Frequently Asked Questions

  • Who is a mortgage broker?
  • What does a mortgage broker do?
  • What is a mortgage brokerage?
  • What’s the difference between a mortgage broker and a “specialist” at the bank?
  • I heard banks have the best rates and are unbeatable. Is this true?
  • How can these other lending institutions afford to beat bank rates?
  • Is there an associated broker fee, application fee, or hidden cost with using a mortgage broker?
  • How much can I afford to pay for a home?
  • What is a home inspection, and should I have one done?
  • What is the minimum down payment needed for a home?
  • What is a conventional mortgage?
  • What is a fixed rate mortgage?
  • What is a variable rate mortgage?
  • Should you go with a short or long-term mortgage?
  • What should the length of my mortgage term be?
  • What are the costs associated with buying a home?
  • How can you use your RRSP to help you buy your first home?
  • How will child support affect mortgage qualification?
  • How does bankruptcy affect qualification for a mortgage?

A mortgage broker is an individual who acts as the link between lenders and homebuyers/investors.

A mortgage broker works to find a client not only the best possible mortgage rate, but also a product that is beneficial and fitting to their personality, lifestyle, and goals.

A mortgage brokerage is a licensed business that is able to carry out activities relating to mortgages, such as arranging one for a client. A mortgage brokerage employs several mortgage agents and brokers who are able to carry out business on its behalf. It is a mortgage brokerage’s responsibility to ensure that their brokers and agents are fully licensed and follow regulatory principals.

A mortgage broker is fully licensed and regulated under several boards such as CAAMP and FSCO. Through these boards, a mortgage broker vows to a strict code of ethics and best practices. A Mortgage “specialist” at the bank does not carry any licenses and is essentially an employee of the bank who enforces, protects, and guards their interests. A mortgage broker is not an employee of any individual lender; therefore, we work for you, and not the bank.

The answer to this is NO. This question is a common misconception that homebuyers have. What homebuyers often do not realize is that there are many other lending institutions that compete with banks. In order to remain competitive, they often lower their rates to an extent which banks are not allowed. However, the only way to get access to these other lenders is through a mortgage broker.

These smaller institutions often do not have large local locations in every city or town. This means that they do not have to pay as many employees, landlords, bills, etc. The overhead is significantly smaller, and they usually specialize in only one thing; mortgage lending. All this extra saving is reflected in their rates, as they can afford to bring them down.

Absolutely not! A client never directly pays a mortgage broker for their services. The lender arranges the compensation for services. This does not apply to private mortgages.

How much can I afford to pay for a home? To determine 'affordability' you will first need to know your taxable income along with the amount of any debt outstanding and the monthly payments. Assuming it is your principal residence you are purchasing, calculate 32% of your income for use toward a mortgage payment, property taxes and heating costs. If applicable, half of the estimated monthly condominium maintenance fees will also be included in this calculation. Second, calculate 40% of your taxable income and deduct all of your monthly debt payments, including car loans, credit cards, lines of credit payments. The lesser of the first or second calculation will be used to help determine how much of your income may be used towards housing related payments, including your mortgage payment. These calculations are based on lenders' usual guidelines. In addition to considering what the ratios say you can afford, make sure you calculate how much you think you can afford. If the payment amount you are comfortable with is less than 32% of your income you may want to settle for the lower amount rather than stretch yourself financially. Make sure you don't leave yourself house poor. Structure your payments so that you can still afford simple luxuries.

A home inspection is a visual examination of the property to determine the overall condition of the home. In the process, the inspector should be checking all major components (roofs, ceilings, walls, floors, foundations, crawl spaces, attics, retaining walls, etc.) and systems (electrical, heating, plumbing, drainage, exterior weather proofing, etc.). The results of the inspection should be provided to the purchaser in written form, in detail, generally within 24 hours of the inspection. A pre-purchase home inspection can add peace of mind and make a difficult decision much easier. It may indicate that the home needs major structural repairs which can be factored into your buying decision. A home inspection helps remove a number of unknowns and increases the likelihood of a successful purchase.

A minimum down payment of 5% is required to purchase a home, subject to certain maximum price restrictions. In addition to the down payment, you must also be able to show that you can cover the applicable closing costs (i.e. legal fees and disbursements, appraisal fees and a survey certificate, where applicable). Regardless of the amount of your down payment, at least 5% of it must be from your own cash resources or a gift from a family member. It cannot be borrowed. Lenders will generally accept a gift from a family member as an acceptable down payment provided a letter stating it is a true gift, not a loan, is signed by the donor. Where the mortgage loan insurance is provided by Canada Mortgage and Housing Corporation (CMHC), the gift money must be in your possession before the application is sent in to CMHC for approval. Mortgages with less than 20% down must have mortgage loan insurance provided by either CMHC or GE.

A conventional mortgage is usually one where the down payment is equal to 80% or more of the purchase price, a loan to value of or less than 80%, and does not normally require mortgage loan insurance.

The interest rate on a fixed-rate mortgage is set for a pre-determined term - usually between 6 months to 25 years. This offers the security of knowing what you will be paying for the term selected.

A mortgage in which payments are fixed for a period of one to two years although interest rates may fluctuate from month to month depending on market conditions. If interest rates go down, more of the payment goes towards reducing the principal; if rates go up, a larger portion of the monthly payment goes towards covering the interest. Open variable rate mortgages allow prepayment of any amount (with certain minimums) on any payment date.

A longer-term mortgage is worth considering if you have a busy life and don't have time to watch mortgage rates. Our 4, 5 and 7-year mortgages let you take advantage of today's rates, while enjoying long-term security knowing the rate you sign up for is a sure thing. If you want to keep your mortgage flexible right now, you can explore a shorter-term mortgage that usually allows you to take advantage of lower rates and save.

The length of mortgage terms varies widely - from six months right up to 10 years. As a rule of thumb, the shorter the term, the lower the interest rate the longer the term, the higher the rate. While four- or five-year mortgages are what most home buyers typically choose, you may consider a short-term mortgage if you have a higher tolerance for risk, if you have time to watch rates or are not prepared to make a long-term commitment right now. Before selecting your mortgage term, we suggest you answer the following questions: 1. Do you plan to sell your house in the short-term without buying another? If so, a short mortgage term may be the best option. 2. Do you believe that interest rates have bottomed out and are not likely to drop more? If that's the case, a long mortgage term may be the right choice for you. Similarly, if you think rates are currently high, you may want to opt for a short to medium length mortgage term hoping that rates drop by the time your term expires. 3. Are you looking for security as a first-time home buyer? Then you may prefer a longer mortgage term, so that you can budget for and manage your monthly expenses. 4. Are you willing to follow interest rates closely and risk their being increased mortgage payments following a renewal? If that's the case, a short mortgage term may best suit your needs.

First and foremost, you have to make sure you have enough money for a down payment - the portion of the purchase price that you furnish yourself. To qualify for a conventional mortgage, you will need a down payment of 20% or more. However, you may qualify for an insured mortgage with a low, down payment of 5%. Secondly, you will require money for closing costs (up to 2.5% of the basic purchase price). If you want to have the home inspected by a professional building inspector - which we highly recommend - you will need to pay an inspection fee. The inspection may bring to light areas where repairs or maintenance are required and will assure you that the house is structurally sound. Usually the inspector will provide you with a written report. If they don't, then ask for one. You will be responsible for paying the fees and disbursements for the lawyer or notary acting for you in the purchase of your home. We suggest you shop around before making your decision on who you are going to use, because fees for these services may vary significantly. There are closing and adjustment costs, interest adjustment costs between buyer and seller and (depending on where you live) land transfer tax - a one-time tax based on a percentage of the purchase price of the property and/or mortgage amount. Finally, you will be required to have property insurance in place by the closing date. And you will be responsible for the cost of moving. Remember, there will be all kinds of things you'll have to purchase early on - appliances, garden tools, cleaning materials etc. So, factor these expenses into your initial costs.

Today, about 50% of first-time home buyers use their RRSP savings to help finance a down payment. If you are a first-time home buyer, the Home Buyers Plan (HBP) allows you to withdraw money from your Registered Retirement Savings Plan (RRSP) tax-free to make your down payment. The HBP is administered by the Canada Revenue Agency (CRA). There are certain conditions you must meet to be eligible for the HBP. For more information, contact CRA at www.cra.gc.ca. How much can you withdraw? - You can withdraw up to $25,000 from your RRSP - If you buy the home together with your spouse, partner, or someone else, each of you can withdraw up to $25,000, for a total of up to $50,000. - The withdrawal from your RRSP does not need to be included in your income on your annual income tax return, and no tax is taken off the money you withdraw. What is the payback period? - You don't have to start paying back the money to your RRSP until two years after the purchase of the home. - You must pay back all withdrawals from your RRSP within 15 years by making RRSP deposits each year, starting the second year following your withdrawal. CRA will determine what your minimum yearly repayment will be and will notify you once you need to start repaying the amount. - If you do not repay the amount due in a given year, it is included in your taxable income for that year and you'll have to pay income tax on this amount. source: Financial Consumer Agency of Canada.

Where child support and alimony are paid by you to another person, generally the amount paid out is deducted from your total income before determining the size of mortgage you will qualify for. Where child support and alimony are received by you from another person, generally the amount paid may be added to your total income before determining the size of mortgage you will qualify for, provided proof of regular receipt is available for a period of time determined by the lender.

Depending on the circumstances surrounding your bankruptcy, generally some lenders would consider providing mortgage financing.