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.
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).