There are many benefits to it. Here’s a summarize :
- A mortgage broker will offer you a range of mortgage and financial products of many banks and other mortgage lenders, while the bank employee will only offer you those featured by the bank they’re working for.
- You don’t need to come to us. The mortgage broker can meet with you at the time and place of your choice, or even simply over a phone interview.
- The mortgage broker will grant you access to banks and mortgage lenders who do not have a branch or an agency.
2) Why do mortgage brokers have a better mortgage rate than those posted by banks :
a) Thanks to important business volumes that we submit to banks, we are granted a lower rate. The same rate is passed on to our customers. To make it simple, with a mortgage broker, you will get the wholesale price instead of the retail price.
b) It’s even sometimes possible for the mortgage broker to make a rates redemption when permitted by the bank’s policies.
3) Do I need to pay for a mortgage broker’s services ?
If it’s about a residential mortgage, NO, because the broker is paid by the bank for a service provided for referencing on the basis of commission calculated in advance.
On the other hand, when it’s about a commercial mortgage, the mortgage broker is paid by the customer, because the files evaluation standards are made on a case by case basis.
4) I hear talks about an insurance that I must subscribe on the requested loan, why ?
When the down payment is below 20% of the property’s purchase price or market value, the bank will not grant you a loan unless said loan is insurable with one of the three most popular following insurance companies in Canada: : SCHL , GENWORTH and CANADA GUARANTY.
This insurance covers the bank in case of defaulting payment on the side of the mortgage buyer.
Otherwise, if you make a down payment of 20% of the property price or more, this insurance is not mandatory.
It is worth noting that certain communities where the property is located, in Canada, are subject to this insurance, even if you pay a 20% down payment or more.
5) Are there any upsides to insuring the loan ?
The fear of banks is to find themselves in front of mortgage buyers who can’t uphold their engagement, whatever the reason is, which brings the bank to seize your house in order to resell it. This operation represents a lot of bother and costs for the bank.
This is why the bank is often willing to give lower mortgage rates if the loan is insured by an insurance company.
The fear of banks is to find themselves in front of mortgage buyers who can’t uphold their engagement, whatever the reason is, which brings the bank to seize your house in order to resell it. This operation represents a lot of bother and costs for the bank. This is why the bank is often willing to give lower mortgage rates if the loan is insured by an insurance company.
6) What’s the difference between a pre-authorized and an unconditional final approval ?
A pre-authorized is a document delivered by a bank or a mortgage lender in which is indicated that the mortgage buyer is globally qualified for a mortgage loan, taking into account the state of his actual debts and revenues by the date on which the buyer asks for a mortgage.
The pre-authorization does not force the bank to guarantee the loan or the rate agreed on. A more thorough written hearing at a future date is mandatory. The result of your credit history’s consultation is valid for 30 days. In general, the pre-authorization is valid for 90 days.
The pre-authorization is more often claimed by the property sellers who are sceptical about their future buyer’s solvency. If the chemistry between the buyer and the seller is good, it can be disregarded.
A final approval, on the other hand, commits the bank or the mortgage broker to give and pay you up the loan at a designated date and it commits the bank to guarantee the mortgage rate agreed on, no matter the changes occurring in the mortgage market meanwhile. It’s this document that the real estate brokers and the real estate agents claim the most often for their file.
7) Is there a difference between a salaried employee and a self-employed individual ?
Most of the banks do not judge each person the same way and, quite often, they go on a case by case basis. Although, two large groups of individuals can be noticed, and both can be divided in smaller groups.
- Full-time salaried employees:
They must prove they occupy a job with at least 2 pay stubs, that they’re not subjected to a probation period anymore and that the employer usually guarantees a minimum number of work hours per week.
- Part-time and seasonal employees:
They must prove they have been occupying this type of job for at least 2 years. The bank will consider their revenue average during the last two years.
- Self-employed individuals:
Most of the banks demand a minimum history of 2 years of activity based on the tax returns made for the respectives federal and provincial governments.
Regarding the tax returns nature, it’s up to the desired bank or mortgage broker to apply its own corresponding loan policy.
8) What’s the difference between a mortgage refinancing and a mortgage subrogation (transfer)?
Both are mortgage renewal techniques.
The biggest difference resides in the legal and notarial fees associated to this change of bank or mortgage broker and the eligibility to some prime rates.
The general rule, when changing mortgage loaner, is that a new notarized contract must be established in order to reflect the new creditor and the legal fees associated to this operation must be dealt with by the borrower.
Although, there’s a particular case in which some banks (not all of them) are willing to assume the notarial fees in order to encourage you into choosing their mortgage product under the condition that the following criterias are met :
A) We only transfer the mortgage balance at the end of the term following the final account statement that the bank will send to the notary.
B) The maximum duration of the applicable depreciation will be the one indicated as remaining depreciation on the last mortgage statement or less.
C) No line of mortgage credit has been inscribed in your deed of loan.
D) D) No collateral charge has been inscribed in your deed of loan.
If those conditions are all met at the same time, there’s the possibility of a mortgage SUBROGATION or a mortgage TRANSFER.
Sometimes, the mortgage loan meet all those conditions, but it doesn’t automatically give all the banks the right to subrogate the mortgage loan. Some banks, because of internal policies, do not subscribe to this mortgage renewal technique.
In contrary, if one of the conditions isn’t met or if we want to consolidate a few debts or get some equity from our property, we then face a mortgage REFINANCING and the bank do not pay the fees associated to this operation.
On the other hand, every bank subscribe to this mortgage technique.
9) What’s the difference between a fixed-rate / variable-rate and a closed rate / open rate ?
The closed rate is a rate linked to the chosen term ( 1, 2 , 5 or 10 years) for which the bank hopes that the term duration between the bank and you will be respected until its maturity, any premature refund is subjected to a penalty indicated in the contract.
The open rate, on the other hand, is a rate that allows the borrower to refund the bank at any moment that suits him the best, there is no deadline for the refund, except the minimum amount of interest per period, generally per month.
The fixed-rate is a rate established from the start between the bank and the borrower that will not vary during the deadline of the chosen term. It’s a guaranteed rate during the term.
The variable-rate, as its name indicates, can vary based on some pre-established rules.
The variable-rate is generally calculated with the following equation :
The bank’s prime rate - (minus) the discount rate.
The prime rate is determined by the bank and varies generally the same way than the central bank’s reference rate with which it is directly bound.
The discount rate : is the rate on which the bank agrees on giving to its customer.
The variable-rate can generally vary upwards or downwards when :
1) The bank’s premium rate varies.
2) The central bank of Canada’s reference rate varies.
10) I’m a new immigrant or residing abroad, can I apply for a mortgage credit in Canada ?
Yes, there are specific programs for each category, although the bank reserves the right to apply some restrictions based on the risk assessment that it will have determined.
11) I was bankrupt or I applied to a consumer proposal agreement, can I have a mortgage credit ?
In general, banks do not give a loan until after the bankrupt citizen has been freed since more than 2 years and he disposes of a minimum of 2 credit cards. Some lenders can soften this rule if the borrower submits significant net assets during the mortgage application.