowers who aren’t prepared to manage their mortgage payments at higher interest rates. Therefore, it’s essential to consider all possible outcomes before getting into “affordable” mortgage debt, which could negatively affect many aspects of your financial well-being in the long term.

Your net household income helps calculate mortgage affordability, including the mortgage debt service ratio; however, other factors are essential. For example, your net income is $5,000 per month, but you spend $3,000 on mortgage payments and another $2,000 to cover property taxes and heating costs. 

These additional expenses might limit your true mortgage affordability. Calculating the TDSR helps consumers understand their maximum mortgage amount based on their monthly housing expenses before making mortgage shopping calculations.

Your credit score will also play an essential role in determining the mortgage interest rate you qualify for as well as whether or not you can get approved for a mortgage loan at all. The higher your credit score is in Canada, the more likely you will qualify for mortgage debt at a better interest rate. A mortgage qualification letter from your mortgage lender is required in Canada before homeowners can close on a mortgage loan.

In Conclusion

Mortgage rates in Canada affect mortgage affordability. Your mortgage payment is based on the total amount of mortgage that you need to borrow and the mortgage interest rate charged by your lender. To determine mortgage qualification and how much you can afford, mortgage lenders will also ask about your gross household income and down payment.

It’s important to note that different mortgage interest rates apply based on how many compensating factors a consumer has (such as excellent credit history and a long employment record). Still, education on mortgage debt service ratios is essential to understanding how much mortgage you can afford.

We are available to walk you through all mortgage processes and help you pick and acquire the most suitable loan.

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Mortgage Renewal/Switch

Reverse Mortgage in Canada: Pros and Cons

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Most Canadians tell themselves that they won’t have to worry about anything once they pay off their mortgage. However, even if you pay everything off, you might find yourself strapped for some cash in retirement. Thankfully, there’s a solution for that.

A reverse mortgage can let you tap your home for cash in your later years. One interesting thing about reverse mortgages is that it allows you to hold on to your home – and all of the memories you created there – for as long as you want. It’s no wonder Canadians have been flocking to reverse mortgages in recent years.

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Statistics released by Home Equity Bank show that Canadian homeowners are now carrying more than $5-billion worth of reverse mortgages. That’s the most significant amount of mortgages in the country ever.

If you’re considering a reverse mortgage, it’s essential to understand the ins and outs of the loan. That will allow you to make a smart decision about whether or not a reverse mortgage is right for you.

What Is a Reverse Mortgage?

A reverse mortgage allows homeowners aged 55 years and older to turn their homes into an income stream in retirement. You can do this by taking out a line of credit or a lump sum payment. If you have equity built up drawing money from it to fund your living expenses is entirely tax-free.

Many people wonder what happens to their homes when they pass away. Will the bank come after the house? Unfortunately, the answer is no – that’s a common myth about reverse mortgages.

The bank will not take away your property with a reverse mortgage when you pass on. The loan is designed to be repaid out of your estate. If you don’t have enough money to repay the loan, the balance comes out of your house’s equity.

If there’s no equity available in your home after you die, the bank will lose its investment completely. That means senior homeowners are responsible for any loss.

Is Reverse Mortgage Right For You?

You can easily profit from taking out a reverse mortgage. However, these loans aren’t for everyone; they can become very costly if you’re not careful. Here are the most noticeable pros and cons of reverse mortgages.

Pros of Reverse Mortgage

●     Helps You to Become Debt-Free

Reverse mortgages allow you to pay off your traditional mortgage. That means that not only are you debt-free, but you’ll also have money freed up for personal expenses and emergencies.

●     Allows You to Live in Your Home

Since a reverse mortgage allows you to hold on to your home, it means you can live in the home for as long as you want. No landlord will ever be able to kick you out, no matter how late the rent is.

●     Increases Retirement Income

By using a reverse mortgage to turn your home into an income stream, you can live off of the money as a source of retirement income. In this way, you don’t have to rely on investment income from your RRSP or savings account.

●     Provides Access to Cash for Home Repairs/Upgrades

A reverse mortgage allows owners to tap into their home equity for whatever they may need the money for, including repairing or upgrading their home. While a traditional mortgage requires you to save up for a down payment before getting the loan, reverse mortgages allow you to access your equity immediately.

●     Tax-Free Money Draws

If you have an existing mortgage, a reverse mortgage can help you get more money out of it sooner rather than later. If the interest on your mortgage is close to the tax-free limit, you can take out a lump sum payment and use that money for living expenses. This way, you’ll get more cash in your pocket come retirement time.

Cons of Reverse Mortgage

Can Affect You Financially in Your Later Years

A reverse mortgage could have an impact on your finances when you’re in retirement. Even if you make regular payments through a lump sum payment plan, this isn’t always enough to cover all of the fees and interest charges associated with a reverse mortgage. As a result, you may find yourself paying off the loan well into your 80s – and this can be a lot of money to lose.

Inflation Could Rise by More Than Your Payments Will

If you choose a reverse mortgage plan that provides monthly payments, consider how inflation will impact those payments over time. For example, inflation could make money go further every year, but your monthly payment may not.

Interest is Expensive on Reverse Mortgages

Reverse mortgages are known for being very expensive in terms of the interest rates they charge. So, if you’re using a reverse mortgage to pay off your existing mortgage, keep in mind that the new one will come with much higher interest charges than what you initially paid.

Closing Thoughts on Reverse Mortgages

A reverse mortgage isn’t for everyone. However, reverse mortgages can be a smart way to pay off traditional mortgages and turn your home equity into an income stream. You just need to fully understand the pros and cons associated with these loans before making a decision on them.

You can visit our home page Best Mortgage Online for more articles on Mortgage. Our experts are available to assist you through the mortgage application process, help you pick the most suitable loan rate, etc.

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New Purchase Mortgage

Best Commercial Mortgage Rates You Can Find in Canada

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When it comes to getting housing units in Canada, the most sought-after option is a house mortgage from the bank or mortgage broker. You can get a mortgage to finance your residential home and commercial property.

A commercial mortgage is similar to what you have for a residential mortgage; the only difference is that this mortgage is taken for non-residential buildings commonly referred to as commercial property. Commercial property covers many facilities that cannot be financed under the residential mortgage plan.

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Commercial mortgage rates are determined by the type of properties and their use. There is no fixed rate for a commercial mortgage as it differs for different properties and the mortgage company involved. In this article, Best Mortgage Online will provide you with the right information about the best commercial mortgage rates you can find in Canada.

Commercial Mortgage vs. Residential Mortgage

As introduced above, the type of property involved sets the major difference between a residential and commercial mortgage. While the residential property is usually sought after by regular home buyers or small real estate investors, commercial property is normally meant for real estate investment corporations, partnerships or limited companies.

The commercial property is usually used for business purposes against homes solely used for residential purposes. As you might have imagined, the rates set for a commercial mortgage are typically higher than a residential mortgage, as well as the repayment conditions. However, the repayment period is usually longer than those allowed for a residential mortgage.

In the case of residential mortgage, qualification is usually based on credit scores, personal income etc. But, for a commercial mortgage, the property you are taking out a mortgage for usually serves as collateral till the loan is paid back. It also requires you to have a higher down payment than residential properties. The down payment for commercial property can be as high as 25 – 35% of the cost.

What Counts as Commercial Property?

To be clear about how rates for commercial mortgages are calculated, it is necessary to differentiate between what type of property qualifies for a commercial mortgage and how it is different from a residential one.

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The common commercial properties that can be financed in Canada include the following:

  • Multi-Family residential property (5 units and above)
  • Mixed-use properties
  • Office buildings
  • Industrial buildings
  • Warehouses
  • Retail plazas
  • Medical buildings
  • Farmlands
  • Shopping malls
  • Construction projects

These commercial properties under this form of mortgage come with specific Loan-to-Value up to 85% depending on the property type. Properties such as farmlands or vacant spaces can have an LTV as low as 50%. Still, the more functional the property is, the higher the LTV provided by the mortgage company.

Commercial Mortgage Rates in Canada

A commercial mortgage company in Canada can help you get the best mortgage for properties at the lowest rate possible. Asides from this, the process of getting a commercial mortgage might be a bit more complicated with a lot of paperwork. Still, you can easily do this with the assistance of a commercial mortgage company.

When it comes to commercial mortgage rates, there is no one-size-fits-all solution. Instead, the rates depend on the type of property to be financed and the borrower’s financial status. For instance, stable properties connected with borrowers with good credit scores carry better rates than riskier properties with borrowers with not a great credit score.

Commercial mortgages are often based on BBB corporate bonds. Mortgage lenders apply a risk premium to the business loan based on its risk. As a result, riskier borrowers must pay a greater premium, whereas low-risk borrowers’ rates will be closer to a BBB corporate bond yield. On the other hand, these rates are often higher than CMHC-insured commercial rates, which pose the least risk to lenders.

On average, in Canada, the conventional rate for commercial mortgage rate for five years is between 4.3% – 8.3%, while a five-year rate for Canada Mortgage and Housing Corporation (CMHC) is between 3.2% – 5.3%. Additionally, CMHC insures business mortgages against failure. This safeguards mortgage lenders by ensuring that they are compensated if a business borrower fails on the mortgage.

How to Apply for Commercial Mortgage?

Although different mortgage companies have different regulations when applying for a commercial mortgage, there are still basic similarities. For example, the following steps are often required to apply for a commercial mortgage.

  1. Put your business finance in order: One sure thing a potential lender will be looking out for is the viability of your business in terms of profitability and income history. This gives the lender a sense of credibility and the ability to repay the mortgage. Therefore, before applying, you should ensure that your finance is in order.
  2. Determine the type of mortgage you want: Even for commercial mortgages, different service plans are still dependent on the property type. Therefore, before applying for a mortgage, it is best to look at the different plans available and pick the most suitable one for your intended purpose.

Some of the points of consideration include the repayment plan, interest rate, location of the property, production or repair time, and recurring costs like operational fees, legal fees etc.

  • Put together your business documents: Time is of the essence during application for a commercial mortgage as there are most likely other interested parties bidding for the same property. Therefore, it is advantageous to have all the required documents beforehand to beat the competition.

Typical examples of documents required during this stage include; a well-articulated business plan, updated financial statements, details about the commercial property and other useful documents or information about your business.

  • Make an offer: Commercial mortgage is quite a serious investment. It is usually capital intensive and carries a higher risk than a residential mortgage. Therefore, it is best to make an offer with your mortgage company to get the best possible mortgage conditions suitable for your company.

Conclusion

The commercial mortgage requires more capital than a residential mortgage; it is only granted for specific types of properties. It also requires different or additional requirements with varying rates and conditions. The rates on commercial mortgages are generally higher; mortgage companies insured by CMHC have a rate between 3.2% – 5.3% for five years.

For ease of getting a commercial mortgage, it is recommended that you have all your documents – financial statements, business proposals etc. – handy before applying. You should also apply early enough to ensure ample time for proper application review.

At Best Mortgage Online, we can assist you in getting the right information to prepare you for a commercial mortgage. Contact us with the button below.

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Mortgage Refinance

When Is the Right Time to Refinance Your Mortgage in Canada

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If you look at the latest state statistics, you can see that home-ownership has been rising in recent years. At the moment, nearly 3/4 of families in the country have a fixed mortgage rate.

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With prices of homes soring, many people have to build up equity in their homes. However, they still may feel they’re cash-squeezed. If that is the case for you, refinancing your mortgage may be an excellent strategy to lower the total monthly payments.

But is it the right time for you to refinance your mortgage? That’s what we’re going to try and answer.

The Basics of Mortgage Refinancing in Canada

If you’re like most Canadians, your existing mortgage is on a closed, five-year term and of a variable rate. That means that the interest on your loan is not fixed for the duration of the borrowing period. Instead, it’s subject to changes in market trends, and at times, this could result in higher monthly payments.

At the same time, if you have a five-year closed mortgage at 3%, today, it might be worth refinancing into a new loan that is also for five years but has an interest rate of just 2%. That’s because your existing equity in your home could qualify you for a lower interest rate on your next mortgage.

By refinancing your current mortgage, you could lower your monthly payment by as much as 20% or even 25%. You can also take advantage of an offer to agree to a fixed interest rate for the next five years.

Many Canadians are refinancing their mortgages simply because they feel this is the best time. As a result, interest rates are rising, but not enough to offset all of your savings.

If you’re thinking about refinancing your mortgage, perhaps these tips might help you decide when is the right time for you to refinance.

When To Refinance Mortgage When Interest is Rising

One of the best times to refinance your current mortgage is when interest rates rise. You might even be able to secure a better interest rate on your new mortgage as well as lower monthly payments if you have equity in your home.

In many cases, those who completed a refinance at the right time didn’t take no for an answer from lenders during their initial attempt.

Another thing to keep in mind is that it will take at least three weeks to approve the new loan. Then you’ll need to get your documents in order, including a copy of your existing mortgage, title search and other financial information needed by your lender to process your application.

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When To Refinance Mortgage When Interest is Going Down

People who refinance their existing mortgage when the interest rate is going down may not see as many savings as they would if rates were rising, but they could still save $100s or $1,000s over the life of your loan. You can then use that money for other financial goals that will reap future rewards, like perhaps using it to pay off credit card debt.

The other thing to consider is that you don’t have to wait until interest rates are higher before refinancing your loan because if you do, you could end up paying more interest over the term of your new mortgage. So, for example, even if interest rates fall by 2%, there might be little incentive for you to refinance your loan.

However, if you can lower your monthly payments by $200 or $300, then it’s probably worth looking into refinancing your mortgage, even if that means you will be locking yourself into a low-interest rate for the next 5 to 10 years. Or perhaps take out another line of credit using the equity in your home as collateral.

When To Refinance Mortgage When Interest is Stable

Another time when you might consider refinancing your existing mortgage is when interest rates are stable. That could make sense because with rates remaining the same, there wouldn’t be any penalty attached to closing out an existing mortgage contract and taking on a new one should interest rates decrease further still, something which seems inevitable at this time.

Another advantage of refinancing during this period is that you might be able to replace your current fixed-rate mortgage with a floating rate. That means your monthly payment could become even less expensive if rates drop further over the next few years as expected. However, if interest rates increase, it shouldn’t have as much of an impact on your loan since you will now have a floating rate attached to your new mortgage.

Most mortgages in Canada are now either variable or adjustable-rate mortgages because homeowners feel these loans offer greater flexibility and affordability. In a rising interest rate environment, especially where money becomes more expensive to borrow, these flexible loans can help mitigate the worst effects that higher rates can cause to home budgets.

Of course, if you do decide to refinance your existing mortgage when rates are going up or down, you’ll need to make sure that the new rate is a fixed one because variable rates can fluctuate dramatically and even go up as high as prime plus 9.0%.

What You Should Know Before Refinancing Your Mortgage

Another thing to keep in mind is that refinancing your mortgage could mean an increase in your monthly payment even if you’re getting a better rate. Why? Because some lenders may also require you to pay for the appraisal, title search and other legal fees associated with closing out an existing loan contract.

Before you refinance your current mortgage, it’s worth doing some research first by getting quotes from different lenders so you can find out how much money you could potentially save by refinancing. This way, there won’t be any surprises when borrowers receive their final quote following their application process or lock-in period, which typically lasts between 30 days and six months. During that time, they cannot switch lenders without paying fees.

Closing Thoughts

With more extended amortization periods now being offered by some mortgage lenders, refinancing your existing home loan may well become an even more attractive strategy today. That is especially true now that interest rates are so low and likely to remain this way for the foreseeable future.

If you do decide to refinance your mortgage, make sure before signing on the dotted line that you’re aware of all the terms and conditions involved with closing out your current loan contract in addition to any other fees that may be associated with this transaction.

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New Purchase Mortgage

Canadian Mortgage Documents Checklist

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The bank representative hands you a thick stack of documents. You are told that these documents must be signed (or initialed) to complete the loan process. However, rarely does anyone tell you what is on those pages. It can be daunting for first-time home buyers – especially if they do not know what to expect.

Inexperienced home buyers should always check with their agent or mortgage representative to determine what documents are required for registration. After reviewing the list of documents, you may discover that there are many you have never even seen before. To help prepare others for this experience, below is a list of typical documents you need to get a mortgage in Canada.

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Mortgage Documents Checklist

1) Pre-Authorized Debit form

The form authorizes your financial institution to electronically debit your bank account each month to pay off the balance on loan.

2) Statement Indicating Down Payment Source(s)

This proves that all funds used towards the down payment came from legitimate sources. Funds must be traceable – i.e., brokerage statement, RRSP withdrawal confirmation, and second mortgage payoff letter.

3) Income Verification

Your lender will require your most recent income tax return and the T4 slips from all companies you have worked for to date to verify your income history. You should also provide a record of any assets or other sources of funds that can be used towards repayment of the mortgage, such as property rental income, dividends from investments, trust income, etc.

4) Pre-Approved Letter From Lending Institution(s)

That is to show that you have been pre-approved for a loan based on a detailed analysis of your financial position by a qualified mortgage specialist.

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5) Job Offer Letter

If you are self-employed, this letter provides proof of stable employment and outlines projected business activity over at least the next twelve months.

6) Buyers Profile

Lenders will typically request a summary of your financial situation to complete this form.

7) Verification of Deposit Held/Assets Owned by the Client(s)

Your lender will want proof that the loan can be repaid and have enough money left over for all other living expenses and savings goals. That may include: pay stubs, monthly bank statements, letters from employers/financial institutions showing salary amounts and deposits into accounts each month over the past six months, RRSP or TFSA contribution confirmations for last year, net worth statement (see note below), etc.

Note: A Net Worth Statement is a list detailing everything you own (i.e., personal property such as your home, cars, heirlooms, etc.), minus what you owe (i.e., money owed on credit cards or loans). Assets are listed according to liquidity – the most liquid items first. The value of each asset is listed next to it. Liabilities are listed last and show how much money or equity is left over after deducting debts from assets. Not every lender will require this form, but it does help provide a complete picture of your overall financial position.

8) Letters Regarding Any Other Real Estate Owned/Mortgages Currently Held

Your lender will want to know if you have other mortgages on any other properties. They’ll need to know this to determine if you can afford the new mortgage payments and still meet all your other financial obligations.

9) Certified Cheque

To complete the registration process, your lender will need a certified bank cheque as proof that you have enough money to pay for all fees and closing costs. The lender must ensure that the name(s) on the cheque must match those on the title as part of this process.

10) T4 or Notice of Assessment

This confirms federal and provincial tax amounts and dates so that interest rates quoted by lenders accurately reflect income tax deductions.

11) Pre-Approved Guarantor Form (if applicable)

If you are buying with someone else who is not going to be on title or provide a down payment, they may need to complete this form for their income and assets to be considered for purposes of underwriting the mortgage.

12) Endorsement/Holder information – The endorsement section of your mortgage documents lists all authorized signers (i.e., those able to make decisions on behalf of the lien-holder). The section must match up with the individual(s) listed on the title and statement of authority (if applicable), or they may not be permitted to make any changes to your file. That includes signing, amending, and terminating agreements and mortgages, and authorizations should be limited based on your settlement date and other requirements specified by your lender.

13) Statement Regarding Holding Title in Trust (if applicable)

If you are buying a property held in trust, you will need to complete and submit this form that documents your authorized signers.

14) Statement Regarding Mortgaged Property (if applicable)

If you are buying an already mortgaged home, you will need to provide proof of the mortgage to be removed from the title and replaced with your new mortgage. You may also need an updated appraisal on the home if there have been any significant changes or improvements since the last valuation was completed.

15) Verification of Employment

Your lender will ask your employer(s) to confirm details related to your job description, salary, etc., so make sure to provide accurate information upfront. The lender may also ask for a letter verifying how long you have been employed at that company.

Closing Thoughts

Mortgage financing isn’t always simple, but it doesn’t have to be complicated. Before you home-hunting, be sure that you are financially prepared to own the property by consulting with professionals who can assess your income and credit history/score, determine how much of a mortgage you qualify for, and help explain the entire process.

And remember: any violations of your lender’s requirements could result in a declined mortgage, so be sure to carefully review all the information to ensure you have submitted everything required.

For more articles on Mortgage, please refer to our home page at Best Mortgage Online. We also have a sister site dedicated to news, tips, reviews and more on Insurance in Canada – Best Insurance Online.

Our experts are available to assist you through the mortgage application process, help you pick the most suitable loan rate, etc.

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Thank You – Equity Takeout

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YOUR EQUITY TAKEOUT HOME LOAN SEARCH JOURNEY HAS STARTED

Thank you for completing your Home Loan search with Best Mortgage Online! We have received your information. Our back office is busy reviewing your details and will notify you shortly once our system has finalized the matching process for your home loan consultants.

You will receive your confirmation email very shortly and if you don’t see it, we would recommend you check your spam folder. Then often within the same day or the next business day, one or several home loan consultants will be in touch with you to help you get started.

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Thank You – Mortgage Renewal

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YOUR MORTGAGE RENEWAL HOME LOAN SEARCH JOURNEY HAS STARTED

Thank you for completing your Home Loan search with Best Mortgage Online! We have received your information. Our back office is busy reviewing your details and will notify you shortly once our system has finalized the matching process for your home loan consultants.

You will receive your confirmation email very shortly and if you don’t see it, we would recommend you check your spam folder. Then often within the same day or the next business day, one or several home loan consultants will be in touch with you to help you get started.

  • ORCA Mortgages
  • Mortgage Centre
  • Mortgage Architects
  • Dominion Lending
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Confirmation

Thank You – Mortgage Refinance

Congrats!

YOUR MORTGAGE REFINANCE HOME LOAN SEARCH JOURNEY HAS STARTED

Thank you for completing your Home Loan search with Best Mortgage Online! We have received your information. Our back office is busy reviewing your details and will notify you shortly once our system has finalized the matching process for your home loan consultants.

You will receive your confirmation email very shortly and if you don’t see it, we would recommend you check your spam folder. Then often within the same day or the next business day, one or several home loan consultants will be in touch with you to help you get started.

  • ORCA Mortgages
  • Mortgage Centre
  • Mortgage Architects
  • Dominion Lending
Categories
Confirmation

Thank You

Congrats!

YOUR HOME LOAN SEARCH JOURNEY HAS STARTED

Thank you for completing your Home Loan search with Best Mortgage Online! We have received your information. Our back office is busy reviewing your details and will notify you shortly once our system has finalized the matching process for your home loan consultants.

You will receive your confirmation email very shortly and if you don’t see it, we would recommend you check your spam folder. Then often within the same day or the next business day, one or several home loan consultants will be in touch with you to help you get started.

  • ORCA Mortgages
  • Mortgage Centre
  • Mortgage Architects
  • Dominion Lending