Mortgage solutions are provided by many bankers and mortgage
brokers in Ottawa and other cities in Canada. Though there are many things you
have to consider about mortgage payments, there are a few questions that are
frequently asked by Canadians who are looking for a good mortgage plan and
payment solution.
Why hire a mortgage broker when the Bank is there?
When you deal with a bank for the mortgage solution, you are
bound by the list of products they have. It is possible that the list does not
have the best solution for you. Also, banks have to think about their profit margin
and will offer you the highest rate that is acceptable to you. A mortgage
consultant on the other hand will have a list of lenders and mortgage products.
You could potentially benefit from lower interest rates. However, if you are
buying a new home or condo that is not built and you require a pre-approval
letter, you must go through a bank, because a mortgage broker cannot guarantee
the rate for long enough.
What fee charges are involved?
Typically there is no fee. The lenders who receive your
mortgage application hand a certain amount of commission to mortgage
consultants. If your application is not accepted because of job instability or
bad credit, you are subjected to brokerage fee.
Do I have to wait for my mortgage to mature?
It is not a good idea to wait for that long. You should
inform your mortgage consultant around 4 months before the time of maturity of
your mortgage. During this time, the consultant can easily shop for other
mortgage rates and your mortgage will be easily transferred if there is a
possibility.
I recently heard of Mortgage Loan Insurance. What is it?
Mortgage loan insurance is required by law and is provided
by three major companies in Canada: AIG Insurance, Genworth Financial Canada
and Canada Mortgage and Housing Corporation (CMHC). Do not confuse this with
mortgage life insurance. Here the lenders are ensured against default on
mortgages with an 80% ratio of loan to value. Borrowers pay insurance premium
between 0.5% and 3.7% which is directly added to the mortgage account.
What is a high-ratio mortgage and how is it different from
conventional mortgage?
Conventional mortgage is the typical mortgage where the down
payment is equal to 20% or more of the property’s purchase price and there is
no mortgage insurance required for it.
High-ratio mortgages are where the down payment is less than
20% of the purchase price. You are required to attain mortgage loan insurance
from one of the three companies that provide insurance. The borrower is allowed
to purchase the house with a small amount of down payment and the lender is
also protected with the loan insurance.
What form of down payment is acceptable?
If you have cash, then it is good. If, however, you do not
have cash, you can use:
• Accumulated
savings
• Sales
proceeds that you gain from an existing house
• Your
Registered Retirement Savings Plans (RRSP). Up to $20,000 can be used for down
payment and if it is repaid within 15 years it will not be subjected to income
tax.
• Investments
that are not registered
• Borrowings
from an unsecured Line of Credit.
Visit www.bennettpros.com for all your real estate needs.
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