Tag Archives: mortgage
7 Questions Home Buyers Should Ask Mortgage Lenders Before Signing
With house prices being what they are today, most people can only afford to buy a home with the help of a mortgage. Because of this, home buyers often start searching for suitable mortgage brokers or lenders right around the time they decide to buy a new home.
But before making a decision, be sure to ask the following questions to the lenders you’re considering, so that you’re fully aware about what you’re getting into and can get the best solution for your needs.
1. What is the best type of loan for me?
Mortgage loans can come in many variations: fixed-rate loans, variable-rate loans, conventional mortgages, high-ratio mortgages, open or closed mortgage etc.
The one you select will depend on factors such as your borrowing history, financial status, long-term plans, and of course what the lenders can offer you (some lenders may specialize in certain types).
Be sure to ask your lender what options they offer, and have them explain the drawbacks and benefits of each option.
2. What interest rate will I get?
Interest rates vary greatly, and are heavily dependent on factors such as the Bank of Canada’s prime rate and the yield on government bonds.
(Side note: interests rates are looking quite good right now.)
However, lenders still have quite a bit of leeway on the rates they can offer, and it never hurts to shop around. Conventional mortgage lenders generally offer the lowest rates, but private lenders can sometimes make up for that through other perks or services.
It’s also important to note that your credit score will significantly affect the interest rate that you’ll get. A history of solid credit repayment will get you savings in the long run!
Don’t hesitate to directly ask the lender what interest rate you will qualify for.
3. Are there prepayment fees I need to worry about?
Mortgages – like most loans – have specific maturity dates, which is the date by which the entire loan amount (principal + interest) must be repaid.
However, many people opt to pay back the loan earlier, in the hopes of saving a bit on the interest payments. This can make sense if you suddenly have access to more money – through a promotion, inheritance, or work bonus, for example.
However, prepayments are a loss to the lender, and so they usually impose penalties and fees on prepayments.
Even if you don’t anticipate prepayment, ask your lender about any prepayment penalties and terms, so that you don’t get a nasty surprise in case it ever happens.
4. What does the timeline for getting my mortgage look like?
Ideally, you’ll want to sign with a mortgage lender who can close your mortgage within 30 days, though this figure could vary depending on market conditions.
Having said that, there are some types of home loans that can take longer to process, due to parameters such as your financial health, the type of home you’re buying etc.
5. What are the documentation requirements?
Mortgage lenders require a plethora of documents to be able to process your application.
This includes things such as proof of income, letter(s) of employment, statements of assets and liabilities, personal ID, and any valid documentation to show a good credit history.
Ask your lender about the full suite of documents that may be required, including potential substitutes in case you are missing a few.
6. Can I get any down payment assistance?
Given how high home prices are, it can be difficult to afford a large down payment if that’s required.
The good news: there could be some government or other assistance programs that you could take advantage of.
One good example is the Home Buyers Plan (HBP), which lets you borrow against your RRSP savings. This program has been enhanced in Budget 2019, giving buyers an even higher limit to use from their RRSP.
If you’re a new immigrant, or a first time home buyer, there may be assistance available for you as well.
Ask your lenders if they can help you find and take advantage of any programs that can reduce your down payment burden.
7. Can I lock in the interest rate?
Considering how mortgage rates are pretty low right now, you may consider locking in your rates as early as possible.
Your lender would basically be committing to providing you a specific interest rate, as long as the house closes within a specific cutoff date. That way, even if the interest rates go up in the interim, you won’t be forced to pay a higher interest rate on your mortgage.
Some lenders offer this facility free of charge, but others do charge a fee. Ask your lender what their policy is, and if they do charge, what the fee would be exactly.
The Final Word
Finding a suitable mortgage lender can be just as daunting as shopping for your home itself. However, armed with the right questions, you can definitely make the process easier for yourself.
If you happen to be in the market for a new house right now, whether for investment or for your own use, consider Pre-Construction Condos. With many new projects coming online in the coming months, Pre-construction Condos are definitely worth a look!
For the first access to the most competitive new listings and the best VIP incentives, sign up to our Insider’s Club!
Buying A House without Canadian Credit History – A Guide for Newcomers to Canada
Canada welcomes hundreds of thousands of new immigrants each year. Newcomers to Canada arrive with hopes, dreams and ambitions, and are a key driver of Canada’s growth for the foreseeable future.
However, being a newcomer to Canada comes with many challenges. One of the many challenges for newly landed immigrants is buying a house here. There is a general myth that it is impossible for new immigrants to secure financing for a house if they don’t have solid Canadian credit history.
This is not true! Newly landed immigrants CAN apply for financing and be approved. It’s more difficult, yes. But it’s not impossible.
In fact, many mortgage lenders have programs specifically designed for new immigrants. This article can help shed light on what options newcomers to Canada have for securing financing to buy their dream house.
Who does this article apply to?
The information in this article applies to you if you meet all of the following criteria:
- You must have immigrated to Canada within the last 5 years.
- You must have Permanent Residence status.
- You must have a minimum of three months’ salaried, full-time employment in Canada, or a two-year history of Canadian self-employment
- The property you are buying will be your primary residence
Note: If you don’t meet these criteria, it may still be possible to secure financing for your home, but the information in this article may not apply. You should definitely contact a mortgage specialist to know your options!
If you have a Credit History from another country
Canadian lenders depend on independent Credit Bureaus to assess the credit-worthiness of applicants. The good news is that the largest credit bureaus in Canada – Equifax and Transunion – also operate in many countries across the globe.
If you are a newcomer to Canada who is arriving from a country where these two credit burueas operate, and you have 2 years of credit history to show, mortgage lenders will often consider your overseas credit history in lieu of Canadian credit history.
If you do not have acceptable Credit History from another country
In case the above option does not apply to you – for example, if you were immigrating from a country where the credit bureaus are not recognized by Canadian lenders – you still have a few options:
Alternative sources of payment history
Lenders may consider your application if you can furnish documents that show that you make your payments on time.
These documents are usually:
- 12-months rental payment history, confirmed via letter from landlord and bank statements
- One other alternative source (hydro/utilities, telephone, cable, cell phone and auto insurance) to be confirmed via letter from the service provider or 12 months billing statements
Mortgage providers will look at these documents to assess whether you are at risk of default or not. If you have a good history of payments, and you meet the other eligibility criteria, you may be approved for a regular mortgage!
Mortgage Default Insurance
If you don’t have the documents to prove a payment history, some lenders may still offer to finance your home purchase. However, you will have to pay for Mortgage Default Insurance to cover this risk of default.
You may be also be asked to make a larger than usual down-payment, usually around 20% or higher. However, if you have more than 2 years of full-time Canadian employment history, the lender may waive this requirement
35% Down Payment
Another option open to new Permanent Residents is to make a 35% down-payment on the value of the house.
In addition to the large down-payment, you will need to show that you have at least 12 months of monthly mortgage payments available to you in a Canadian bank account on the date you apply.
The funds must have been in your account for at least 90 days, and must be your own savings or non-refundable gifts from parents/family.
Although the high down payment can be difficult for most newcomers to manage, if you have a large pool of liquid assets available then this is probably your best option.
Closing Thoughts
If you are a newcomer to Canada, we hope this article has helped you realize that there are avenues for you to pursue buying your dream house, even without a Canadian credit history.
However, there are many additional criteria to consider, such as maximum home value eligibility, mortgage rates, closing fees, and other eligibility requirements depending on your specific mortgage product. There are also incentives for first time home buyers that you might be eligible for.
We strongly recommend speaking to qualified mortgage specialists to understand your options better.
On a separate note, Condos are a great first-home option for newcomers, as they represent great value and generally will require lower monthly mortgage payments. Pre-construction projects are even better value for money!
Contact us if you’re looking for a Pre-construction condo in the Greater Toronto Area. We’ll be happy to assist you in finding your dream home!
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