– 50% of Canadians use mortgage brokers, surveys show Canadians need this professional advice to guide their decision and help them get the best mortgage contract; rates and terms.
– Professional, full time experts
– Pre-approval avoids stress, ensures guaranteed rates, verifies income, credit and down payment documentation
– Improves your negotiation ability, strengthens offers
– Better chance of succeeding in multiple offer situation
– See all available houses, no viewing restrictions
– Lowers financing time frame once offer is accepted
– Improves ability to secure best rate
Bank vs. Mortgage Broker
– Difference is diversity, rates are about the same but the terms and conditions are much different between mortgage companies, credit unions and banks.
– Mortgage penalties are worst with big banks; 65% of Canadians with 5-year mortgage pay a penalty costing them thousands
– Brokers can place you with a lender that protects you against high penalties
– Penalties with banks can be up to $30,000 – see Canadian mortgage pre-payment penalty lawsuits; monopoly organizations charge higher penalties
Mortgage Pre-Payment Penalties
– Variable rate always pays 3-month interest penalty
– Fixed rate can be a 3-month interest penalty or IRD penalty (different lenders calculate their IRD penalties in different ways; mortgage brokers can place you with a lender who has a standard IRD penalty, lowering your penalty and protecting you from predatory penalty practices)
– Brokers can present your application to a wide variety of lenders, focusing your application on the lender that best suits your specific needs.
– Mortgage companies calculate pre-payment penalties using standard IRD which is advantageous to the borrower. Provides mortgage companies with competitive advantage over the banks.
Mortgage Payoff – How to pay off mortgage at least 7 years faster
– 20% mortgage payment increase – direct against principal, pay off loan 5 years sooner
– Accelerated payment option – 26 payments per year vs. 24, pay off loan 3 years sooner
– 20% annual Lump sum option
Rental suite considerations
– Standard practice, can include income if suite has own kitchen, bathroom
– Rental income can be used in mortgage qualification income calculations, increase the amount you can borrow
– Must understand landlord and tenant rights to protect yourself
– Decreases monthly housing costs
– Rental income can be used to help cover the mortgage payment, build a housing maintenance fund, increase mortgage payment by 20%, invest the difference.
Down payment and Co-signer
– Minimum 5% down (own source funds or gift from close family)
– Co-signer on hook for mortgage as much as principal applicant
– TFSA, savings, RRSP up to $35,000 per applicant, sales of equipment