By Len Lane
Brokers For Life has been working with homebuyers across Canada for many years. We understand that the mortgage landscape can be confusing to applicants and that why we’ve provided this FAQ section — with answers to the most popular questions we’ve received over the years.
If you still have questions, please contact us. We care about educating our clients!
What does a mortgage broker do?
A mortgage broker acts as an intermediary between a lender and a borrower. In other words, they facilitate the transaction between you and your bank or mortgage lender.They take care of the legwork of searching for the best mortgage product and interest rate by utilizing their network of lenders and financial institutions.
Do mortgage brokers work for the bank or a financial lender? At Brokers For Life, all of our brokers work for you, not your bank or mortgage lender.
What kind of clients do you work with?
Brokers For Life works with homebuyers from many walks of life. We’re even able to help those with poor credit, little money for a down payment, and those who are self-employed.
What do you charge?
Here’s some great news: Brokers For Life doesn’t charge you anything. Our fee is paid by the lenders we secure your mortgage through, not you. In special circumstances, and depending on the length and amount of the loan, we may have to charge a fee. However, we don’t charge our clients in the majority of cases.
What will I pay in closing costs?
Closing costs will vary depending on your situation. They may include appraisal fees, survey fees, your legal fees, and realtor commissions. We can help you determine about how much your closing costs will be. Give us a call!
Why is a mortgage insurance premium necessary?
If your down payment is less than 20% of the property value, you’re required to pay an insurance premium. For lenders, a down payment of this size is more of a risk, so the insurance premium is a guarantee for the lender in the event of your defaulting on the loan.
What is mortgage life insurance?
This is insurance coverage that would pay off in the event of death or disability of the homeowner. Contact Brokers For Life to find out about our mortgage life insurance options.
What are Fixed and Variable rates?
In a Fixed Rate Mortgage, the interest rate is fixed for a specific amount of time. This period of time (the mortgage term) can range anywhere from 6 months to 10 years. Over the course of the mortgage, less of the payment counts toward interest and more toward the principal.
A Variable Rate Mortgage is one in which payments are fixed, but the interest rate will fluctuate with changes in the Prime Rate. When rates go up, a larger portion of the payment goes toward interest. When rates go down, more of the payment goes toward principal.
Can I make my down payment with gifted money?
In most cases, the answer is yes. However, the funding must be from a family member. There are certain circumstances in which you cannot use gifted funds. For example, your mortgage product may have a limit on the percentage of the down payment that can be gifted. Brokers For Life can find out if your gifted funds can be applied to your down payment.
Mortgage broker vs my bank
Not 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 best.
Brokers For Life is an independently owned mortgage brokerage that works for you. Because of our network of lenders, we’re 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.
Why should I get a pre-approved mortgage?
There are several benefits to getting a Pre-Approval before you start searching for your next home.
How long does the mortgage process normally take?
If we are able to get the necessary documentation, we might be able to get an approval in as little as 24 hours. Keep in mind, the longer it takes for us to receive your documents the longer your approval will take to secure. Take a look at our mortgage checklist, for a summary of what you’ll likely need to provide.
Is it really safe to apply for a mortgage online?
Applying for a mortgage online with Brokers For Life is safe and secure, but you don’t have to take our word for it- if you see https: at the beginning of your web browser, it means the site you are on it secure. If it says http:, you are not on a secure web page. Our online application form is secure, and you can see it for yourself!
How much should I consider spending on a home?
Most mortgage lenders allow you to spend no more than 32% of your monthly income on your mortgage, and newer guidelines allow up to 44% of your monthly income for mortgage payments and other debt payments. Our mortgage calculators can help you determine your affordability.
Should I consider a mortgage to help with debt?
Yes. In fact, this is a common use of a mortgage loan. Many of our customers obtain a mortgage to consolidate credit card debt, renovate their kitchen, or invest.
If I’m unable to confirm my income, could I still qualify?
Unfortunately, you usually can’t. However, there are some exceptions. For instance, if you are self-employed or have been a commissioned employee for at least 2 years, you can generally qualify for a mortgage loan. You’ll have to provide certain documentation, including articles of incorporation, a business license, and the most recent two years Notices of Assessment from CRA.
You may also be able to qualify based on equity loan if you have a large enough down payment and very good credit.
Why is an appraisal necessary?
Every conventional mortgage that includes a minimum 20% down payment requires an appraisal because the mortgage is uninsured. The lender wants to see that your purchase price is in line with the property’s fair market value. Lenders want to see that you are purchasing a quality property and that they will be able to recuperate the full amount if you default on the loan.
What benefits do I receive for mortgage pre-payments?
Pre-payment typically allows you the following privileges:
What’s better; a short-term or long-term mortgage?
While a short-term mortgage will usually have a lower interest rate, you’re rate might go up when you renew at the end of your term. A long-term mortgage will typically have a higher rate, but you won’t have to renew for a longer period of time. The option you choose depends on your situation. If interest rates are low, it may be wise to choose a longer term, where a shorter term might be a better choice if interest rates are currently high, so you might be able to renew at a lower rate.
Does paying bi-weekly actually save me money or shorten my amortization time?
It does! With a monthly mortgage, you’ll make 12 regular mortgage payments annually. When you pay bi-weekly, you’ll make 26 half-payments, amounting to 13 regular mortgage payments annually.
That might not sound like much, but it adds up. A bi-weekly payment schedule could make you mortgage-free years sooner, saving you thousands in interest payments to boot!
Our bi-weekly payment calculator can give you more details.
What is required for my down payment to be confirmed?
This will depend on the source of your down payment.
What minimum down payment do I need?
You can provide as little as 5% of the total price of the home if you have good credit. Even if you have poor credit, we have a network of lenders that are willing to work with poor credit buyers, providing you have a 15-35% down payment.
We also offer an Alternative Down Payment Program that allows buyers to borrow their down payment. When working within this program we must add 3% to your mortgage.
Can I transfer my mortgage if I buy another home?
Depending on your mortgage lender, yes. Most lenders are now offering options that allow you to take your mortgage with you. Typically you will not be assessed additional fees if the possession period between your old and new home is 60 days or less.
What is mortgage assumption?
Mortgage Assumption is usually when the buyer “assumes” the mortgage from the seller. In other words, you are taking responsibility for the mortgage payments. Because of the potential risk, we do not recommend this method. Additionally, lenders are recognizing the additional risk in mortgage assumptions and are working to make it more difficult for people to assume mortgages for which they do not qualify.
What’s the difference between a Cosigner and a Guarantor?
A guarantor is someone who guarantees that payments will be made on a mortgage. They can apply to be removed from the title at a later point if the owners become able to qualify on their own.
A Cosigner is registered on the title on the property, making them a co-owner of the property.