Schedule of Payments

A mortgage loan is repaid in regular payments, either monthly, biweekly or weekly. The more frequent payment schedules can save you money by increasing the amount paid toward the total mortgage each year.

The more frequently you make your payments, the more principal you repay in a year, and therefore, the lower the overall interest you pay on your mortgage.

Open Mortgage

This means you can repay the loan, in part or in full, at any time without penalty. Interest rates are usually higher on this type of loan. An open mortgage can be a good choice if you plan to sell your home in the near future. Most lenders will allow you to convert to a closed mortgage at any time.

Many experts suggest taking an open mortgage for a short term in times of high rates and converting to a longer term when rates fall.

Closed Mortgage

A closed mortgage keeps payment unchanged for the duration of the loan period, and usually offers the lowest interest rate available. It’s a good choice if you’d like to have a fixed payment to work your budget around for a few years.

However, closed mortgages are not flexible and there are often penalties or restrictive conditions attached to prepayments or additional lump sum payments. It may not be the best choice if you might move before the end of the term. Closed mortgages have terms ranging from six months to twenty years with a five year term being the most common. Generally speaking, the longer the term, the higher the interest rate.

Split or Multiple-rate Mortgage

With this mortgage, you negotiate a portion of your total mortgage loan at one rate and term, and another portion at a different rate and term. In this way you can split your mortgage into two, three or more terms.

There are many more mortgage options available, such as a convertible mortgage. To find out more, talk to your lender.

Before meeting with a potential lender, it is important that you are well prepared to ask the appropriate questions.

Where to get a mortgage

Many institutions and individuals lend money for mortgages. These include insurance companies, banks, trust companies, caisse populaires, credit unions, finance companies and pension funds. You can also check your local newspaper classified advertisements for a listing of private lenders.If you have a Self-directed RRSP, you may wish to investigate with your lender the possibility of borrowing some or all of your mortgage from your self-directed RRSP.

Mortgage brokers don’t usually lend money but can find a lender for you.

What a lender wants from you

Lenders want plenty of financial information about you and your co-buyers to assess your ability to repay the loan. This ability is based on your Gross Debt Service (GDS) and Total Debt Service (TDS) ratios and also on your assets, liabilities, earnings, employment history and your past record of repaying loans. Specifically, your lender may want the following:

• personal information — age, marital status, dependents
• details of employment, including proof of income (T-4 slips, personal income tax returns or a letter from your employer stating your position)
• other sources of income, for instance, pensions or rental income
• current banking information
• verification of your down payment
• consent to run a credit investigation
• a list of assets, including property and vehicles
• a list of liabilities, for example, credit card balances, car loans — the total amount you owe and your monthly payment amounts
• fees for an appraisal or for a copy of a valid appraisal report if one was recently done
• mortgage insurance fees if a high-ratio mortgage is required
• a copy of the property listing
• a copy of the Agreement of Purchase and Sale on a resale home
• plans and cost estimates on a new home
• the condominium financial statements, if applicable
• a certificate for well and septic, if applicable

Approval Process

A mortgage approval should take only a few days, but it’s probably best to allow up to two weeks. During this process, the lender will do a credit check and spot check other information you have provided. In addition, an appraisal of the value of your home may be obtained.

Whether the lender approves your loan application will be determined by an evaluation of the following:

• Capacity: Do you have enough income to repay the debt?
• Credit history: Do you pay your bills on time and do you live within your means?
• Capital: What are your current assets?
• Collateral: What assets can you pledge as security against the mortgage?

If required, a request for mortgage loan insurance is submitted to CMHC or a private insurer. The lender then approves or rejects your mortgage loan.

Pre-approval

A pre-approved mortgage is very common. With pre-approval, your lender approves the amount of your mortgage and gives you a written confirmation or certificate for a fixed time period before you start looking for a home. The pre-approval term, usually lasting from 60 to 90 days, also sets the mortgage rate the lender will offer to you. If rates go down in that period, the lender should offer you the new lower rate.

Pre-approval gives you a head start on house hunting, but your final approval is still subject to an appraisal of the value of the home and a credit review of your finances.

With the right mortgage — one that’s flexible and tailored to your financial situation — you have the luxury of owning your home. You also have the luxury of being able to relax.

For any questions in regards to arragning your mortgage for Mississauga Real Estate please contact Martin Zielinski.