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FAQ BUYERS

What mortgage features should I shop and compare for?

Besides getting a competitive RATE on your mortgage, you should also consider the following:

PREPAYMENT OPTIONS - Good mortgages will allow you to prepay between 15-20% of your balance at any time during each year of a TERM.
PENALTIES - Generally, mortgages are closed for the term agreed upon (for example, a 5 year term). This means that, except for any prepayment options allowed, you must pay a penalty to discharge (or transfer) the mortgage in mid-term. Often you will be required to pay the greater of a three-month interest penalty or an "Interest Rate Differential" (IRD), which is the difference between the rate on your mortgage and the rate the lender is currently offering.
PORTABILITY - This is a standard feature of most mortgages that allows you to "move" your mortgage with you if you buy a new home.
ASSUMABILITY - If you think you might sell your home within your mortgage TERM, ask for a mortgage that the new buyer can ASSUME (take over). Assumability can be an attractive option when selling your home particularly if you have a low interest rate. If you do allow your mortgage to be assumed, be aware that in some provinces, unless the lender releases your obligations in writing, you are still liable if the new owner defaults on the mortgage and the lender suffers a loss.
ONLINE BANKING (OLB) - If you want to be able to access your mortgage details online, ensure your new lender's online banking capability supports this.
CASH BACK - Some lenders will give you cash back (e.g. pay you 3% of the value of your mortgage) as an incentive to bring your business to them. However, be aware that you will pay a higher rate on your mortgage in order to receive this cash.
ADMINISTRATIVE FEES - Don't easily agree to pay any administrative fees. If the lender wants your business, they will drop them.

How much money do I have to put down?

A down payment is how much money you have available to put down against your original mortgage amount. The amount of down payment you provide is important. Unless you qualify for the FIRST HOME LOAN INSURANCE PROGRAM (see below), your down payment must be equal to at least 10% of the lesser of the appraised value of the property or your final offer price. In addition, if your down payment is less than 25% of the final offer price, then you will have to pay an additional insurance premium. Such mortgages are called HIGH RATIO or INSURED MORTGAGES. Mortgages where at least 25% of the purchase price is put down are called CONVENTIONAL MORTGAGES.

The First Home Loan Insurance Program, originally intended to assist first-time homebuyers, enables buyers to make a down-payment of as little as 5%. Even if you are not a first-time homebuyer, you may still qualify. In major Canadian centres, the maximum mortgage that qualifies for this program may be as high as $300,000. Outside of these centres it ranges from $125,000 to $250,000.

The RSP HOME BUYER'S PLAN is an additional option you have to increase the size of your down payment. It allows you (and your spouse if applicable) to borrow up to $20,000 EACH from your RSP (if it is not locked in), towards a down payment. This in effect is a loan from yourself (from your RSP to your mortgage). No withholding taxes are deducted from this loan providing that you pay the money back into your RSP within 15 years. The minimum amount you need to repay each year is 1/15th of the total amount borrowed from your RSP. The disadvantage of this program is that you will forfeit the ability to earn a return on your RSP funds. You should consider repaying your RSP loan as soon as you can. Check with us or with your lender to see if you qualify to use the RSP Home Buyer's Plan.

What extra costs should I expect when buying a home?

Make sure you reserve a little extra money (we recommend between 1.5% to 2.5% of the purchase price), to pay for other expenses associated with buying a home. Costs vary by province and even city and can include:

APPRAISAL FEES - Appraisals may be required to provide the lender with a professional opinion of the market value of the home. Expect to pay between $100 to $200 for an appraisal. Some lenders may offer to pay this for you.
HOME INSPECTION FEES - Are not usually a lender requirement, but a diligent buyer will make any offer on a home subject to a professional inspection. Expect to pay between $250 to $350 for an inspection.
PROVINCIAL SALES TAX - If your mortgage is CMHC or GE Capital insured (less than 25% down payment), you will pay P.S.T. of 8% in Ontario, out of pocket, at closing.
LAND SURVEY OR TITLE INSURANCE FEE - A survey can cost between $600 to $900, but most lenders will accept Title Insurance, available for about $225.
LEGAL COSTS - A lawyer will charge you professional and disbursement fees for drafting the title deed, preparing the mortgage, and conducting various searches. Expect to pay about 1.5% of the purchase price in lawyers fees.
LAND TRANSFER TAX - Most provinces charge a land transfer tax.
MORTGAGE APPLICATION AND PROCESSING FEE - On high ratio insured mortgages, expect to pay an administration fee of $165 to $185. On new homes, this drops to about $75.
CLOSING ADJUSTMENTS - You should expect some closing adjustments for bills that the seller has prepaid such as property taxes and utility bills.  Call your utility companies
HST (GST+PST) - On the purchase of a newly constructed home, HST (GST+PST) is payable. Ensure you know who pays - you or the lender. If you pay the HST (GST+PST), you should ensure you (and not your builder) get the HST (GST+PST) rebate.

What type of documentation will I need to provide?

Documentation requirements vary by lender. In general expect to provide the following documentation when completing a mortgage application:

A completed and signed MORTGAGE APPLICATION (you can complete this online with Quicken Mortgage).
CONFIRMATION OF YOUR EARNINGS: If you are a salaried employee, you'll need to provide a signed letter of employment. If you are commissioned, you'll need to provide 3 years tax returns and assessments. If you are self-employed, you will need to provide 3 years tax returns and financial statements.
A copy of the ACCEPTED OFFER to purchase including all schedules and waivers (Agreement of Purchase and Sale).
Proof of the VALUE OF THE PROPERTY you are purchasing.
Confirmation of your DOWN PAYMENT.
Certificate of FIRE INSURANCE.
A copy of a SURVEY or Title Insurance.
The name, address, and phone number of your LAWYER.

Should I add Property Taxes to my regular mortgage payment?

Simply said, don't. Many municipal governments allow you to do this directly (direct deposit). Adding this to your regular mortgage payment unnecessarily takes cash out of your pocket and puts into your lenders'. Be aware, however, that if you have a small down payment, most lenders will require you to add the taxes to your mortgage payment in order to ensure that the equity in the property is not eroded by property tax arrears.

Mortgage Life Insurance - is it a good idea?

Mortgage insurance allows you to insure for the event of death or dismemberment and the consequence of not being able to meet your mortgage payments. The insurance fee available through lenders is attached to your mortgage and you will be insured for a value up to the outstanding balance of your mortgage. This insurance is normally not transferable should you change your mortgage company or increase your existing mortgage. Consider mortgage insurance if you don't currently have a separate life insurance policy. Recognize however, that the value of the insurance policy diminishes the closer you are to paying off your mortgage (you are insured up to the amount outstanding). It may make more sense for you to get life insurance separately.
taken from the quickenmortgage.ca website, thanks for permission

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