Even if you have a pre-approved mortgage certificate, you must still meet with us during the conditional offer period to get a final mortgage approval. To ensure that the process goes smoothly, make sure you bring:
We will update/verify your financial information, and put together the information required to complete the mortgage application. We may require an appraisal and/or a survey or title insurance. We will also inform you about the various types of mortgages, terms, interest rates, amortization periods and payment schedules available.
Depending on your down payment, you may have a conventional or high-ratio mortgage.
A conventional mortgage is a mortgage loan that does not exceed 75% of the lending value of the property. The lending value is typically the lesser of the property’s purchase price and market value. Your down payment is at least 25% of the purchase price or market value.
If you contribute less than 25% of the home price as a down payment you will need a high-ratio mortgage. This type of mortgage requires mortgage loan insurance, of which CMHC is a major provider. You may elect to have the insurance premium added to your mortgage or to pay it in full upon closing.
Fixed, Variable or Adjustable Interest Rate
Mortgage interest rates are either fixed, variable or adjustable. A fixed rate is a locked-in rate that will not increase for the term of the mortgage. A variable rate fluctuates based on market conditions while the mortgage payment remains unchanged. With an adjustable rate, both the interest rate and the mortgage payment vary based on market conditions.
A closed mortgage may be a good choice if you’d like to have a fixed payment that will allow you to adjust your budget to your new lifestyle. However, closed mortgages are not flexible and there are penalties or restrictive conditions attached to prepayments or additional lump sum payments. It may not be the best choice if you decide to move before the end of the term or if you want to benefit from a potential decrease of interest rates.
This type of mortgage is flexible and can usually be pre-paid by any lump sum or paid off at any time without penalty. An open mortgage can be a good choice if you plan to sell your home in the near future or to pre-pay with large lump sums. You may convert to a closed mortgage at any time, although you may have to pay a small fee.
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We will also tell you about the term options for the mortgage. This is the length of time that the mortgage conditions, including interest rate, will stay the same. It can vary from six months to 10 years. Choosing a longer term (for example, five years) gives you the chance to plan ahead and protects you from interest rate increases while you adjust to homeownership. Weigh your options carefully and don’t be afraid to ask us to work out the differences between one, two, five-year or longer terms.
This is the amount of time over which the entire debt will be repaid. Many mortgages are amortized over 25 years, but may be as long as 30 years. The longer the amortization, the lower your scheduled mortgage payments, but the more interest you pay in the long run.
A mortgage loan is normally repaid in regular payments, either monthly, biweekly or weekly. Payment schedules that are more frequent can save some interest costs by reducing the outstanding principal balance more quickly than with monthly payments. The more payments you make in a year, the lower the overall interest you have to pay on your mortgage. Keep in mind that mortgages may have important payment features that can save you money and let you be mortgage-free sooner.
If your calculations show that you will have trouble meeting monthly debt payment and that you will likely have trouble getting approved for a mortgage, the first thing you should do is to come in and talk with us. We can offer options and advice that may include:
The Importance of Your Credit Rating Before approving you for a mortgage, we will want to see how well you have paid your debts and bills in the past. To do this, we simply get a copy of your credit history (credit report) from a credit bureau. This provides us with information on your financial past and use of credit. Before we see your credit history, you should get a copy for yourself to make sure the information is complete and accurate. Simply contact one of the two main credit-reporting agencies (Equifax Canada Inc. or TransUnion of Canada) to get a copy of your credit report. There may be a fee for this service.