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Q: Why use a mortgage broker?

A: A mortgage broker is a mortgage expert who introduces buyers to a full range of mortgage products, interest rate options and payment strategies. He or she is independent of the bank and other lenders and acts as a personal representative and negotiator on behalf of the client. Working with a broker ensures personalized service and is by far is the most efficient way to get the best-structured and best-priced mortgage.

Q: Do mortgage brokers charge a fee?

A: No. Mortgage brokers are paid their fee by the lender, not the client. If for any reason a fee is charged, it must be disclosed full beforehand.

Q: How do I qualify for a mortgage?

A: A lender will base their final credit decision based on several criteria including an applicant?s gross annual income, credit history, assets and liabilities. The most commonly required documents include paystubs, notice of assessments, bank account screenshots, job letters and purchase contracts.

Q: What are closing costs?

A: Closing costs are fees associated with the purchase of your home (additional to the purchase price itself). They can include include property transfer taxes, legal fees, and moving expenses and appraisal fees.

Q: I have a 5- year mortgage term. What does this mean?

A: Every mortgage has a start and end or maturity date. Together they determine the term (duration) of your mortgage. Terms can be range from 6 months to 10 years, and 25-30 years maximum.

Q: What is amortization and what amortization term should I choose?

A: Amortization refers to the total number of years it takes to pay off an entire mortgage. Term, on the other hand, refers to the duration or length of your contract. When a term ends, the mortgage amount, interest rate and amortization can be changed.

Q: What is a fixed rate mortgage?

A: A mortgage that has a fixed/set interest rate for the term of the mortgage.

Q: What is a variable interest rate mortgage?

A: A mortgage with an interest rate that?floats?(rises or falls) with the prime rate.

Q: What is an open mortgage?

A: A mortgage that can be prepaid partially or entirely at any time without penalty. Interest rates are usually higher for open mortgages.

Q: What is a closed mortgage?

A: A mortgage that allows little to no option of paying off your mortgage early. Borrowers are penalized for early payments.

Q: What is a high ratio or insured mortgage? And what are the mortgage insurance fees?

A: A high ration mortgageis a loan granted to an applicant who has put down less than 20% of the total purchase price as down payment. Unlike conventional mortgages, high ratio mortgages require a one-time default insurance fee.

Q: Is it important to insure my mortgage with life insurance and disability insurance?

A: Yes, but it is best to contact a professional life insurance consultant who can properly assist you with an insurance quote.

Q: What is the minimum down payment I can make?

A: Your down payment can be as little as 5 per cent of the total purchase amount and increase to any amount beyond that. With most lenders, down payments of less than 20 per cent are considered high ratio and requiremortgage insurance to be purchased. This insurance (provided by CMHC, Glenworth, or Canada Guarantee) protects the lender in the event the borrower defaults on the loan. The insurance premium represents a percentage of the total mortgage and is added to the total loan?simply put: the smaller the down payment, the higher the premiums.

If, however, your down payment is 20 per cent or more, then the mortgage is classified as a conventional mortgage and there is no associated mortgage insurance cost. You may decide to go with a larger down payment so you can save on the insurance premium, but remember: you will need to keep some cash on hand to use for other purchase related expenses like legal costs, property transfer taxes, moving costs, renovations, and new furniture purchases.