fbpx

SAMARY MORTGAGES

Frequently Ask Questions

Why do you need a mortgage broker agent?

  • A mortgage agent 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 in the market for you; bank provides their own product only.
  • If you have a lower credit score or other challenges, a professional mortgage agent knows and has access to lenders who are willing to provide mortgage products to you.

Back to Index

What is a Conventional Mortgage?

  • A mortgage that does not carry any form of high-ratio or mortgage insurance premium (e.g. down payment 20% or more is considered as a Conventional Mortgage).

Back to Index

What is Closed Mortgage

  • A closed mortgage is a restrictive type of mortgage that cannot be prepaid, renegotiated, or refinanced without paying breakage costs or a penalty to the lender.
  • With a closed mortgage, the interest rate is more attractive than an open mortgage because you are limited by how much extra you can pay towards your mortgage each year.
  • Whenever possible, be sure to select the “original mortgage balance pre-payment option” as this will enable you to pay off more in a year than the “current balance” alternative.

Back to Index

What is Open Mortgage?

  • An open mortgage provides the flexibility of being able to repay all or part of your mortgage at any time during the term without paying a prepayment charge/penalty.
  • 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.

Back to Index

What is the mortgage default insurance?

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

Back to Index

What is a stress test?

  • The mortgage stress test (affordability assessment) requires lenders to check that a borrower can still make the payment at a rate that is higher than the actual mortgage rate
  • You need to pass the stress test even if you don’t need mortgage loan insurance.
  • The bank must use the higher qualifying interest rate of either 5.25% or the bank’s interest rate plus 2%.
  • Credit unions and other lenders that are not federally regulated do not need to use this mortgage stress test.
  • This means that your income needs to be high enough and your existing debt low enough to be able to pay down your mortgage at the higher rate.

Back to Index

Can I use gifted funds as a down payment?

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

Back to Index

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

Back to Index

What is the minimum down payment?

  • 5% of the purchase price for a property less than $500,000
  • 10% for the next $499,999  
  • 20% for all dollars exceeding $999,999
  • 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
  • 20% of the property value for rental units

Back to Index

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 beginning.
  • Depending on the circumstances surrounding your consumer proposal or bankruptcy and its history, there are lenders in the market who will consider providing mortgage financing to you.

Back to Index