Frequently Asked Questions on Mortgages
By : Radu Arvatescu
You’re ready to buy a home and explore your mortgage options, but you still have some pressing questions to answer. You want to know how to pay off a mortgage faster and the type of documents that are required for mortgage renewal. You want to see a mortgage renewal letter sample. You may have even asked: can you be denied a mortgage renewal?
As the top mortgage brokers in Ontario, we’re ready to answer all of your questions and then step you through the mortgage application process.Is it better to get fixed or variable mortgage? How much down payment is needed to secure a mortgage? We answer these questions and more in the following sections.
Take a look at our frequently asked questions on mortgages, and contact us when you’re ready to move onto the next step.
TABLE OF CONTENTS
- What is an Affordable Mortgage?
- How to Pay Off Mortgage Faster
- Do You Need a Home Inspection Before Proceeding With a Mortgage Application and Closure?
- How Much Down Payment Is Needed to Qualify for a Mortgage?
- Can You Be Denied a Mortgage Renewal?
- What is an Example of a Mortgage Renewal Letter Sample?
- Can You Switch Mortgage Lenders Before Closing?
- What Documents are Required for Mortgage Renewal?
- Is It Better to Get Fixed or Variable Mortgage?
- What is A Pre-Approved Mortgage and Why is it Important?
- What Costs are Involved With Buying a Home?
- Ready to Look for Your New Home?
An affordable mortgage differs from person to person, but there’s actually a specific formula that most lenders use. For the average borrower, the lender will start with the 28/36 rule as a baseline.
- Your monthly mortgage payment should be no more than 28% of your total monthly income before tax.
- Your total debt, including your mortgage, shouldn’t exceed 36% of your monthly income before tax.
This simple calculation will ensure that you can meet your mortgage repayments, your existing debts, and other costs involved with owning a home. The formula also allows for general living costs, savings, retirement planning, and coverage for other areas of your finances.
With a mortgage that is more than 28% of your monthly income, or a total debt load that is more than 36%, you will be more likely to miss mortgage payments or run into financial hardship.
Banks often adhere to this rule, and some may use stricter formulas to minimize risk. However, sometimes you can still afford a mortgage even if you don’t meet the rule. This is why it’s important to work with a mortgage broker that will evaluate your finances in detail to see what you can truly afford today and throughout the lifetime of your mortgage.
If you have concerns about affordability, a mortgage broker is the best place to start on your homeownership journey.
Paying off a mortgage quickly will lower your debt ratio and allow you to leverage the equity in your home. This could open up new financing options to you, including loans, home lines of credit, and finance for expensive purchases like vehicles, property, and land.
As you learn how to pay off mortgage faster, you will find that there’s no simpler way than paying more on your mortgage each month. This will reduce what you owe and take you closer to financial freedom with each payment.
Another way to address the question of how to pay off mortgage faster is to find a loan that offers better conditions and a lower interest rate. When you pay less interest on a mortgage, more of your repayments will go towards the principal balance. Equity will build faster. You could choose to find a better loan at your next renewal date, with the help of our brokerage service.
There are other unconventional techniques that people have found when determining how to pay off mortgage faster. Some individuals and families have successfully used special lines of credit to leverage their home equity to pay off a primary loan quickly.
If you have a mortgage and it feels like you aren’t making progress with your repayments, it’s time to talk to us. We can explore the best strategies for how to pay off mortgage faster. Our access to the best lenders with the lowest rates will benefit you in the long term.
Home inspections are recommended whenever you are purchasing a home. As one of the biggest investments you will ever make, it’s important that you know exactly what you’re getting into. Most lenders will require an inspection so that they can have confidence in your investment and its security.
An inspection is more than just a requirement for securing a mortgage. It will help you to understand more about a home that you are buying. An experienced inspector will be able to identify current problems, as well as those that could develop in a few years or even decades. This will help you to plan home improvements and determine how much you might need to spend on maintenance in the coming years.
You should always aim to get as much information as possible when you are considering making an offer on a home. An inspection is one of the most important steps in the evaluation process, and you should never move forward with a home that you haven’t thoroughly researched and inspected.
The more money you can put on a down payment for a home, the less you’ll need to pay in the principal of a mortgage. Ultimately, a higher down payment improves affordability because your repayments will be smaller and you’ll pay less interest.
Downpayments typically scale depending on the price of a home. If you intend to purchase a home that is listed for $500,000 or below, then you can expect to pay down at least 5% of the total purchase price.
For homes priced above $500,000, the downpayment will be made up of 5% of the first $500,000 and then 10% on the remaining price up to $1 million.
Homes that are priced above $1 million attract stricter lending criteria and down payments of at least 20%.
If you already have a mortgage, you’ll eventually need to go through the renewal process. For most Canadians who choose 5 year fixed rate mortgages, this will happen relatively quickly.
You might think that once you’ve found a lender, you can stick with them for as long as you are paying off your home. This isn’t always the case. If you’re wondering can you be denied a mortgage renewal; the simple answer is yes.
Your current lender may deny renewal if you haven’tkept up to date with payments and have demonstrated that you’re not a reliable borrower. If this happens, you will need to look for a new lender. Can you be denied a mortgage renewal from the new lender? Yes, but only if you don’t have the right documentation and the support of an experienced broker.
If you have a steady income stream and the ability to pay, you can get a low rate mortgage with the help of an Ontario broker. Banks are stricter than private lenders, so the question of can you be denied a mortgage renewal is more likely to come up when you stick with the big five Canadian banks.
You’re far less likely to be denied if you choose a trusted mortgage broker. If you are having trouble switching or if you have already been denied, you can talk to us to help you find an affordable mortgage with favorable conditions and a competitive interest rate.
Mortgage renewal is a relatively simple process, even if you choose to find a new lender through a local Ontario broker. Banks are required to send a renewal letter at least 21 days before your existing mortgage term expires. Most banks will send even earlier, as will most reputable private lenders.
In this mortgage renewal letter sample, you’ll see all of the information that will be included.
Your mortgage renewal letter will cover:
- The remaining principal on your home.
- The current and new interest rates (if it changes).
- Frequency of payments, and new frequency (if it changes).
- The term of the proposed renewal.
- A breakdown of the charges that a lender will apply upon renewal.
Lenders are also required by law to state that your interest rate will not change until after the renewal date.
If you receive a letter that lacks the information outlined in this mortgage renewal letter sample, you should contact your lender immediately to request a new copy.
You can agree to the renewal and return your signed acceptance, either physically or electronically, depending on how you have requested that your bank contact you. Or, you can talk to our brokerage team to find a new loan with a better interest rate and better conditions. You won’t be charged any penalties if you move to a new provider at the expiration of your current term.
A mortgage renewal letter sample includes similar information to what is included in your original mortgage agreement. Over years of renewing and paying your mortgage, you’ll become familiar with the format, especially if you choose shorter terms to take advantage of better interest rates.
You could find the perfect home, get pre-approval, make your offer, and be all ready to close the mortgage… but, something happens. Interest rates drop, or maybe you get cold feet about the lender and their process. It’s not uncommon, so you’re probably wondering can you switch mortgage lenders before closing?
In short, yes. Unless you’ve specifically signed a contract that says you can’t change lenders, you are free to find a better financial solution. However, when considering can you switch mortgage lenders before closing, there are a few details to keep in mind.
Switching a lender at the last minute will mean you then need to find new financing. You could lose the window of opportunity to get the home that you’ve been looking at. You may also attract fees from your broker, depending on your original agreement. Sometimes it’s necessary, but only if you have considered all of the downsides first.
It’s best not to ask can you switch mortgage lenders before closing at the last minute. Instead, talk to your broker initially to explain all of your requirements and address any concerns that you might have. A broker that is attuned to your needs will be better able to find a mortgage offer that is perfect for you. You can avoid switching by choosing the right professionals to work with.
With our experienced brokers, you won’t need to ask can you switch mortgage lenders before closing. While it will always be an option available to you, you will find our service to be so efficient and so focused on your unique requirements that your pre-qualified loan will be a perfect fit.
What Documents are Required for Mortgage Renewal?
If you choose to renew your mortgage with your existing provider, you can often sign the renewal form and continue without providing new documentation.
However, if your loan conditions change significantly, or if you decide to switch provider, documents are required for mortgage renewal.
The new lender will usually request the same documents that are needed for an initial loan application. The following documents are required for mortgage renewal:
- Pay stubs and tax forms.
- A notice of assessment.
- Personal tax returns.
- A letter of employment.
- Business documentation (including accounting) if you are self-employed.
- Bank account information and a statement of assets.
- Credit report.
- Sources of income.
- A legal description of the home and proof of ownership.
These are the basics to cover when considering what documents are required for mortgage renewal with a new lender. The process of gathering and submitting documentation can sometimes be overwhelming. If you want to simplify it, you can work with a mortgage broker in Ontario. Our team will explore lending options and you’ll only need to submit your documentation once. We’ll handle the rest and guide you if any additional documents are requested.
Documents are required for mortgage renewal, but you’ll avoid stress with our leading brokerage firm.
This is easily one of the most common questions asked in the mortgage industry. Is it better to get fixed or variable mortgage? Although common, it’s not an easy question to answer, because every borrower has different needs. Before you can determine the best mortgage for your unique situation, you’ll need to know the pros and cons of both mortgage types.
Variable mortgages often come with lower rates, but these are subject to change throughout the loan term. You get a more affordable mortgage today, but this might not be the case towards the end of the term.
A fixed rate mortgage is predictable because it allows you to lock in today’s interest rate, with predictable payments throughout the term. The interest rate might not be as low as a comparable variable mortgage, but you’ll have peace of mind knowing that it won’t change.
This brings us back to the question, is it better to get fixed or variable mortgage? If you can accept volatile interest rates, then variable might be the best choice for you. If you want predictability and stability, then a fixed rate will work better.
If you can’t decide is it better to get fixed or variable mortgage, we are here to help. Our brokers have years of experience advising individuals and families from all backgrounds and financial situations. We will look at your finances and your long term goals to find the most affordable loan with the best rate.
A pre-approved or pre-qualified mortgage is an agreement between you and a lender to move ahead with a mortgage offer once all of your documentation is submitted. It’s a type of guarantee that allows you to explore the home market and make offers while knowing that a mortgage is ready to be processed in the background.
Without a pre-approved mortgage, it will be impossible to know how much you can spend. You can talk to our brokerage team to discuss your lending options and get pre-approved for a home loan.
A mortgage can be costly, but you can consider it an investment in your long term financial stability. Before you begin the process, you’ll need to ensure that you have funding for:
- A down payment of at least 5%.
- Closing costs, which can be as high as 2.5%.
- Professional home inspection.
- Lawyer fees.
- Property insurance.
Consider also that you may need to purchase appliances, furniture, and other items upon moving into your home. You should then be able to cover maintenance and upkeep throughout its lifetime.
Talk to our insurance experts today to get a complete breakdown of all the costs involved in the mortgage application and closing process.
With the most common mortgage questions answered, you’re one step closer to buying your first home, a move-up home, or a new investment.
Our brokerage focuses on simplicity, transparency, and the best results. We work tirelessly to find the right lenders for your needs, with the best possible rates and terms that suit you.
Don’t settle for big bank lenders that treat you like a number. For a personalized home buying experience, contact us today.
Lowest Residential Mortgage Rates in Canada*
|Term||OUR RATE||TD Bank Rate|
|3 Year Fixed/ 25 yrs||5.99%||6.51%|
|3 Year Variable/ 25 yrs||6.20% Promo||6.70%|
|4 Year Fixed/25 yrs||5.54% Promo||6.29%|
|5 Year Fixed/ 25 yrs||5.54% Promo||6.14%|
|5 Year Variable/ 25 yrs||6.20% Promo||6.90%|
|5 Year Fixed/ 30 yrs||6.05% Promo||6.24%|
|5 Year Variable/30 yr||6.70%||7.05%|
|4 Year Fixed/30yr||6.34% Promo||6.39%|
|3 Year Fixed/30yr||6.24% Promo||6.61%|
|**NEW RENTAL 5 Year Fixed /30yr||6.15% Promo||6.29%|
|** NEW RENTAL 3 Year Fixed /30yr||6.34% Promo||6.66%|
Updated: Aug 23 , 2023
* Current promotion rates may provide an additional 0.05% discount or may be anytime discontinued at the Lender discretion . Rates may vary between geographic regions and the posted rates on this website may not be available in your area.TD Bank rate used for comparable are the rate listed by TD Canada Bank in the Broker Chanel Portal at the date above. Please contact our MCI office for more details and current promotions.
LOWEST REGULAR RATES IN CANADA*
* Current promotion rates may provide an additional 0.10% discount. Rates may vary between geographic regions and the posted rates on this website may not be available in your area. Please contact our MCI office for more details and current promotions.