There are two aspects of mortgage loans that I want to write about today. First is how to decide on a mortgage provider. You need to choose carefully, find an expert who’s trustworthy and professional. It’s easy to see why, as you will be providing them with an all-access view of your finances. They are also going to be responsible for getting you a good deal that many will be paying off for decades. So, before we discuss the essential questions to ask your broker to give you confidence in your investment, it’s better to begin talks with a mortgage broker about why they are suitable for you.
The second topic is how to get to grips with fees and penalties. The more comfortable you are around terms and different options available, the more straightforward and less stressful the process becomes.
Ask for references
If they are reputable mortgage providers, they will be happy to give you referrals. It gives them a chance to reveal to you their reputation. On the other hand, if they refuse, however nicely, to provide you with references go someplace else. Don’t waste your time.
Keep in mind that due to the extreme competition in this market lenders will vary little in their loans. The great divider in this industry is customer service. Make sure, either from the references you received, friends and family or even your real estate agent, that they are competent professional. You’ll need someone who deals with concerns efficiently. You’ll also want a proactive broker, one that anticipates roadblocks and strategizes how to navigate around them.
What is the breakdown of the entire cost?
There’s a lot of jargon involved in mortgages and a seemingly endless list of fees and taxes. You don’t want to sign up for a mortgage without identifying the entire range of costs. Be pedantic with your lender, make sure they have informed you of every report that is being charged to you such as pest inspection or credit reports. Remember, it is against the law not to provide a complete loan estimate, and this also includes their fee estimate.
What are my prepayment privileges?
The Government of Canada’s definition of this is “the amount you can put toward a closed mortgage on top of your regular mortgage payments, without having to pay a prepayment penalty.” The reason for this penalty is because your lender will be missing out on interest in your payments, which is how the whole concept of a loan operates.
What are my refinancing restrictions?
Canada’s newly enforced mortgage regulations have made refinancing tricky to occur on a mortgage loan. If you find yourself refinancing you have to prove that you’ve got the funds to pay at a substantially higher interest rate. Another major factor in these lending rules is that mortgage holders of 20% down payments are also subject to the stress test. However, keep in mind that these stringent tests are only enforced in federally regulated lenders so if refinancing is a possibility to you it may be wise to see the offers that private lenders are offering.
Before closing day, there are going to be additional fees adding to the final cost of your mortgage. For instance, a home inspection makes sure that the house is in good working order and gives you the safety specs on your potential new home.
Another substantial cost is the appraisal fees that calculates the value of the property. This valuation allows the broker to give you a mortgage to roughly match the price of the house. If you are successful on the closing day, you’ll be presented with a whole new set of fees and taxes. I’ve simplified the most common of these below;
- Land tax – This is based on a sliding scale and varies between provinces. There can sometimes be rebates for first-time buyers.
- Property tax – The previous homeowner may have already paid this along with utility fees so what typically happens, in this case, is that the buyer reimburses the seller to the proportionate value of the cost from the closing day onwards.
- GST/HST – These are the taxes placed on Canadian properties. All properties except used homes without substantial renovation are subject to this tax. GST is the standard form, and HST is in provinces that combine the GST and PST (Provincial Sales Tax).
After the closing day, you will need to pay legal fees and property insurance. After this, you’re ready to pick up your keys and move into your new home!
Can I port my mortgage if I move my address?
So before asking this question, you’ll want to know what it means. To port a mortgage is essentially to transfer your existing mortgage terms and rates across to an alternative property. Make sure you know whether you can port before signing the contracts. All too often, home searchers are wearing rose-tinted glasses about their forever home, but life is unpredictable, and there are many reasons why Canadians find their property not so perfect when their circumstances change. The most common reasons that homeowners feel the itch to move is an increase in family size. That doesn’t mean you have to get a five bedroom property because you are a couple considering children. However, you need to be clear what the fine print is for a mortgage port. Other common reasons for moving include job location, downsizing and getting a more manageable property in retirement.
Make your broker work for their commission. Inform them of your situation and ask the questions that need answering. Here are a few questions I recommend asking:
- Should I go for an open or closed terms?
- What are the benefits and drawbacks of selecting a variable rate for me?
- What is the largest amortization rate I can get within my budget?
- What term best suits my needs?
Having a savvy broker who can tailor their lending services to your needs is invaluable. And it’s better to ask these questions now than berating yourself for rushing the process years down the line.
As you have probably gathered, settling on a mortgage product requires a lot of insider expertise and planning to get your perfect balance between value for money flexibility and security.
Find out what rates and terms are available to you, today. Click the below link to speak with a Mortgage specialist from BMO. There is no obligation. The benefit to you, is that they will help you to understand what mortgage products you are eligible for given your affordability:
This information is just our view and should be not be considered advice of any sorts.
From our experience and other professionals we partner and engage with, we work to find useful tips and information that would be important to share.
If you are someone that is looking for professional advice tailored to your circumstance, please contact a bank, financial advisor, or mortgage broker.