Here are some mortgage related frequently asked questions, answered by our mortgage advisors at Quickfire Mortgage Solutions in Edmonton, AB.
What is mortgage default insurance?
Mortgage default insurance is a government-sponsored program that allows buyers to purchase homes with less than 20% down payment. Any property purchase with less than 20% down payment must have default insurance. This insurance is a percentage ofthe mortgage amount and is usually added to the mortgage. Mortgage default insurance is only available on homes that a buyer lives in.
How much money do I need for a down payment?
In most cases, the minimum down payment required is 5% of the purchase price of the home.
How does the Home Buyers' Plan (HBP) work?
Each purchaser can use up to $25K from their RRSPs under the Home Buyers Plan. Couples can pool their RRSPs together and put down $50,000. This is the only way for you to take money out of your RRSPs tax-free, and this program is available to first time home buyers only. Repayment of the funds back to your RRSP can be made over a 15-year timespan on equal1/15 payments. You also have a 2 year grace period before your 15 years start.
If I have mortgage default insurance, do I also need mortgage life and disability insurance?
Maybe. Mortgage life insurance is a life insurance policy for a homeowner, which will allow your family or dependents to pay off the mortgage on the home should something tragic happen to you. Mortgage default insurance is something lenders require you to purchase to cover their own assets.
Mortgage life and disability insurance is meant to protect the family of a homeowner and not the mortgage lender itself. Mortgage life and disability insurance is extremely important in many circumstances but it is not crucial in others. I analyse your specific situation when it comes to insurance and together we will come up with a plan best-suited to your needs.
What's the best rate I can get?
Your mortgage term plays the biggest part in the interest rate of your mortgage. Your credit score also influences the interest rate for which you will qualify, and as the more stable you appear as a borrower, the lower your rate may be. Rate is definitely not the most important aspect of a mortgage, though, as many rock-bottom rates often come from no frills mortgage products. In other words, even if you qualify for the lowest rate, you often have to give up other things such as prepayments and porting privileges when opting for the lowest-rate product.
Can I refinance my home to pay off debts?
Yes, by refinancing now and paying off your debt, you can put yourself and your family in a better financial position. It's very important to not rack up your credit cards after refinancing, however, so set your goals and budgets, and stick to them! Ask me if this is the right strategy for you.
What's the maximum mortgage amount I can qualify for?
To determine the amount for which you will qualify, there are two calculations you'll need to complete. The first is your Gross Debt Service (GDS) ratio. GDS looks at your proposed new housing costs (mortgage payments, taxes, heating costs and strata/condo fees, if applicable). Generally speaking, this amount should be no more than 32% to 35% of your gross monthly income. For example, if your gross monthly income is $4,000, you should not be spending more than $1,280 in monthly housing expenses. Second, you will need to calculate your Total Debt Service (TDS) ratio. The TDS ratio measures your total debt obligations including housing costs, loans, car payments and credit card bills. Generally speaking, your TDS ratio should be no more than 44% of your gross monthly income. Before falling in love with a potential new home, you may want to obtain a pre-approved mortgage with me. This will help you stay within your price range so you can spend your time looking at homes you can confidently afford.
How much am I supposed to pay my mortgage broker?
Great news!! You don't pay a cent. I am paid by the lender we secure your mortgage with. In special circumstances, especially for commercial mortgages, a fee may charged but this is always disclosed at the beginning and would be transperant.
How long does the mortgage process normally take?
If you are able to submit the necessary documentation right away, I might be able to get an approval in as little as 24 hours. Keep in mind, the longer it takes for me to receive your documents, the longer your approval will take to secure. However, timing is also contingent on lenders - some lenders are much faster in their approval process than others. I will be able to properly advise you timing once we choose which lender we go with.
Why is my appraisal necessary?
Most purchases with conventional mortgages that include a minimum 20% down payment require an appraisal because the mortgage is uninsured. Lenders want to see that your purchase price is in line with the property's fair market value. Lenders want to make sure you are purchasing a quality property and that they will be able to recuperate the full amount if you default on the loan.
Mortgage Broker vs My Bank
OK ... It's not really a question, but still a popular comparison amongst home buyers. When you work with your bank, you get one choice - the one they offer you. But there are plenty of other lenders out there that may be able to offer you a product or rate better suited to your unique needs. Every bank says they have the best product or rate, but it's just not possible for everyone to have the right fit for you.
I am an independent mortgage broker and advisor and I work for you. Because of my network of lenders, I'm able to present you with a range of choices, allowing you to select the best option. Lenders compete for your business, so you get the best deals. Best of all, you'll have an experienced mortgage broker to help you make sense of your choices and understand the variety of products and how each one could benefit you.