The first step, before you seek advice from a mortgage advisor, is to get clear about your goals and objectives. Your personal situation will determine the best kind of mortgage for you.
By asking yourself a few questions, you will narrow your search among the many options available and discover which mortgage suits you best.
* Do you expect your finances to change over the next few years?
* Are you planning to live in this home for a long period of time?
* Are you comfortable with the idea of a fluctuating mortgage payment?
A good mortgage professional can help you determine the answers to the following questions to decide which loan best fits your needs.
* What is the interest rate on this mortgage? Sounds simple enough, but you’d be surprised as to how often a client comes to me and doesn’t know what interest rate they were offered from other lenders that they visited prior to me. Beware of interest rates in advertisements, these are often used in bait and switch schemes to get clients in the door.
* Will you give me an estimate on my closing costs up front? There are fees that are associated with every mortgage. Essentially they are the transactional costs of obtaining a home (i.e. legal fees, interest adjustments and tax adjustments to name a few). Any good mortgage agent will be able to provide this information to you during your first or second meeting.
* Which is a better mortgage for me, variable or fixed? This will depend on your personal situation, and tolerance for risk. If you are more risk tolerant and can handle a fluctuating payment, then maybe a variable rate is best for you.
* What are my down payment options? A typical down payment is between five and 20% of the purchase price. The more money you can put down, the better your chances are of being able to lower your rate and improve your mortgage terms. If you are unable to put down 20% or more, you will be required to pay a mortgage insurance premium through CMHC, Genworth or Canada United Guaranty. There is still no money down options, and they are called Cash Back Mortgages.
* What are the penalties and prepayment privileges? Most lenders’ penalties are either three months interest or Interest Rate Differential (IRD), whichever is higher. Most lenders also offer privileges to pay down your mortgage early. You can prepay up to 15 and 20% of the original mortgage amount for the term of the mortgage. Some also offer doubling up on mortgage payments and some offer skip a payment options.
* What qualifying guidelines are used in this mortgage? These requirements relate to your income, employment, assets, liabilities and credit history. The lender will also be looking at your stability with where you work, and live.
* How long can you hold an interest rate? Some lenders can only hold an interest rate for 30 days, others as long as six months to a year. Most are for 120 days.
* Do you have any client testimonials? The ultimate proof that a mortgage brokerage is reputable and will deliver what they promise can be found in their client testimonials. Most service oriented mortgage companies will take the time to survey their clients after each closing.
Jean-Guy Turcotte is an accredited mortgage professional with his partners at Regional Mortgage Corp and can be reached at 403-343-1125, texted to 403-391-2552 or via email at jturcotte@regionalmortgage.ca.
