Mortgages and Financing


 

The Importance of a Mortgage Pre-Approval

Taking the important step of getting pre-approved affords you knowledge and confidence: you’ll know in advance exactly how much financing you qualify for, and you’ll be confident during your search knowing where you stand.

This is also likely the time when you will first be introduced to the often intimidating and complex world of mortgages. It’s critical you understand your options so you can make an informed decision that suits your personal circumstances.

When you meet with your financial representative, if there’s anything you don’t understand, ask. Ask lots of questions. If you still don’t get it, ask again. This is not an area to take chances or to be shy, since how you structure your mortgage could amount to tens of thousands of dollars over the term of your loan.

If during this process you sense your lender representative isn’t patient in answering your questions, move on. The financial services industry is very competitive and, assuming you qualify for a mortgage, if one company doesn’t want your business, someone else will. If you have had troubles getting qualified in the past we can help you find someone to take your application.

Generally speaking, when we put in an offer that is contingent on you qualifying for a first mortgage you only have, on average, 5 banking days to do so. That is NOT the time for surprises on your credit report, or affordability factors to come up. We do what we can to avoid disappointment. So pre-qualifications, although not mandatory, are always a great idea.

Fixed or variable

During your pre-qualification interview, the lender will explain to you the different types of mortgages.

A fixed mortgage involves a fixed rate of interest over a specified period of time, known as the term. This provides a certain level of peace of mind, since you’ll know exactly what your monthly payments will be, which allows you to budget accordingly.

A variable mortgage, on the other hand, is just like it sounds: the interest rate fluctuates based on the market rates. This can be a good arrangement if rates are on the way down, but it also tests one’s nerves if rates begin to rise.

With rates being as low as they have been over the last couple of years, more and more home buyers are locking into fixed mortgages to take advantage of the low rates.

Long versus short term

The term of the mortgage refers to the life of the mortgage contract, typically anywhere from one to five years. At the end of the term, the mortgage becomes due and payable. In most cases, however, the lender and borrower negotiate a renewal for a new term, which also provides you the opportunity to change the terms of the mortgage if your circumstances change.

So, long versus short term is pretty self-explanatory. Generally speaking, if rates are low it might be a good idea to lock in for a long term. If rates are high, it may be advisable to choose a shorter term until you know how the rates are trending. If they begin to rise, you can consider locking in for a longer term.

Open versus closed

This refers to how much flexibility you have to repay the mortgage, in full or with large lump-sum payments, at any time over the term without penalties.

However, you do pay for the flexibility. For example, open mortgages are usually available only for short terms, and the interest rate is often higher. The benefit is you have the freedom to make a large payment when you can.

Closed mortgages, on the other hand, often have lower rates, but you don’t offer the flexibility to make large one-time payments.

Amortization

This is the period over which your mortgage is paid in installments. In June 2012, the Canadian government outlined new rules limiting the maximum amortization period at 25 years. For many first-time buyers, the period is usually 25 years. Generally speaking, the shorter your amortization, the less interest you have to pay, but the larger your monthly payments will be. Most first-timers go for a long amortization to keep payments as low as possible, since it’s their first experience with a mortgage.

With all of the above mortgage considerations, what you choose really depends on your own personal circumstances, preferences, and comfort level. Your mortgage specialist can walk you through a number of different scenarios with these variables, so you can see exactly what each change will cost you.

There are many products and services available in the industry today, so be sure to take your time and explore all your options.

Call For Your Pre-Approval

 

After 30 years in the industry our clients have worked with multiple lenders throughout the GTA. If you do not have representation currently, give us a call (905) 476-7881  based on your requirements we would be happy to refer an appropriate lender to you. Remember, you are never obligated to accept the offer of financing any lender gives you, at the point of the pre-approval it's just about options.

Knowing your options is an important step in home ownership.


Mortgage Calculator


How Much Can You Afford?

 

Our mortgage calculator will help you determine loan amounts, mortgage qualification, or whether you should be renting or buying.

 

Complete the fields below (e.g., Cost of Home, Down Payment, Monthly Income) and click Calculate Now. To view the different results of your calculation, click on the various tabs. To mail yourself a copy of your results, click the Receive this Detailed Analysis link.

 

 

 

Required Fields
Term In Years:     
Interest Rate:      %
Cost of Home:  $
Down Payment:  $  
Annual Insurance:  $  
Estimate Insurance to 0.43% of Cost
Annual Property Tax:  $  
Estimate Tax to 1.2% of Cost
Monthly Income:  $
Monthly Debt:  $
Optional Fields
Gross Debt Service Ratio (GDS):     
Total Debt Service Ratio (TDS):     
Condos Fees:  $
Results
  Receive this Detailed Analysis

Your Monthly Payments
 
Loan Amount:
Loan Insurance (%):
Total Loan (Mortgage) Amount:
 
Principal & Interest:
Homeowners Insurance:
Property Taxes:
Condo Fees:
Monthly Loan Insurance (%):
Total Monthly Payment:
Income Needed to Qualify for the Mortgage
Total Monthly Loan Payment:
Total Monthly Debt Payment:
Monthly Loan Insurance (%):
Qualifying Income of % GDS Ratio:
Qualifying Income of % TDS Ratio:
What You Can Afford
We are using the % ratio.
Cost of House:
Down Payment:
Loan Value:
Monthly Principal & Interest:
Monthly Insurance:
Monthly Property Tax:
Monthly Condo Fees:
 
Cost of House = [(Monthly income x Debt Ratio) – monthly tax – monthly insurance – condo fee] /
(monthly interest rate/ function of interest rate)
Renting
Monthly Rent: $
Annual Rental Increases:  %
Monthly Renter Insurance: $
Savings or Investment Rate:  %
 
Owning
Planned # of years in home: 
Yearly appreciation of the home:  %
Annual home maintenance:  %