What is the difference between a Mortgage Specialist at a Bank and a Mortgage Agent/Broker?

Let’s compare this to ice cream, because who doesn’t love ice cream?  A Mortgage Specialist working for a big Bank only serves plain vanilla ice cream in a cup.  No hot fudge, choice of cone or even sprinkles!  Meaning they only have access to one set of rates and one set of products.  A Mortgage Agent/Broker has over 40 different flavours of ice cream to choose from, both hard and soft serve, unlimited toppings and your choice of cup or handmade cone. By having access to a variety of lenders, each with their own products and rates, a Mortgage Agent/Broker has the ability to present you with a variety of solutions tailored to your specific needs.

Do I pay fees to work with a Mortgage Agent/Broker?

The short answer is NO.  Most common mortgage transactions do not charge fees.  On a very rare occasion for an Alternative or Private mortgage the broker may have to charge a fee but this is ALWAYS discussed up front.

How do I find the best rates?

You work with a GreaterThan Mortgage Agent and they’ll find you the best rate while making sure you’re in the right mortgage for your goals.

What is an “Insured” mortgage?

A “Default Insured Mortgage” is when you put less than 20% down payment and the mortgage is “insured” by the Default Insurance Provider.  All default insured mortgages are for owner occupied properties ONLY.

Why do I have to pay a default insurance premium?

Default Insurance helps to protect the lender in case you “default” on your payments (i.e. you are in arrears on your mortgage payments).  The premium is calculated as a percentage of your total mortgage and is a one-time fee included in the overall mortgage.

What is a “Conventional” or “Uninsured” mortgage?

This is when you put 20% down or greater for your down payment. With the higher down payment, it is NOT required for the mortgage to be default insured.

How much do I need for a minimum down payment?

For a default insured mortgage, the minimum down payment is 5% of the purchase price  up to $500,000 and 10% on the difference above that up to a maximum purchase price of $999,999.  For a conventional mortgage and/or purchase prices over $1,000,000 a down payment of at least 20% is required.

Can I put less than 20% down if it’s my second house purchase?

Yes.  As long as you will be occupying the home as your primary residence, it does not matter if it is your first, second or even third house purchase.

How much down payment do I need for an investment/rental property?

The minimum down payment requirement for an investment property is 20% of the purchase price.

What is a Mortgage “Term”?

This is the length of time that you are guaranteed that rate with your lender.  Fixed terms in Canada range from 1, 2, 3, 4, 5, 7, or 10 year terms and variable rate terms are normally offered in 5 year terms however some lenders also offer a 3 year variable.

What does “Amortization” mean?

Amortization refers to the overall “life” of your mortgage, aka how long it will take you to pay off your mortgage.  25 years is the maximum amortization for a default insured mortgage and 30 years is the maximum amortization for a conventional mortgage.

What is the difference between a "Fixed" and "Variable" rate term?

A fixed rate term guarantees a set rate for the duration of that term.  A variable rate guarantees you will stay +/- a set percentage above or below Prime Rate for the duration of that term.  For example, a 5 year variable term at Prime - 1.0% guarantees you will stay 1% below Prime for the next 5 years.

What is “Prime Rate”?

Prime rate is the annual interest rate that all of Canada’s Mortgage Lenders use when setting their interest rate for a Variable Rate mortgage and/or Home Equity Line of Credit (HELOC). Prime Rate is not set by one Bank or one lender, however the majority all use the same Prime Rate.

How does the Bank of Canada’s Overnight Lending rate affect the Prime rate?

Although not directly related, the movement of the Bank of Canada’s (BoC’s) Overnight Lending Rate dictates the movement of the Prime Rate.  If one goes up, they both go up, if one goes down, they both go down.  The BoC reviews the Overnight Lending Rate 8 scheduled times per calendar year.

How do I pay my mortgage?

Mortgage payments are set up as a Pre-Authorized Debit from your main bank account.  They can be on a monthly, semi-monthly (twice per month), bi-weekly (every two weeks), or weekly frequency.  We recommend choosing a frequency that aligns with your payroll direct deposit.

What is an “Accelerated” payment frequency?

This is an easy way to help pay off your mortgage more quickly.  The result is your payment is a little higher than the regular weekly or bi-weekly payment, meaning that extra amount goes towards your principal balance.  This can reduce your amortization on average by about two and a half years.

Can I change my mortgage payment frequency?

Absolutely!  Depending on the lender and the timing before your next payment is due, you can easily change your payment frequency mid-term.

What does a “Closed” mortgage term mean?

The most common mortgage term (fixed or variable) is a Closed term. This means that there are restrictions on how much extra money you are allowed to prepay towards the principal mortgage balance each year.  You may also incur a penalty if you break a fixed term early.

What does an ”Open” mortgage term mean?

An “Open” mortgage term is rare and can normally be found as a Variable Rate term.  This allows you to prepay the entire balance without penalty or restriction but normally comes at a rate premium. 

How much extra can I put towards my mortgage?

While each lender is different, most allow you to prepay 15% or 20% of the original mortgage amount towards the principal balance each year.  Plus they also allow you to increase your regularly scheduled payment by 15% or 20%.

How much are the penalties to break a mortgage before the term is over?

There are two types of penalties: 3 months simple interest OR interest rate differential.  Which penalty you pay depends on a few different factors such as the lender, length of time left on your current term and the current interest rate environment.

What is an Interest Rate Differential?

In simple terms, the Interest Rate Differential (IRD) compares your original posted mortgage rate to the current rate offered by the same lender for the term that matches the same length of time you have left on your current term.  The key word in this answer is “posted”.  Not all lenders have the same posted rate therefore not all IRD’s are calculated equally.  Let us help you understand how this can save you thousands of dollars!

When would I pay a penalty to my mortgage lender?

Penalties are incurred if you break your term early by selling your property, moving your mortgage to a new lender, or entering into a brand new term.  Penalties may be avoided by staying with the same mortgage lender.

How do I access the equity in my home?

Your hard earned equity can be accessed by either refinancing your current mortgage or by setting up a secured line of credit against your home.  The equity can then be used for debt reduction strategies, home improvements, purchasing real estate, funding post secondary education for children and so much more.

What is the maximum amount I am allowed to refinance my mortgage for?

Government guidelines state that, provided you qualify, you are able to refinance your mortgage up to 80% of the current value of your home.

What is a HELOC?

HELOC stands for Home Equity Line of Credit.  This is traditionally a revolving line of credit secured against your home, which is held under the same security charge as your mortgage.  “Revolving” means as your mortgage balance decreases, you build available room on your line of credit.

What is the maximum amount of HELOC I can have?

Government guidelines state that the initial HELOC limit cannot exceed 65% of the total value of your home.

Can I renew my mortgage before the end of the term?

Most lenders offer the option to early renew without penalty 4 to 6 months in advance of your maturity date.

Can I move my mortgage to another lender?

Yes and we are happy to help guide you.  Depending on the lender, they may even cover some or all of the costs associated with the transfer.

How do you determine whether or not I qualify for a mortgage?

Qualification is based on 3 main areas of verification: income, down payment and ability to repay (aka credit review).  These factors all directly impact your Affordability Ratios; these government guidelines depict what percentage of your gross annual income is being used to cover your monthly debt obligations.

How long is a pre-approval good for?

Most lenders offer a pre-approval that is valid for up to 120 days; meaning your new purchase closing date must fall within that time frame.

Can I make a “firm” offer on a property if I have been pre-approved?

NO.  A pre-approval means you can afford the amount of mortgage requested.  It does not guarantee that the property you are purchasing will meet the lenders’ guidelines for approval.  Although a pre-approval is crucial in understanding how much you can afford and whether or not  you can qualify for a mortgage, it is not a guarantee that the Lender will approve the mortgage based on the specific property details.

 Why would a lender not want to “approve” a specific property?

In an overly competitive market, the most common reason is because the property’s appraised value does not meet the high purchase price.  Other reasons may be the age of home, underlying issues, location, zoning, etc.