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Vittorio Oliverio, B.Sc, AMP

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Q & A

What is a Conventional Mortgage?

A conventional mortgage is considered to be a mortgage where the down payment is equal to 20% or more of the purchase price. It is a mortgage that generally does not require Mortgage Loan Insurance.

What is a High Ratio Mortgage?

A High-Ratio mortgage is a mortgage which is greater than 80% of the purchase price or appraisal, whichever is less. High-Ratio mortgages require Mortgage Loan Insurance which is provided by either Canada Mortgage and Housing Corporation (CMHC), Genworth, or Canada Guarantee a private Insurer, and protects the lender against loss. Mortgage Loan Insurance premiums range from .50% to 3.85% of the mortgage amount and are calculated based on the overall loan to value.

For instance, borrowers with a 5% down payment, a loan to value of 95%, would pay a premium of 3.85% while those with a 15% down payment, a loan to value of 85%, would pay an insurance premium of 1.00%.

What is the benefit of getting pre-approved?

A pre-approved mortgage is just like applying for a mortgage when you buy a home, but it is done ahead of time. CPMG will take all the information it requires from you to determine how much you can comfortably afford to pay each month and what price range of home you can look at purchasing.

With a pre-approved mortgage you can shop with confidence, knowing that the biggest hurdle in home buying has been set up ahead of time. Generally speaking, pre-approval terms and conditions are guaranteed by the financial institution for up to 90-120 days depending on the lender, giving you the protection of 'locking in' a certain mortgage rate should rates climb higher while you look for a home to purchase. If interest rates go down, the banks will generally give you the lower rate.

What is the difference between floating rate and fixed rate mortgages?

Variable or floating rate mortgages provide that the interest rate will change on a periodic basis during the term of the loan according to a pre-determined formula. This formula is typically based on the prime-lending rate set by the Bank of Canada.

Fixed rate mortgages provide that the interest rate will not change throughout the term of the mortgage, but is set at a fixed rate at the beginning of the term.

Can I get a mortgage to renovate my property or pay off credit cards?

Yes! Mortgages can be obtained for a variety of purposes including home purchases, home renovations, or refinancing to pay off other high interest rate debt.

What are typical pre-payment privileges available with my mortgage?

Most lenders today offer pre-payment privileges of 20% of the original mortgage balance. There are a few lenders that offer only 10% and others that offer 25%. Pre-payment privileges can typically be taken advantage of in the form of annual lump sum payments, too.

What are the early payout penalties that apply to my mortgage?

Either a three-month interest penalty or interest differential penalty will apply if you close out your mortgage prior to the maturity date of the term. The greater of the two applies. Interest differential is charged when interest rates have decreased relative to your rate, whereas three-month interest charges are typically charged when interest rates have increased relative to your rate.

Can I qualify for a mortgage if I am unable to confirm my income?

There are a number of products available for applicants who, for whatever reason, have a solid down payment but are unable to provide standard income verification. Another normal requirement is that the applicant have good credit. The amount of the mortgage advance will typically be 65% of the total property value but mortgages of up to 75% of the total can also be arranged. Private mortgage play a big part in this category.

What if I have a poor credit history?

While you may not be given immediate mortgage approval, CPMG has access to many lenders and with help you find the right mortgage. The terms and interest rates will depend on the severity of your credit situation.

What documentation is required to confirm my down payment?

For funds derived from a bank account, lenders require a bank statement confirming the down payment. For funds derived from RRSP, GIC, or stock portfolios, the most recent statement is required. For funds derived from the sale of property, a fully executed binding sale agreement is required.

Can I use gift funds as a down payment?

Most lenders will accept down payment funds that are a gift from family as an acceptable down payment. A gift letter signed by the donor is usually required to confirm that the funds are a true gift and not a loan. Where the mortgage requires Mortgage Loan Insurance, the gift money is required to be in the purchaser's possession before the completion of the mortgage.

How does bankruptcy affect my ability to qualify for a mortgage?

Depending on the circumstances surrounding your bankruptcy, generally some lenders would consider providing mortgage financing. If you have been previously discharged from bankruptcy, the best way to determine whether or not you qualify at this time is to fill out an application and have one of the CPMG team members discuss your situation. CPMG has many lenders to approach based on your circumstances.

How will child support and alimony affect my mortgage qualification?

Where Child Support and Alimony are paid by you to another person, generally the amount paid out is deducted from your total income before determining the size of mortgage you will qualify for.

Where Child Support and Alimony are received by you from another person, generally the amount paid may be added to your total income before determining the size of mortgage you will qualify for, provided proof of regular receipt is available for a period of time determined by the lender.

Should I wait for my mortgage to mature before obtaining an approval?

No, have CPMG begin shopping around for an interest rate at least 90 days before your mortgage matures. Lenders will often guarantee an interest rate to you as much as 120 days before your mortgage matures. Most lenders will cover or offset a majority of the costs of transferring your mortgage. This means a rate promised well in advance of your maturity date, thus eliminating any worries of higher rates. And if rates drop before the actual maturity rate, the new lender will usually adjust your interest rate lower as well.

Most lenders send out their mortgage renewal notices offering existing clients their posted interest rates. The rate you are being offered is usually not the best one.

I'm retired with a pension income. Can I get a mortgage?

Absolutely! Financial institutions are not permitted to discriminate based on age. As such, you are entitled to the same mortgage terms and qualifications guidelines as non-retired persons.

Further, pension income qualifies the same as any other income.

As a non-resident, can I qualify for a mortgage?

Yes, as a non-resident you are able to qualify for a mortgage. The maximum Loan to Value Ratio is typically limited to 65%, but can go as high as 75% in special cases.

A credit report from the country of origin, proof of income and down payment is also required.