SAMARY MORTGAGES

Frequently Ask Questions

Why do you need a mortgage broker agent?

  • A mortgage broker coordinates borrower’s needs and lender’s terms and conditions until closing the mortgage. It is a time-consuming process due to significant background information gathering and verification involved
  • Unlike your bank, a mortgage agent works for you, his/her loyalty is to you, not the lenders
  • A good mortgage agent will find the best product for you, better than your bank’s products
  • A mortgage broker provides mortgages on a wholesale basis from lenders, and therefore can offer the best rates available in the market
  • You have a lower credit score or other challenges, and a good agent will know which lenders are willing to work with you

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What is a Conventional Mortgage?

  • A mortgage that does not carry any form of high-ratio (e.g. down payment 20% or more) or lender insurance premium

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What is Closed Mortgage

  • The interest rate on a closed mortgage is usually lower than on an open mortgage with a comparable term length
  • If you break the mortgage contract, a pre-payment penalty will apply

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What is Open Mortgage?

  • Having the flexibility in making extra payments or paying off your mortgage completely (pre-payment) with no penalties
  • The interest rate is usually higher than on a closed mortgage with a comparable term length; this is because it allows more flexibility to put extra money toward your mortgage on top of your regular payments

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What is the mortgage default insurance?

  • Mortgage default insurance protects lenders in the event a borrower defaults on their mortgage
  • If your down payment is less than 20% of the price of your home, you must buy mortgage loan insurance
  • Mortgage insurance in Canada can be purchased from Canada Mortgage & Housing Corporation (CMHC), Genworth Financial and Canada Guaranty

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How much can I afford to buy a home?

  • Lenders look at two ratios when determining the mortgage amount you qualify for, which generally indicate how much you can afford
  • These ratios are called the Gross Debt Service (GDS) ratio and Total Debt Service (TDS) ratio; they take into account your income, monthly housing costs, and overall debt load
  • Typically max. GDS 39%, and max TDS 44% to qualify; however, some lenders have programs up to TDS 50%
  • Calculations require following basic information;
    • Your taxable income
    • Any outstanding debts
    • Property tax
    • Condo fee (if applicable)
    • Heating cost (typically take as $100)
  • Your licensed mortgage agent will do the calculations for you

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Can I use gift funds as a down payment?

  • Yes, gifts from close family members such as parents, siblings etc. are acceptable
  • A gift letter signed by the donor is required
  • The gifts must be in the borrower’s bank account prior to the application submission

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How much maximum I can withdraw from RRSP for down payment?

  • The Home Buyer Plan (HBP) allows you to withdraw up to $35,000, tax–free, from your Registered Retirement Savings Plan (RRSP)
  • It can be used only to buy or build a qualifying home
  • After the 2 year grace period, you’ll have a maximum of 15 years to repay the full amount back into your RRSP
  • This is only for;
    • First time home buyers
    • Residents or Citizens of Canada
    • Owner occupied homes

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What is the minimum down payment?

  • Purchase Price < $500,000, 5% of the purchase price
  • $500,000 < Purchase Price < $999,999, 5% of the first $500,000, 10% for the portion above $500,000
  • $999,999 < Purchase Price, 20% of the purchase price
  • Regardless of the amount of your down payment, at least 5% of it must be from your own cash resources (ex. Savings, RRSP, TFSA etc.) or a gift from a family member. It cannot be borrowed

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Will I even qualify for a mortgage if I have bad credit or bankruptcy?

  • If you know you have a low credit score, you should be transparent with the mortgage agent from the start
  • Your agent will find mortgage products that are best tailored to your needs
  • Depending on the circumstances surrounding your bankruptcy, there are lenders would consider providing mortgage financing

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