Questions For Mortgage Application
No. Now all lenders only require your VOID cheque to charge the monthly payment automatically every payment frequency you select.
If we receive all support documents with application, it mostly takes 1 to 2 business days.
It’s free of charge to all A-Class clients who have qualified income and credit histories for getting residential mortgage from A-Type lenders which only offer the mortgage to A-Class borrowers. Most B-Type lenders will charge an application fee (or processing fee or admin fee) to the B-Class borrowers who have unqualified income and/or credit problems. The rates from B-Type lenders are much higher than the rates from the A-Type lenders.
For most mortgage brokers’ websites, it’s not secured. But for our website, it’s secured. When you click the final appropriate application form, it will be transferred to our secured website. You can find “https://” in front of website domain name instead of the regular website “http://”. The “https://” means secured website and we use the same security technology as online banking. And there is no any data left in the server once you click the “Submit” button.
All A-Type lenders, including 5 chartered banks, use debts ratio to qualify the mortgage applications. Your income may be very high, but you may have lot’s of mortgage or high monthly payments for car loans or other short term debts, then the TDS / GDS (Total Debts Service Ratio / Gross Debts Service Ratio) may exceed the limitations of the lenders’ policy.
GDS means Gross Debts Service. This ratio equals to qualified mortgage monthly payment amount plus monthly heating cost plus monthly property tax amount, divided by your gross monthly income. Most lenders set the limitations from 36% to 40%.
TDS means Total Debts Service. This ratio equals to all monthly payments for your debts including property tax and heating cost divided by gross monthly income. Most lenders set the limitation to 44%. But the lender will use a “qualified rate”, not the actual mortgage rate you can get, to calculate the monthly mortgage payment. And also they will use their estimated amount to calculate the heating cost, not your actual heating cost. For example: the lender uses 5.14% to calculate your monthly payment instead of using the real rate of 2.99% you got.
The lender provides a rate to the mortgage broker or agent, for example 2.69% for 5 year fixed. The mortgage broker or agent wants to sell 2.59% to the clients. The lender will never pay any extra cost. So the lender will deduct the interest difference between 2.69% and 2.59% from the commission the lender will pay to the mortgage broker or agent. This 2.59% rate is called “Buying Down Rate”.
An equity loan is a mortgage loan in which the borrower receives money. Typically the loan is secured by real estate already owned outright.
For example, if a person owns a home worth $100,000, but does not currently have a mortgage on it, they may take an equity loan at 80% loan to value (LTV) or $80,000 in cash in exchange for a mortgage on the title.
The Qualifying Rate is used by the lender to qualify the mortgage application. Usually it’s the post rate of 5 years from Bank of Canada for most lenders. This is to protect the repayment capability of the borrowers. It’s not the real rate the borrowers will get. For example, the borrower gets the real rate 2.89% for 3 year fixed term. It’s qualified based on the existing borrower’s income and credit. After 3 years, if the market rate is changed to 6.50%, then the borrower may not have capability to repay the monthly mortgage payment. So for protecting the borrower’s repayment in the whole amortization period, the lender uses the qualifying rate to approve the mortgage application. Some lenders use real rates of 5 years if the term is equal to or more than 5 years. Some lenders use their own post rates which usually are lower than the 5 year posted rate of Bank of Canada.
In real estate industry, there is a famous theory is Location, Location, and Location. In mortgage industry, there is another theory is Compare, Compare, and Compare!
You need to compare at least 3 mortgage brokers, 3 banks and need to search on Google, Yahoo and Bing Search Engines to find out what the lowest rate is for your preferred term. Do NOT sign and submit any application before you make the final decision. You can call, visit or search on the Internet. BUT, you also need to compare the conditions of each mortgage rate to find out whether those conditions may influence your family financial and real estate plan in the contract term. Other than it, you need to find a good professional mortgage broker to be your family’s financial consultant. You need to focus on 3 points:
- Transparent: All information disclosed is clear and transparent, especial the rates. You can visit the mortgage broker or agent’s website to find out whether they treat the same to everybody. If they publish just bank’s rates, mostly they try to quote different rates to different people based on people’s knowing for mortgage rates. So Do NOT use those kinds of mortgage brokers or agents who quote higher rates initially and use matching policy later, because those brokers or agents always try to get more profits from you. Today you know other lower rates, those brokers or agents can match it. How will they quote you if you don’t know the lower rates tomorrow?
- Honest: Some brokers or agents always say “No Problem” and “Low Rates”, whatever you are qualified or not. They usually use this strategy to stick you until just several days before closing date, then you will be told “Sorry, the lender declined this rate. But I have a higher rate for you…”. At that time, most borrowers don’t have any time to switch to other mortgage brokers. So, try to trust and use the mortgage broker or agent who tells you the truth at the beginning, even though mostly the truth is HARSH.
- Professional: Have enough mortgage and financial knowledge, experience with good working attitude. Mostly the mortgage brokers have more experience and knowledge than the mortgage agents. So selecting the Mortgage Broker will be much safer than selecting the Mortgage Agent.
Once you select your permanent mortgage partner, you can contact him/her and submit application with all support documents that the lender needs.
There are 2 types of mortgage loans when the lenders register their loan business. One is Mortgage (Real Mortgage), another is called Collateral Loan / Mortgage (also called mortgage by those lenders). Collateral Loan (Mortgage) has many types, like Secured Line Of Credit, Car Loan etc… There are 3 major differences to influence the borrowers in the future between Collateral Mortgage and Real Mortgage:
- For Real Mortgage, the compound interest MUST be charged every 6 months (semi-annually). The compound interest of Collateral Loan may be charged every month, quarter or bi-weekly.
- There is a legal fee (lawyer fee) involved in the future when switching after your maturity date for the Collateral Mortgage. It means you can switch for free to new lender for most real mortgage, but you have to pay a legal fee to switch your mortgage to new lender if your existing mortgage is a collateral mortgage.
- You may be declined for renewal if you loss your job for the Collateral Mortgage. For Real Mortgage, the law forces the lender renew your mortgage whatever you have job or not.
Some chartered banks, trust companies and insurance companies are providing the Collateral Mortgage. Like CIBC, TD, National Bank, ING, HSBC, Manual Life, London Life etc…
So when you compare the mortgage rates, you can’t just compare the rates directly. A Collateral Mortgage of 2.35% may be equal to a Real Mortgage of 2.50%. If you count the future legal fee, it might be equal to a Real Mortgage of 2.69%, because the renewal rates after maturity from most Collateral Mortgage lenders usually are much higher than the rates from many Real Mortgage providers and you will transfer to new lender after maturity date.