Categories
Mortgage Refinance

Secrets of Debt Consolidation In Canada: What You Should Know

Debt consolidation can be an effective method of making your debt repayment more manageable. You wouldn’t be the only one with debt hanging around your neck. It is a Canadian thing, with the average Canadian debt ratio shooting above 70%. This is a remarkable departure from how things were 20 years ago.

Debt consolidation is the combination of the amounts you owe into one. This includes credit card debts on multiple accounts and other personal loans. So, instead of keeping up with multiple debts, you only focus on repaying a single debt.

You can consolidate yourself through different means depending on your choice or whether you have a property. If you have a home in Canada, you can use a mortgage to consolidate your debt. However, many Canadians find debt consolidation confusing, but you are lucky; by the end of this post, you will know everything about it.

What is Debt Consolidation

Essentially, this is when you take a large loan to replace and pay off your smaller loans. This large loan will allow you to pay your loans at a go.

So, instead of focusing on additional payments such as credit card payments, auto loans, and other personal loans. The new loan has a better interest rate than your previous loans if you are lucky. So, you get to repay the loan, and you will pay it cheaper.

One of the hallmarks of an efficient financial system is that it provides people with the ability to live above their means when the need arises.

The Canadian financial system is pretty efficient, with different loans to help people with what they need. Sometimes people need more than they can afford at that moment, and as such, they take different loans to meet up with obligations.

Debt consolidation is a way to ensure the easy repayment of these loans as you will be able to combine all you owe.

To consolidate, you have to be smart about it. You have to make sure to have a payment plan that you will follow. Asides from having a plan, there are other things that you have to note.

Things To Note about Debt Consolidation

Let your Debt Consolidation Loan Have Lower Interest

A debt consolidation loan should make repayment easier and not burden you. If you can afford it, consult a financial advisor or planner to review the debt consolidation loan you want to get.

If you can’t afford it, you have to read the terms and conditions of the loan carefully. Focus on the interest rate, fees, and duration.

Consult an Expert to Draw a Plan for You

In this situation, the advice of a financial planner or advisor can be crucial. They will use their experience to develop a plan to make repayment easier.

The expert will help you draw a budget, amount to repay monthly, and plan b for when you suffer income challenges.

Above the Monthly Fee

If you don’t want to deal with a financial advisor or planner, you should be doing. Pay above whatever your lender has set as your minimum fee. This will allow you to make your payment faster and easier. Also, it helps you keep up if you have income challenges.

Have a Payment Plan B

When consolidating your debt, you have to plan for all eventualities. One of such eventualities is a challenge to your income. So, to prevent this, pay above the minimum when you can. Also, make other plans when you can.

Different Ways to Consolidate Your Debt

You can consolidate your debt in different ways. Some of these ways could involve using your mortgage. Below we have treated these different ways. Read and choose the one that best fits you.

Debt Consolidation Loans

These loans help you combine all your loans into one you obtain from a credit union, bank, or other financial institution.

You can use this loan to complete your unsecured and secured debt payments. Getting a lower interest rate for your debt consolidation loan or even getting the loan depends on your collateral.

You can have different collateral, but your home is the best to help you get a lower interest rate. Also, your credit score is an added advantage. Institutions could only need you to have collateral or a good credit score. Sometimes they could require both.

It is not compulsory to use your home as collateral, but as we have said, it could be essential to get you a cheaper interest. So, if you don’t want to use your home as collateral, approach a bank, but it would be crucial to have an excellent credit score.

Using Mortgage Refinance

You can use your existing mortgage to consolidate your debt. However, there is a catch. You would have to break your current mortgage early, and breaking your mortgage early usually comes with a penalty.

Refinancing your home mortgage gives you access to 80% of your home value after deducting the remaining mortgage. With this 80%, you would combine your mortgage and other amounts owed into a single one.

Home Equity Loan

This allows you to access the available equity in your home. You can calculate the available equity by removing your home’s current market value from the remaining amount you’ll pay as a balance.

You will use this available equity to consolidate your owed amount and pay all of them at once.

Using your First Mortgage to Consolidate your Debt

If you want to consolidate your owed amount and want to get a mortgage, you can do everything at once. However, you must be ready for the lender to scrutinize you thoroughly for this to be possible.

The lender will examine your loan to value ratio or LTV. This ratio will allow your lender to determine how big of a risk it is to lend you your mortgage sum. If your LTV ratio is below 80%, your mortgage lender could allow you to combine loans.

Conclusion.

Debt consolidation could help you solve your money problems. However, as we have mentioned, you have to plan excellently.

Best Mortgage Online can help you with your debt. Call us right now at 1-855-567-4898 for consultation.

Categories
Mortgage Refinance

TD Bank Mortgage Rates

TD Canada Trust is a leading bank based in Canada. It is one of the top 10 North American banks, and for a good reason. TD Canada offers multiple professional financial services, intending to change the lives of their customers and community. Mortgage services are amongst their many services.

With TD Canada, you can get a mortgage on your home, whether you are a new homeowner or you are making a switch from a different bank. Their mortgage services are comprehensive, affordable, and flexible. Read on to learn more about TD’s mortgage rates and options.

Canada’s Mortgage Rules

TD Canada adheres strictly to the mortgage laws of Canada as a country. Any customer who wants to apply for a mortgage with TD must be familiar with these rules. While your mortgage consultant might run over them with you, there is no harm in knowing some of the basics of Canada’s new mortgage rules. So here they are.

Stress Test: Customers who apply for mortgages are required to pass the qualifying criteria, also known as the stress test. This will determine whether they can afford a mortgage if interest rates increase. A TD mobile mortgage specialist can shed more light on the qualification criteria for individual customers.

Uninsured mortgage rates: Customers should know that the Office of the Superintendent of Financial Institutions has raised the qualifying rate for uninsured mortgages. From the previous 4.79%, it has now been increased to 5.25%. For customers with down payments over 20%, the stress test either uses the new qualifying rate of 5.25% or the customers’ mortgage interest rate plus 2%, depending on which is higher.

Insured mortgage rates: For customers whose down payments are less than 20%, the stress test uses the insured qualifying rate or the customers’ mortgage interest rate plus 2%, depending on which is higher.

These are just a few things to know about the current mortgaging laws before applying for a mortgage loan with TD.

TD’s Mortgage Options

At TD Canada Trust, they offer many different mortgage plans and options for customers. This allows them to cater to the individual needs of customers. Their options include:

First-time homeowners

TD understands the pressure and confusion that accompanies purchasing a home for the first time. This is why they offer mortgage services specifically for first-time homeowners. These services help customers decide on the best home and mortgage plan to suit their budget and tastes. The TD mortgage rate Canada for first-time homeowners varies.

First-time homeowner mortgage services include:

– Helping customers make smart financial decisions on how much they can afford to spend on a mortgage, including their current and future expenses.

– Assisting customers with pre-qualification for loans by assigning them to a loan officer.

– Walking customers through the process of mortgage application with sound financial advice.

– Educating customers on the real estate market, especially as new home buyers, and how to make offers on homes.

Home Loans and Down Payments

TD Bank offers mortgage plans for customers who can only afford to make low down payments due to money shortages. Their home loan options and their features include:

FNMA Home Ready: 3% minimum down payment and flexible underwriting.

TD Bank Right Step Mortgage: 3% minimum down payment and payments can come from gifts or grants.

FHA Mortgage: 3.5% minimum down payment with no income limits.

FNMA 97 Mortgage: 3% minimum down payment and only applicable for first-time home buyers.

Veterans Administration Mortgage: no down payment or mortgage insurance required.

FNMA Refi Now: high debt-to-income ratios and no cash back at closing.

You can get more information about all these home loans and down payment options at TD Bank’s official website.

Construction Loans

TD construction loans offer services to customers that are building new homes or renovating their current homes. TD construction loans offer the following features:

– Flexible down payments

– Both fixed and adjustable-rate options

– Interest-only payments during construction

– Initial loan payment

– Fixed-rate mortgage after construction.

The application requirements for construction loans can be found on TD Bank’s official website.

Mortgage Refinancing

TD Bank also offers mortgage refinancing services. These are applicable for customers who want to change their mortgage plan, lower their monthly payments or make significant purchases.

To apply for mortgage refinancing, customers will have to fill out a mortgage application and submit documents like credit reports. Closing costs will apply and can be up to 1-3% of the new mortgage cost. TD also offers a mortgage refinance calculator to give customers an idea of the probable cost of their new mortgage loan after refinancing.

Mortgage Affordability Calculator

TD offers the opportunity for customers to calculate a range of affordable house prices. This information is useful as customers enter the real estate market and trustworthy as it gives them a price range. All that customers have to do is fill out a questionnaire survey with some key information that will allow the calculator to give you a value for a home you can afford. This information includes details such as your desired location, annual income, monthly expenses, and others.

TD Mortgage Rate Canada

TD mortgage rates in Canada are as follows currently:

Fixed-Rate Mortgages:

I year fixed closed – 2.79%

2 year fixed closed – 3.54%

3 year fixed closed – 3.69%

4 year fixed closed – 4.14%

5 year fixed closed – 3.99%

6 year fixed closed – 5.24%

7 year fixed closed – 5.35%

10 year fixed closed – 5.06%

1 year fixed open:

4.50%

6-month convertible mortgage:

3.04%

5-year variable closed:

TD mortgage prime rate – 0.70%

5-year variable open:

TD mortgage prime rate + 1.00%

Annual percentage rates apply and vary and can be viewed on TD’s website.

Conclusion

TD Bank is a versatile and highly rated bank that offers services of all kinds. The mortgage plans create avenues for all classes of customers to suit their unique needs. The TD mortgage rate in Canada is affordable and can be fixed or variable, depending on what is most convenient to customers.

Whatever your mortgage needs may be, TD bank has an option for you.

TD Mortgage Interest Rates – Frequently Asked Questions.

What is the TD mortgage prime rate?

The TD mortgage prime rate is the standard TD mortgage interest rate for variable rates. Customers that apply for variable interest rates pay in terms of ‘TD mortgage prime rate + or – interest rate’. The TD mortgage prime rate is currently 3.35%

What is the difference between a fixed and variable interest rate?

TD mortgage interest rates can be fixed or variable. Fixed rates remain constant throughout your mortgage payment time. Variable rates may vary monthly depending on changes in the TD mortgage prime rate.

Can mortgage rates be negotiated?

While TD bank has a very vast array of mortgage options, in certain situations, customers could negotiate better rates.

Compare and get the best mortgage rates in Canada. Visit Best Mortgage Online website and find answers to your mortgage related queries.

Categories
Mortgage Refinance

When Is the Right Time to Refinance Your Mortgage in Canada

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.

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.

Home Loans Canada

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.

You can get in touch with our Mortgage experts for loan rates and advice. We also have more articles covering different aspects of Mortgage in Canada available at Best Mortgage Online for your reference.

Categories
Mortgage Renewal/Switch

Will Your Mortgage Renew Automatically in Canada?

In Canada, when a borrower takes out a mortgage loan to purchase a property, the loan is typically secured by a written agreement called a “Mortgage.” The borrower agrees to repay the mortgage using monthly payments consisting of interest and principal. The period used for repayment of principal is referred to as the term.

In most cases, borrowers will sign a mortgage for a term of 5 to 25 years. However, once the borrower has paid down the principal to 80% of the property’s original value, he may be able to renegotiate his loan with his lending institution to obtain lower monthly payments.

What Does Mortgage Renewal Mean?

Renewing a mortgage means that the borrower will take out another written agreement with the lending institution, paying off the original loan and signing up for a new term to pay down the principal. Each time this is done, borrowers may be charged fees to obtain their new mortgage.

When Does Mortgage Renewal Occur?

When you renew your mortgage depends on whether or not it has an automatic renewal clause or “option.” At least 30 days before the expiry of your current mortgage, you should receive notification from your lending institution regarding its renewal policy. Borrowers are typically informed if their mortgages will automatically renew subject to certain conditions. These conditions include:

  • The property value increases;
  • The creditworthiness of the borrower;
  • The property type; and,
  • Changes in market conditions.

Suppose your lender does not include an automatic renewal clause in its mortgage agreements. In that case, borrowers are required to make arrangements with their lending institution before the expiry date of their mortgages to obtain new loan terms. Failure to do so may result in a default on the original agreement.

Borrowers who fail to pay their outstanding debts will be subject to foreclosure proceedings by their lenders. They will also lose any accumulated equity in the property, which generally reverts to the lending institution.

Best Mortgage Online

What Happens When Your Mortgage Expires?

If you have a fixed-rate term with no options or renewals attached, your mortgage will expire at maturity. That means that your lender cannot ask you to renew or extend the term of your agreement, and for this reason, a fixed-rate mortgage is a good choice if you think that you might want to move from the property in question before the end of the term.

When Does Your Mortgage Renew Automatically?

During the fixed-rate term of your mortgage, you may wonder what will happen to your rate and monthly payments if they aren’t changed when your agreement expires. That is a good question and one that your lender’s automatic renewal clause can answer.

When Does Your Mortgage Not Renew Automatically?

Most mortgages contain an automatic renewal clause with terms that range from six months to five years. The length of time will vary depending on the type of property involved, how much has been paid off on the existing loan, the borrower’s creditworthiness, and market conditions.

For example, borrowers with “substantial equity” in their homes may have a renewal term of 10 years, while those with no equity usually have to renew for five. With this being said, the bank will not provide a more extended renewal option than the borrower needs or wants.

Borrowers who want a definite expiry date can choose a five-year option and then renegotiate the terms of their loans at maturity. Those who prefer to pay off their mortgages earlier can opt for shorter terms, such as 18 months or two years.

What Happens During Your Mortgage Renewal?

Once your mortgage has been automatically renewed, you will be required to sign another agreement with your lending institution. This document will list all of the original loan details along with the new interest rate, repayment date, amortization period, and other information.

The bank will not automatically save you money on your new rates or terms. To receive the best possible renewal package from your lender, you must call the institution during this time to negotiate a more competitive interest rate and term.

Let’s say that your mortgage is renewed at a higher rate than that on the original agreement. Then, it may be possible for you to refinance with another financial institution within a short period following its expiration. 

That particular strategy may spare you some of the higher associated costs involved with breaking before maturity, as well as those incurred from being charged an early termination fee by your current lending institution.

How Can Your Mortgage Renew Automatically in Canada?

If you need a new mortgage, consider how it will renew automatically in Canada. Some lenders offer personalized renewal terms tailored to your specific requirements. These may include:

  • The ability to lock in interest rates;
  • Mortgage renewal guarantees; and,
  • Loans with flexible terms.   

Pros and Cons of Automatic Mortgage Renewal

There are advantages and disadvantages for borrowers who choose to have their mortgages automatically renewed. For example, suppose you are out of the country or plan on moving far away from your property before the end of your fixed-rate term. In that case, automatic renewal may be beneficial because it reduces one more element that could prevent you from renewing.

On the other hand, if you expect rates to fall over the next few years, it might make sense for you not to renew your mortgage but instead opt for a shorter term to take advantage of lower interest rates. In this case, opting out of automatic renewal will give your lender less bargaining power when terms with you at renewal time.

The Bottom Line On Automatic Mortgage Renewal

Keep in mind that there may be a cost involved with breaking your mortgage agreement before maturity, even if your lender does not renew it automatically. However, you can avoid this expense by calling your lender before the automatic renewal date and negotiating a better deal.

If you are looking to acquire home loans, more information on Mortgage in Canada, loan rates in states of Canada, etc. let Best Mortgage Online help you.

Categories
Mortgage Refinance

Three Important Aspects to Look at Before Refinancing

Are you a mortgage holder and looking to make changes to the original loan? Refinancing should be the answer. This approach gives you the flexibility to take charge of your mortgage while adding instant funds into your budget. 

Homeowners can use the new loan to lower the interest rates, pay off the mortgages quickly, and turn home equity into cash. However, make sure that you switch to the appropriate loan to make the most of refinancing. 

Understanding the process thoroughly might help you know whether switching to a new loan is the right decision or not. There are multiple factors you need to keep in mind while refinancing, here’s the guide to the three most critical aspects every borrower must look at before adopting this approach. 

A brief overview of refinancing

Before jumping into the list of essential elements, it’s vital to learn more about refinancing to understand better. As the name suggests, refinancing replaces an existing debt obligation with another debt with new terms and conditions. 

This approach lets you swap out your old, higher interest rate for a new one with lower rates. The terms and conditions for refinancing are based on several economic factors and may vary from one country to another. 

For instance, you can refinance to borrow up to 80% of the value of your home in Canada. If your current mortgage is just 50% of your home’s value, you can refinance to borrow the remaining 30% to complete the mortgage loan amount to 80% of the home value. 

This approach is mainly adopted for three significant reasons: 

● To change your mortgage type

● To borrow more money

● To get a lower interest rate

3 major aspects to consider before refinancing

Now that you are well-acquainted with the refinancing concept, let’s unveil the three significant elements to consider before using this approach. Please read them carefully to avoid any last-minute surprises.

The Cost of Refinancing

Refinancing isn’t free; hence, the borrowers must consider the cost before switching to the new loan. Depending on the loan, you have to pay various additional charges, including mortgage registration fees, legal fees, home appraisal fees, and more. The borrowers can avoid the mortgage discharge fee if they continue with the same lender. 

Additionally, if you refinance before your term is over and choose the same mortgage rate, you’ll be charged penalties. However, you can avoid them by blending and extending your mortgage rate that mixes your new rates with the existing ones. These fees can add up to hefty amounts depending on which fees apply to you while refinancing.

The Interest Rates

Refinancing your mortgage equals applying for a new loan; therefore, it is mandatory to look at the interest rates before making a switch. Unarguably, the most important reason for adopting this approach is to get a better interest rate. 

Hence, the borrowers should opt for refinancing if there is a considerable difference between the interest rates, making the whole process worthwhile. A difference of a few to some percentage points can make a big difference while saving tens of thousands of bucks in the overall repayments.

Best Mortgage Online

Check Your Loan-To-Value Ratio

The loan-to-value (LTV) ratio is yet another critical factor to consider before refinancing your mortgage. This value mainly looks into how much money you take out to buy a home versus the home’s actual value. 

LTV is one of the primary ways lenders use to calculate the level of risk associated with the approval of your mortgage. Hence, the borrowers must present a better LTV ratio to get a loan faster. The more money you invest into the house, the more equity you have in it—also, the lower your LTV, the better the chances of securing good loan terms. 

As you pay off the mortgage, you build up equity in your home. This is the difference between the value of the property and the remaining balance of your mortgage. Your home equity will rise as you pay your mortgage. 

In Canada, you can refinance to borrow up to 80% of the home’s value. For instance, you owe a $200,000 mortgage on a $400,000 home. It means that your current loan-to-value ratio is 50%. Since you can only borrow up to 80% of your home, you can refinance to borrow an additional amount of $120,000 (30% of $400,000)

If you have two mortgages, you may also use a refinanced amount to consolidate the second mortgage with your first one. 

Other factors to keep in mind before refinancing

In addition to the elements listed above, there are a few more factors that you should consider before refinancing your mortgage. 

● Check if your credit rating is good enough

● Determine the good time to refinance 

● The primary reasons for switching to a new loan

● Know your Debt-To-Income (DTI) ratio. 

● Don’t forget the taxes

The Bottom Line

Refinancing your mortgage is a big decision; hence take ample time and conduct in-depth research before making a switch. A mortgage refinance is best suited to homeowners that home equity is looking to borrow a massive amount at a fixed rate. 

However, it might not be a good option for borrowers who need quick access to money or looking to borrow small amounts at a time. This approach comes with both pros and cons; therefore, you should keep all aspects in mind before transitioning from one loan to another. The decision is for you to make, so make it precise.

For more mortgage advice and loan rates, give us a call at 1-855-567-4898 (toll free) – Best Mortgage Online.

Categories
New Purchase Mortgage

How to Pick a Mortgage Lender in Canada: 10 Questions to Ask

If you’re a new homeowner, a mortgage is a huge commitment. Like any contract, it’s essential to know the details of what you are signing up for. After all, mortgage rates change frequently, and if you don’t know the particulars of the mortgage agreement, this can cost you money.

Understanding Mortgage in Canada

In Canada, there are a few different mortgage options:

  • Conventional mortgage: A mortgage that requires the borrower to make mortgage payments to repay the loan over time
  • High Ratio Mortgage: Type of mortgage that requires the borrower to make mortgage payments to repay the loan over time and requires the borrower to pay a monthly mortgage insurance premium.
  • Second/Third Mortgage: For one who has already signed another mortgage agreement with an institution.

The mortgage lender you use will significantly affect the mortgage rates and terms you receive. Here are some tips on choosing your mortgage provider:

  • Talk to family or trusted friends
  • Ask your real estate agent for recommendations
  • Shop around online through mortgage brokers in Canada
  • Decide if you want to go through a mortgage lender or a mortgage broker

What Makes a Good Mortgage Lender?

Your lender will be your single point of contact for the mortgage agreement as far as mortgage providers go.

You want to find someone who makes you comfortable throughout the mortgage process and is reliable. Some mortgage brokers offer competitive rates and products, while some lenders earn their money solely by originating mortgages.

Some mortgage lenders or brokers offer their mortgage insurance, while others link you with mortgage insurers. It is essential to know that mortgage rates can change quickly, so it’s vital to know if your mortgage provider will be able to match the best mortgage rates in Canada.

Identifying Your Mortgage Lender

The mortgage broker is a professional who helps people find a mortgage lender and helps them through the process of getting a mortgage.

Mortgage lenders can range from banks to credit unions and trust companies, among others. When it comes time for changes, you’ll want someone with experience when it comes time for changes, such as renewals or payment amount changes. During financial hardship, the last thing you need is an inability to make adjustments with your mortgage lender without incurring fees.

Typically, mortgage lenders will provide a mortgage broker with a mortgage rate and mortgage insurer, or they may give them a combination of both. As a result, the mortgage lender can offer conventional and high ratio mortgages.

A mortgage broker can help you find the best mortgage rates available in Canada, regardless of whether they’re from a bank, credit union, or mortgage insurer.

There are two types of mortgage brokers:

  • Sales-Based Mortgage Broker: A mortgage broker whose primary source of income is originating loans and collecting commission for doing so.
  • Non-Sales Based Mortgage Broker: A mortgage broker whose primary source of income is not originating loans and collecting commission for doing so.
Best Mortgage Online Canada

10 Questions You Need to Ask Your Mortgage Lender

Different lenders offer different mortgage plans with these options. Here are the top 10 questions to ask mortgage lenders in Canada before signing on any dotted line:

What is your mortgage rate?

This is an obvious question, but it gives you a rough idea of what kind of mortgage you can afford. If mortgage rates are low (less than 5%), then mortgage rates are usually lower too.

What is your mortgage penalty?  

This question will tell you what the lender charges if you need to break your mortgage agreement early or if mortgage rates drop below what you initially negotiated been. For example, some lenders charge an entire three-month interest while others only charge one month’s interest to break the mortgage agreement early. Failing to pay your mortgage penalty can also negatively affect your credit rating.

How will mortgage rates change over time?

Different mortgage lenders use different methods to calculate mortgage rates, so it’s essential to compare the mortgage terms of each lender. For example, some lenders offer “fixed” mortgages that don’t change for a set period, while other mortgage rates vary based on the prime rate or other lending rates.

What penalties do you charge if rates rise during my term?

The mortgage lender should be clear about whether they have a penalty for your mortgage rising in interest before it expires. This way, you’ll be able to make an informed choice about mortgage rates.

How often is my mortgage interest rate reviewed?

Some mortgage lenders will review mortgage rates every month, while others only review mortgage rates every 3-5 years. You should know how often your mortgage will be reviewed to avoid higher mortgage rates when you renew your mortgage agreement.

Can I lock my interest rate for a set period?

Most mortgage lenders will offer you the chance to “lock in” mortgage rates before they change. That is great if you’re planning to buy a house and want to know your mortgage costs, but it also helps prevent mortgage rates from increasing.

How much do mortgage payments increase over time?

Depending on the mortgage lender, mortgage rates can increase by 5% or more after a few years. So make sure you’re aware of how mortgage rates might change over time so that you’re not surprised later on.

Can I pay off my mortgage early?

Some mortgage lenders will let you pay off your mortgage early, but there’s usually a charge for this. If possible, try to find mortgage lenders who don’t charge early mortgage payment penalties.

What type of mortgage do you offer?

Different lenders offer different mortgage plans, so make sure the mortgage lender knows what kind of mortgage you’re looking for. For example, mortgage lenders might offer mortgage plans that allow you to pay off your mortgage early without penalty, and other mortgage rates might not provide this option.

Will I be charged mortgage application fees?

Most mortgage lenders will charge a mortgage application fee when applying for mortgages, but some mortgage lenders may also charge mortgage application fees when mortgage rates drop. This way, you’ll know what mortgage lenders will charge before you apply for a mortgage.

Closing Thoughts

Other mortgage lenders may offer other mortgage plans, so it’s crucial to shop around for mortgage rates until you find the best mortgage lender. Some mortgage lenders will charge a monthly mortgage administration fee and a mortgage penalty fee if your mortgage rate rises during your term.

Best Mortgage Online can also help you acquire a mortgage, refinance a mortgage in Canada, … with the best rates on the market. Call us and talk to our agents are available at 1-855-567-4898 (toll free).

Categories
New Purchase Mortgage

Applying for Mortgage in Canada: A Step-by-Step Guide for Homebuyers

The dream of homeownership in Canada is alive and well. According to a recent Royal LePage survey, it’s what nearly half of Canadians older than 25 years old want. However, today’s housing market can be very different from what you have known before if you come from a country with a subsidized or socialized housing sector. 

The purpose of this guide is to give you an understanding of the mortgage process in Canada and help you choose a home that fits your budget.

If you are reading this, there’s a good chance that your new life in Canada starts with buying a house. In fact, for many people, it’s the biggest purchase they will ever make, so it’s essential to find out as much as possible. This article will help you through the process and eliminate some of your concerns about mortgages in Canada.

Understanding Mortgage Terminology in Canada

Before you start the process of applying for a mortgage, there are some key terms you should understand. Once you know what they signify, it will be easier to decipher information about mortgages provided by banks, real estate agents, and other professionals who deal with them daily.

Some might sound familiar, while others could be entirely new for you. Below are some of the essential terms you should know before applying for a mortgage.

  • Principal: The principal is the amount of money borrowed, not including interest or fees. Therefore, if you borrow $300,000 at 5% p.a., your principle is $300,000.
  • Interest Rate: Interest is the money charged for borrowing your money. Most loans have an interest rate, usually expressed in percentage per year.
  • Fixed-Rate Mortgage: The interest rate you sign up for in your mortgage agreement will remain unchanged throughout the term of your mortgage.
  • Variable-Rate Mortgage: Variable-rate mortgages are where the interest rate is not fixed and may fluctuate according to a predetermined formula.
  • Collateral: Collateral refers to any guarantee you provide if you cannot make your monthly payments or default on any of the terms and conditions in your mortgage agreement. For example, a common form of collateral has a second property that you own and can be sold to cover the unpaid portion of your loan.
  • Mortgage Term: Most mortgages in Canada are closed-term (have a predetermined term that cannot extend) and fully amortized, which means you make equal monthly payments of principal and interest to reduce your balance.
Best Mortgage Online

Types of Mortgages

When you go through purchasing a home, the lender will consider your financial position (income, credit rating, debts), the type of property you plan to buy (for example, single-family dwelling or condo), and your timeframe for repayment. Once they understand all of these parameters, they will suggest different mortgages based on their requirements.

Depending on your needs, your lender can offer you a variety of mortgages with different terms and conditions depending on your financial situation. However, some of the most common types that are recommended for first-time buyers are:

Conventional Mortgage

A conventional mortgage does not require any additional insurance coverage to assure the risk of default. In addition, homestead protection is automatically included in this type of mortgage which means you cannot be forced to sell your home in case of default.

High Ratio Mortgage

A high ratio mortgage has a down payment requirement between 5% and 19.99%. In Canada, most lenders require you to have at least 5% of the purchase price of the cash home, with the remaining amount financed through a mortgage loan.

Mortgage Loan Insurance

In case you have a down payment of less than 20% for purchasing your home, your lender will require additional insurance coverage to protect against default. Mortgage loan insurance protects lenders against loss in cases where mortgage payments are not made.

Conventional High Ratio Mortgage

Conventional high ratio mortgage is a recommended type of mortgage for first-time buyers that features a down payment of more than 5% with the balance financed through a mortgage.

Mortgage Pre-approval Process

Once you have finally found the perfect property for you and discussed the price with the real estate agent, it’s time to approach a lending institution to pre-approval your mortgage. Your lender will do a complete assessment of your financial position and ask all the necessary questions to determine how much money they are willing to lend you.

The lender will use different ratios to determine your eligibility for a mortgage. For example, your gross household income ratio compared to your fixed monthly debt payments, including the new home purchase, should not be more than 32%.

The pre-approval process is usually completed within 48 hours, depending on what type of property you are buying and whether it requires additional approvals from a strata board or not.

Mortgage Application Process

Once you have been approved for a mortgage, the lender will provide you with a document called a ‘vesting letter’ that will include your name and the property address, as well as the maximum amount they are willing to lend you. Next, go ahead and sign a purchase agreement with the seller and ask your real estate agent to forward the listing information to your lender.

You will have to provide the lender with copies of all documents related to the sale of your home, including any offers you have received from other buyers. The offer copy must include how much money they are willing to pay for the property and the closing date. Lenders also require a copy of your last mortgage statement to determine what kind of terms you had on your previous mortgage and how much equity is available in your home.

They will then provide the necessary funds to the vendor (seller), who will pay off their existing mortgage with their financial institution. All that’s left is waiting for the title transfer and your mortgage funds to be released. It usually takes between 15 and 45 days, depending on what province or territory you buy real estate.

Closing Thoughts

There’s no such thing as a dumb question in buying your first home. Do not hesitate and ask away if you feel like you are bothering the lender with too many questions. Also, you can expect some surprises since things always take longer than expected, and the lender will probably ask you for additional documents to be submitted.

Best Mortgage Online can help you search for home loans in Canada, contact us at 1-855-567-4898 (toll free).