General Mortgage – FAQs

A hi ratio mortgage is one where your down payment at the time of purchase is less than 20%. In all such cases, the mortgage is insured by CMHC, Sagen, or Canada Guaranty.

As long as you plan to live in the second property, then you can have a second home with a high ratio mortgage. If the property you are buying is intended as a rental, then you MUST put down at least 20%.

Here are a couple of possible scenarios:

1) You buy a second home, cottage, condo or whatever for your own use. It is not a rental property.

2) You decide to buy a new home, and convert the home you are now living in into a rental property. Your new home can have a down payment of less than 20%.

The answer depends on your situation. If you can totally afford a 25 year amortization, then it would be considered “better”, as you would pay off your mortgage in less time and pay much less interest over time.

But maybe you cannot qualify for a mortgage with a 25 year am. In that case a 30 year am is essential. In fact, a couple of lenders will even offer a 35 year am if necessary.

If you are going to have a 30 year amortization, you MUST have at least 20% equity in your property.

It’s hard to get mortgage financing on a piece of unserviced land. At best you are probably looking at needing at least a 50% down payment.

And if you are looking for A-lender rates, this is probably going to get done only in the branch networks, and not with your mortgage broker. You might want to knock on the door of your favorite credit union.

A mortgage to purchase a home may be doable once you start to generate scores from your new credit cards. There are a lot of factors and location is HUGE because you will be talking with B-lenders and they are very picky where they lend.

They like urban, well populated areas. Rural and well and septic are very hard. You will certainly need a 20% DP and maybe as much as 35% – depending on when you do this, and where you buy and your employment and income etc.

It really depends on your overall profile. If the new job is in the same industry you have been in for years and if it is for more money, you have a good chance of being approved. And if you are in a hi demand industry like I.T., health care, education that helps too. Multiple recent job changes, or a new industry is more challenging. Do please ask us BEFORE you firm up an offer to purchase.

Appraisals have to be very recent and not stale dated – and in rising markets this is also in your best interests as your property has gone up markedly in value since the last time one was done.

And when talking about private mortgages or B-lender mortgages, the lower the appraised value, the higher the potential rate. And if the appraisal came in too low, it might take some lenders out of their comfort zone. So a good, fresh appraisal report is essential to a good mortgage result.

For many years, those who chose a variable rate mortgage have fared better than those who chose a fixed rate. Interest rates fell year after year and the VRM acolytes saved lots of money compared to their friends.

And today the difference between the two rates is still quite compelling. BUT it would appear rates have far more room to increase in coming years than any other time in recent memory. And for many people, a fixed rate is certain, whereas the VRM is a step into the unknown.

So the answer is…. it depends. Talk first to your trusted advisers. See what makes sense for YOU.

There are two credit reporting agencies in Canada – Equifax and Trans Union. Mortgage brokers access a copy of your Equifax report and submit it with your application to lenders. In some situations, some lenders will also pull a copy of your Trans Union report. And in the branches, some lenders will go first to Trans Union.

The bottom line for consumers is that it is wise to keep both reports healthy and with no errors.

It often takes a few miserable outings before one succeeds. My sense is to win one must make an aggressive offer, almost outside one’s comfort zone, and understand that over market value might be the end result – but if you don’t do it, the winner will, and regardless, a new market value is established.

You need to accommodate the seller as much as possible when it comes to the closing date, and do bring a husky deposit to the party. At least 5% of the purchase price is good.

Try to get a home inspection done at your own expense if time and access permit, prior to making your offer.

And if your real estate agent (even your mortgage agent too) makes a nice presentation about you to the sellers this can also help. Video presentations can be very effective.

This is part of your mortgage loan agreement which entitles the lender to any income (from leases, rents, etc.) derived from the property once the owner defaults on the loan.

So it is a big deal only if you stop making mortgage payments, and is reasonable for lender to require. It is a fairly standard clause on all private and B-mortgages

We are often asked what will happen if the appraisal comes in lower. Will the home buyer still be able to finance it?

We always hope the appraisal will come in at the agreed price. But often in a super heated market the buyer may have “overbid” in order to win the property.

The lender would still lend the agreed percentage of the purchase price, or the appraised value, whichever is less.

If that leaves a shortfall you need to have access to additional money. If not, you may need to tap into the “Bank of Mom and Dad”

Our client wrote me and said “I am intending to put in an offer on this unit. I had a lawyer review the status certificate. The status certificate package did not include the most recent audited financials. Will this impact on my ability to get financing? The lawyer indicated I should bring this to your attention.”

I answered “I believe that if there are no such financials by the time of closing that this could jeopardize your purchase.

Our team had one like this not long ago. The lawyer never mentioned the missing financials, and when it was going through final review, just before closing, the lender wanted it (rightfully so). We managed to get the financials in time so it closed but it was dicey.

The seller’s realtor can perhaps find out when the financials will be available and you could set a closing date accordingly for a few weeks after that IF you feel confident their answer will turn out to be true.”

The review of the status certificate is typically a solicitor condition, not a broker condition. The solicitor reports back to the lender as to whether or not there are issues.

The status certificate review is a critical and important part of the condo purchase process.

Many borrowers choose bi-weekly –perhaps because they read somewhere that is the best repayment strategy — fully believing this will pay the whole she-bang off faster and with much less interest over time.

But this is not accurate.

Here is where I bust the bi-weekly myth wide open. Bi-weekly payments (and weekly payments) may make no difference to the long run of your mortgage. What?! No difference?!

BI-WEEKLY PAYMENTS DO NOT SHORTEN THE AMORTIZATION PERIOD

BI-WEEKLY PAYMENTS DO NOT REDUCE THE AMOUNT OF INTEREST

BI-WEEKLY PAYMENTS DO NOT INCREASE THE AMOUNT OF PRINCIPAL BEING REPAID

They serve as a convenience, not a money saving tool. Good to know, right?!

Let me explain…

To get the sizzle in your bi-weekly payment, you have to request accelerated bi-weekly payments. Accelerated means you divide the normal monthly payment by two and pay that every two weeks.

Lenders typically offer either bi-weekly payments or accelerated bi-weekly payments.Accelerated bi-weekly payments shorten the amortization period, reduce the amount of interest paid over time, and even pay back principal faster.

They are both a convenience AND a money saver. So basically accelerated bi-weekly payments are your budgetary BFF.

So if you just care about matching mortgage payments to your bi-weekly pay cheque, go ahead and request bi-weekly payments.

BUT if you want to get ahead of the curve too, then you should ask for accelerated bi-weekly payments.

Is it possible that I could get a pre-approval and eventually a mortgage in spite of this?

Regarding securing a mortgage with debt service ratios a bit high – yes, there are some ways we can make that work – depends on several factors including:

Is this a hi ratio mortgage (less than 20% DP or not) ? If it is hi ratio, then no we are in tough.

But if you have more than 20% down payment, we can work with credit unions and other alternative lenders who take a different approach towards underwriting a mortgage.

Not usually a problem. If you can produce a letter from your employer providing a return to work date with your position and expected compensation at that time. Then it is as if you are still working. This is just as true for dads taking paternity leave.

Chances are your bank will say no you cannot. However, we have dozens of lenders who will readily pay this debt with mortgage financing. It might be a brand new first mortgage, or maybe a temporary private second mortgage. No problem!

Fees associated with a mortgage refinance vary considerably, depending on your unique circumstances. Mortgage Prepayment Penalty Unless your current mortgage is fully open or is exactly at the renewal date, your lender will charge you a prepayment penalty as you leave. Legal fees and disbursements All mortgage refinances require the use of real estate lawyers.

If your new mortgage is with a private lender, you will be expected to pay for your own lawyer as well as the lender’s lawyer. Lender and brokerage fees If you are refinancing with an A-lender there should be no brokerage or lender fees charged, but if your new mortgage is with an alternative lender you will be charged such fees.

This will give you an idea https://askross.ca/what-does-a-private-mortgage-cost/ Appraisal costs An appraisal costs from a few hundred dollars to well over $1,000. The cost depends on location, value and urgency – a rush job will cost more.

There should be no cost if your mortgage is with a bank or some other A-lender. Brokerage fees are typically charged on private mortgages and B-lender mortgages. The amount depends on the size of the loan and the complexity of the client’s situation. We are always clear and upfront about any such costs – no surprises!

The likely primary reason is because you need to pay 8% PST on the mortgage insurance premium.

For example, with a $607,000 mortgage, the insurance premium may be $18,817

The premium is added onto your mortgage amount = $625,817 

However, there is PST charged on the insurance which is $1,505.36

Likely they deducted it from the advance. Any other variance might be explained by the interest adjustment date.

There are several scenarios where you might need a bridge mortgage, but yes downsizing is a classic. If the sale of your current home is firmed up, this is a relatively easy transaction for your bank. But if you have not yet sold your home, you may need a private mortgage arranged by your mortgage broker.

Suppose you are buying a new home, but the one you are in will not sell before your closing date. You get approved for a regular mortgage for the property you are buying, PLUS another temporary mortgage to cover your down payment and closing costs until your current home sells. The temporary mortgage is the bridge mortgage.

It essentially helps you “bridge” the gap between the time your current home is sold and your new home is being purchased. This is why the solution is called a bridge mortgage. At Ross Taylor Mortgages we will make all the arrangements for you.

Competent, capable and service oriented trumps cheapest cost. I don’t ask the lawyers we deal with to discount their services, but I do expect a seamless client experience. Why would you cheap out on such a majorly important service for the largest financial transaction you have ever done?

This is definitely not recommended. If you resign from your job prior to your purchase completing, then your mortgage approval would be at serious risk. Mortgage lenders can do a verbal confirmation of employment (by telephone) up to and including the funding date. If you have resigned, even if you are still there on that date, your employer would probably share this information with the lender and that would be that. Please tread very carefully.

With most lenders, these things mean the same thing – based on a review of your information and documentation, the lender is comfortable telling you your maximum borrowing power. It is not an iron clad approval for when you actually buy a property. Suppose your circumstances change or the property has serious structural issues – you may yet not be approved after you agree to a purchase.

Sometimes clients are confused that the tax statement sent by their township does not reflect all the payments they have already made directly to their mortgage lender.

Regarding your property taxes, when a lender remits taxes on your behalf they do so according to their own internal schedule and processes. And that would not necessarily be the same as the schedule you would follow if remitting yourself.

If you have recently changed mortgage lenders or just completed a home purchase, your real estate lawyer is the first person I would turn to here when trying to find out the status of your property tax account.

The previous lender should have provided an accounting of their tax remittance account to her at the time of payout. That can be compared to the city billings to figure out where you are actually at.

Our client asked this question after she gave us the last document still outstanding as requested by her mortgage lender. The fact is we are likely looking at two more weeks from that date. This was a refinance and here is what remained to be done:

Even at this late stage, the lender has to sign off on all your documents; then declare the file is complete. Then the lender and Charles send packages to your lawyer. Then your lawyer requests a payout statement from RBC (and we wait for that – they control how fast they give it.) Then your lawyer and you coordinate signing meeting.

In general for refinances, I tell our clients we allow five to six weeks from beginning to end. If a particular lender is slow, I will tell our clients and we will expect it to take longer.

Don’t get me wrong, we know how to close rush deals if we have to – in case of emergency. Last year we closed a $3 million purchase only one week after we received the file! But that was a special case and “all hands on deck”.

We also counsel clients to avoid closing dates at the very end of the month or the very beginning of the month, if at all possible. Those dates are when lenders and lawyers are busiest.

Yes you have a shot at mortgage consideration, but it ultimately depends on many factors. Is the CP still showing on your credit? Have you re established new credit? Are you thinking of buying or refinancing? How large a down payment do you have? Etc.

Rates are all over the place depending on if you are borrowing or lending. Location matters. Loan to value matters. Property type matters and so does whether or not we are talking about a first or a second mortgage.

Please call me at my direct number 416-989-1050 and I will be happy to spend a few minutes with you and better answer your question. You can also check out our three part series on private mortgages here.

Buyers do need to have a financial cushion so that if the property appraises light they can make up the difference. That is the challenge I see here. If you have no additional savings or investments, you could have a serious problem and in danger of notcompleting your purchase.

Example – final price $1.3 million. Buyer expecting to put down 20% = $260,000.

But appraised price is $1.2 million. Buyer must put up $340,000 now.

I have to admit it is tough if you do not have any funds to put towards the purchase. There is something called a Flex Down mortgage but you need to come up with the financing yourself – could be a Personal Line of Credit perhaps.

Some municipalities will offer DP assistance. I did a couple in Orangeville a few years ago. Maybe one near you might offer the same.

I would go to city hall and ask them if they have a down payment assistance program or if they know of one in a nearby municipality.

The lower the stress test rate, the more mortgage you qualify for.

If you take a variable rate mortgage, your stress test rate is “only” 5.25%. But if you take a fixed rate mortgage, your stress test rate will be around 6.5% (depending on the actual fixed rate you are being given)

We work with credit unions and other lenders who have mortgage products that qualify you at your actual mortgage contract rate – so if the fixed rate is 4.44%, that is your stress test rate! This is a huge benefit.

We hear this complaint in the months following a purchase in situations where the homeowner has to pay property taxes through the mortgage lender. The lender takes an amount for the mortgage and also an amount for property taxes from the borrower’s bank account on the agreed payment schedule.

The reason it’s more than you would expect is that all lenders like to seed the tax account so that there is always extra in there no matter when the city comes along and collects it.

Generally by the second year things get sorted out and the amounts being withdrawn each payment adds up to the actual annual property taxes.

Absolutely yes you can. Many first time buyers find themselves in an arrangement where there is a tax payment withdrawn from their bank account at the same time as their mortgage payment.

But for various reasons, they would rather manage the payments themselves. Personally, I set up an equal monthly amount to be deducted from my bank account by way of Bill Payment. Others contact their municipality and enter into a payment plan directly with them.

Whatever approach you wish to take, you will need to apprise your current mortgage lender of any changes.

There is no cost for the pre-approval.

When you consummate the purchase of your home, you will have normal closing costs. They are outlined in this article https://askross.ca/top-10-things-your-home-buying-budget-needs-to-include-in-addition-to-the-purchase-price/

When we receive an approval, the lender will indicate whether or not they require an appraisal done on the property. The cost varies, especially by location. In Toronto, properties under a million should cost less than $400. We typically share the cost with our clients as a show of goodwill.

As to other specific costs arising from your mortgage that is mostly between you and your real estate lawyer who will charge you a fee to register the mortgage, purchase title insurance, accept monies from the lender and various other tasks. All reputable lawyers have a well defined cost for these services.  As brokers, and for the A-lenders we represent, there are no other incremental expenses.

Assuming you are a first time buyer in Ontario, and the purchase price is say $800,000 closing costs are typically:

1) Legal fees, disbursements and title insurance                $2,500 to $3,000
2) Land Transfer Tax LTT (in Toronto)                                  $16,475
     LTT outside Toronto is only $8,475
3) Interest Rate Adjustment                                                   $0 to $3,000 (depends on lender and your closing date)
4) Moving Expenses – up to you                                            $1,000 and upwards Those are the main costs required to close the purchase of a home with no CMHC insurance. If the DP is less than 20% you also have to pay the 8% PST on the insurance premium (roughly $1,500)

If you choose to buy from a builder (or assignment of a pre construction property) there would be more closing costs for sure.

This is not a silly question. In the summer of 2022 it is not uncommon for appraisals to come in lower than the agreed purchase price. This can play havoc on buyers’ finances. Our client asked “Given that the appraisal came pretty close to the purchasing value, should we be worried about the bank requesting a second appraisal closer to the closing date? How long is this appraisal good for?”

Ross answered as follows:

No I don’t think you should be worried at all. There is no motive for an appraiser to come in higher than your purchase price. Even if he feels you got a steal, in this climate, this appraisal value says it is a solid purchase. We were hoping for exactly the result you got and no need to overthink it 😊