What is a home inspection and is it necessary?
A home inspection is a visual examination of the property to determine the overall condition of the home. In the process, the inspector should be checking all major components (roofs, ceilings, walls, floors, foundations, crawl spaces, attics, retaining walls, etc.) and systems (electrical, heating, plumbing, drainage, exterior weather proofing, etc.). The results of the inspection should be provided to the purchaser in written form, in detail, generally within 24 hours of the inspection.
A pre-purchase home inspection can add peace of mind and make a difficult decision much easier. It may indicate that the home needs major structural repairs which can be factored into your buying decision. A home inspection helps remove a number of unknowns and increases the likelihood of a successful purchase.
We can provide you with a list of reputable home inspectors. Please feel free to give us a call if we can be of assistance.
How much can we afford to pay for a home?
To determine ‘affordability’ we will first need to know your Taxable Income along with the amount of any debt outstanding and the monthly payments. Assuming it is your principal residence you are purchasing, they will then calculate 32% of your income for use toward a mortgage payment, property taxes and heating costs. If applicable, half of the estimated monthly condominium maintenance fees will also be included in this calculation.
Second, we will calculate 40% of your Taxable Income and deduct all of your monthly debt payments, including car loans, credit cards, lines of credit payments. The lesser of the first or second calculation will be used to help determine how much of your income may be used towards housing related payments, including your mortgage payment. These calculations are based on Lenders’ usual guidelines.
What is the minimum down payment needed to buy a home?
The minimum down payment required to purchase a home is 5% of the purchase price. Traditionally the funds for the down payment would come from personal savings or investments, however for qualified borrowers there are other options available for sources of the down payment such as a gift from a family member or from a line of credit or other loan.
What is mortgage loan insurance?
Mortgage Loan Insurance is insurance provided by Canada Mortgage and Housing Corporation (CMHC), a crown corporation, and Genworth Financial – Canada, an approved private corporation. This insurance is required by law to insure lenders against default on mortgages with a loan to value ratio greater than 80%. The insurance premiums vary depending on loan to value and amortization.
What is a high-ratio mortgage?
A High-Ratio mortgage is one where the amount to be borrowed by way of a mortgage is greater than 80% of the purchase price, or the appraised value, whichever is less. High-Ratio mortgages generally require Mortgage Loan Insurance provided by either Canada Mortgage and Housing Corporation (CMHC) or Genworth Financial – Canada, a private Insurer.
The Mortgage Loan Insurance premium is paid to CMHC or Genworth and protects the Lender in the event the mortgage is not repaid and the bank has to take back the property. The benefit to the borrower is that it allows them to purchase a home with less than 20% down payment. The insurance premium is paid by the borrower and can be added directly onto the mortgage.
What is a conventional mortgage?
A conventional mortgage is usually one where the down payment is equal to 20% or more of the purchase price. This type of mortgage does not normally require Mortgage Loan Insurance.
Why should I use Peter Kampe and Mortgage Intelligence for my mortgage needs?
Financial Institutions sell only their own products to the public through their own sales force. As a result, they are not able to provide unbiased advice or selection since by doing so they risk losing your mortgage to a company whose product may provide more value to you. Mortgage Intelligence on the other hand, sell a variety of mortgage products and services as we deal with many lenders, not just one. Because of this they are able to search for product from a variety of lenders, including banks, trust companies, insurance companies and credit unions, for the one that offers the best product, rate and terms for your particular needs. Thus, they can be totally objective in their recommendations to you.
Peter Kampe and Mortgage Intelligence are able to negotiate on your behalf, structuring deals to meet the criteria of the lenders, and therefore getting you a mortgage solution that works for you. We do the shopping and negotiation, and obtain the best possible deal for you!
With our knowledge, experience and contacts in the Financial Industry, Peter Kampe and Mortgage Intelligence are able to process your application quickly, efficiently and with no hassles. We are able to obtain approvals QUICKLY!
How does Mortgage Intelligence get paid?
In most cases, We do not charge you for this service. Mortgage Intelligence Services gets paid through finder’s fees, which are paid to us from the financial institutions. This finder’s fee does not affect the rate, which we are able to obtain for you, & in fact generally we will beat the rates you can obtain at your regular institution by 0.50% to 1.25%. The lower rates that Peter Kampe and Mortgage Intelligence are are able to obtain will save you thousands of dollars over the term of the mortgage. We will shop the market for you & find the best deal available!
In situations where traditional lenders will not approve a mortgage because of credit challenges in the past, and where the application must be placed with a private or non-traditional lender, a brokerage fee may be charged to the client. This cost will always be disclosed to the client up front and must be authorized in writing by the client before it can be charged.
Is my information kept confidential?
Security and Confidentiality is of the highest importance to Mortgage Intelligence. Rest assured that your private personal and financial information is not sent anywhere without your express permission.
Does paying my mortgage bi-weekly really cut years off my mortgage?
Payment frequency is not the major factor in reducing the amortization period of your mortgage. Principal reduction is! But what about all the talk of bi-weekly payments taking five years off your amortization period. Although you will save some interest making your payment bi-weekly, ultimately it is the fact that your total payments each year are higher that results in the significant reduction in amortization. For instance, when a client chooses a bi-weekly payment of $500 over a monthly payment of $1000, in fact they are choosing to pay an extra $1000 annually. In most cases a bi-weekly payment is simply a monthly payment divided by two. That means that instead of paying $12,000 in monthly payments, you are now paying $13,000 in bi-weekly payments. That extra $1000 is what ultimately cuts the years off your mortgage. You can do close to the same thing by increasing your monthly payment, if a monthly payment frequency would be more convenient for you, or by taking an accelerated semi-monthly payment.
Most people find that a payment frequency tied to how often they earn their income makes the most sense. And where possible, increase your regular payment amount or make periodic lump sum payments as both will help reduce the length of time it will take to repay your mortgage fully.
Does bankruptcy disqualify me from getting a mortgage?
Depending on the circumstances surrounding your bankruptcy, generally some lenders would consider providing mortgage financing. If you are a previously discharged bankrupt the best way to determine whether or not you are is by giving Mortgage Intelligence a call or send us an email!
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.
Can I get a mortgage to purchase a home and make improvements?
Subject to qualification, yes. In fact, even purchasers with 5% down may qualify to buy a home and make improvements to it. For high-ratio financing, both Canada Mortgage and Housing Corporation and GE Capital, insured mortgages are available to cover the purchase price of a home as well as an amount to pay for immediate major renovations or improvements that the purchaser may wish to make to the property. This option eliminates the need to finance the renovations or improvements separately. Some conditions apply.
Where the improvements are cosmetic, the Mortgage Loan Insurance Premium is unchanged from the standard schedule. Where the improvements are deemed to be structural, the Mortgage Loan Insurance Premium is increased by .50% over the standard schedule.
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, Canada Mortgage and Housing Corporation requires the gift money to be in the purchaser’s possession before the application is sent in to them for approval. Where Mortgage Loan Insurance is provided by GE Capital this is not a requirement.
What is a pre-approval and how do I get one?
A Pre-approved Mortgage provides an interest rate guarantee from a lender for a specified period of time (usually 60 to 120 days) and for a set amount of money. The pre-approval is calculated based on information provided by you and is generally subject to certain conditions being met before the mortgage is finalized. Conditions would usually be things like ‘written employment and income confirmation’ and ‘down payment from your own resources’, for example.
The easiest way to get a Mortgage Pre-approval is by contacting Mortgage Intelligence . We will ask you some simple questions and calculate the size of mortgage you qualify for, using this information. With your authorization, we will then proceed with arranging a Pre-approved Mortgage for you if you are planning to buy property in the near future. Most successful Real Estate Professionals will want to ensure you have a Pre-approved Mortgage in place before they take you out looking for a home. This is to ensure that they are showing you property within your affordable price range.
In summary, a Pre-approved Mortgage is one of the first steps a Home Buyer should take before beginning the buying process. Give Peter Kampe and Mortgage Intelligence a call to find out more!
How do mortgage penalties affect me?
When getting a mortgage, one of the important features is the potential penalty incurred when paying down your balance more than your prepayment privileges allow. This can happen when you want to refinance your house before the end of you mortgage term or you have a large inflow of cash and wish to pay down your mortgage. An important thing to note is that large commercial banks tend to have higher penalties. Some of these penalties are calculated using a 3 month interest penalty, and others use the Interest rate differential, which is a formula that compares your interest rate with the lenders current rates. based on the wide range of penalties, it’s important to take lenders prepayment penalties into account when getting a mortgage. The following penalties were calculated using the respective lender’s own calculator using the same mortgage information.
Bank Lender 1 – $18,755.49
Bank Lender 2 – $16,258.00
Non-Bank Lender 1 – $6,994.99
Non-Bank Lender 2 – $2,732.00
Should I wait for my mortgage to mature?
No, give Peter Kampe and Mortgage Intelligence a call as Lenders will often guarantee an interest rate to you as much as 120 days before your mortgage matures. As long as you are not increasing your mortgage, they will cover the costs of transferring your mortgage too. 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. ALWAYS ask us to find the BEST rate for you prior to maturity. Allow us to shop around for you and get the BEST possible interest rate!
What are the sources for mortgage financing?
There are a wide range of financial institutions that are involved in the mortgage industry in Canada. Some of these include:
- Chartered Banks, Loan Corporations
- Trust Companies, Credit Unions
- Finance Companies, Pension Funds
- Life Insurance Companies, Private Individuals
With your help we will select the mortgage lender who’s right for you!
Will I need mortgage insurance?
A mortgage is a large debt and should be life insured, for your family’s peace of mind. Some lenders include life insurance as part of their cost; others will let you insure the mortgage yourself. But Mortgage Intelligence always recommends mortgage insurance in some form.
How much will it cost me to have a Mortgage Intelligence Consultant?
For most people the Mortgage Intelligence Consultant provides a free service. They receive their fee from the lender providing your mortgage.
Will this fee increase the cost of the mortgage?
No because the lender either has to pay its own sales staff to originate mortgages or it can pay a broker – it’s all the same.
What is the best term to consider?
Usually the shorter the term the lower the rate. However many people prefer the comfort of a longer-term mortgage and as an example we have provided a historical tracking of the five-year rates. This is another area where your Mortgage Intelligence Consultant can help.
How does my amortization affect the amount of interest I pay?
The amortization period has a dramatic effect on the amount of interest paid
over the length of the mortgage. Consider the example of a $150,000 mortgage
with an interest rate of 6.20%*
- With a 25 year amortization the monthly payments are $977.61
- With a 20 year amortization the monthly payments are only increased
by $107.57 to $1085.18. The savings in interest would be $32,843.40
- With a 15 year amortization the monthly payments are increased by
only $298.03 to $1,275.64. The savings in interest would be $63,669.38
* The example assumes the interest rate will remain constant
through the whole amortization period.
What difference does payment schedule make?
Most mortgages have very flexible payment alternatives. Weekly, bi-weekly, or
monthly payments are most common. These choices also have a great effect on the
overall interest payments.
Consider the example of a $150,000 mortgage with an interest rate of 6.20%
over a 5 year term.
Payment Remaining balance at end of term Weekly $244.40 $129,285.80 Bi-weekly $488.81 $129,327.89 Monthly $977.61 $135,132.08
How does the Home Buyers’ Plan (HBP) work?
Each purchaser may borrow up to $20,000 from their RRSP under the Home Buyers’ Plan. (The funds must have been in the RRSP for at least 90 days prior to withdrawal to be eligible under the program)
Provided you buy or build a qualifying home and meet all of the conditions for making a withdrawal under the Home Buyers’ Plan, you can use the particular funds you withdrew under the Home Buyers’ Plan for other purposes. (Not only down payment and closing cost, but for any other purpose you choose.)
This program is available to the first time home buyer only. (You are considered a first time home buyer if, at any time during the period beginning January 1, 1995 and ending 31 days prior to your withdrawal in 1998, you did not own a home while you occupied it as your principal place of residence)
This information is current throughout 1999. And the program has been extended indefinitely.
Repayment of the funds back to your RRSP can be made over 15 years. (The repayment period starts in 2001 and ends in 2015)
If the amount is not repaid in a year, that year’s repayment amount will be added to your income and taxed.
In order for the home to qualify it must be located in Canada and intended to be used as your principal residence.
This program may be used in connection with the 5% down program.
If you have any questions about the HBP program you can call the General Enquiries section of your local tax services office. You can find the address and telephone number listed under “Revenue Canada” in the Government of Canada section of your telephone book.
If you use a Telecommunication Device for the deaf (TDD), you can get tax information by calling the toll-free, bilingual TDD enquiry service at: 1-800-665-0354
What information is required to be Preapproved for a Mortgage?
If you are applying for a preapproved mortgage, have following information
ready to give to your Mortgage Intelligence Consultant:
- Have your employer give you a letter on company letterhead outlining
your name, position, gross annual income, and number of years employed with
- If you are self-employed, you will need three years financial
statements, and tax returns (together with official assessment from Revenue
- Social Insurance Numbers.
- At least 3 years history of residences and employers.
- Know your banking information (i.e. institutions name,
address, type of accounts, account numbers)
- Know your assets and their value (i.e. cash amounts, stocks,
bonds, RRSPs, car).
- Know your liabilities (i.e. car loan, credit card balances).
- Also, be sure and advise your Mortgage Intelligence Consultant about
any past credit problems you may have had.
- Finally, write down a list of questions you would like to have
Why is verifying my Down Payment important?
If there is ‘one’ thing that causes problems which may delay the closing of your house it’s verification of the Down Payment. Here’s why:To meet the Requirements of Canada Mortgage and Housing Corporation, GENCOR (GE Capital) and the Major Lending Institutions, on or before the issuance of a lending commitment you will be asked to provide “Confirmation of Down Payment” from Non-borrowed funds in one or more of the following forms.
- Down Payment from the Sale of an Existing Property
You will be required to provide a copy of the unconditional “Purchase and Sale Agreement” on your existing property. This needs to be accompanied by a copy of the statement of “Mortgage Balance” on any mortgages presently held against the property. The difference between the sale price and the mortgages owing will substantiate the funds available for your down payment.
- Down Payment from a Gift
All or part of the minimum equity requirement may be provided by way of a financial gift, as long as all of the following conditions are met:
- (a) the donor is an Immediate relative of the borrower;
- (b) the Approved Lender has verified that the money is a genuine gift;
- (c) the Approved Lender has verified that the funds are in the borrower’s possession prior to the time of the application to CMHC or GENCOR for mortgage loan insurance.
- The Approved Lender will verify the authenticity of the gift by obtaining a written confirmation, signed by the donor and the borrower, which will include the following points:
- (a) the money is a genuine gift from the donor and does not ever have to be repaid;
- (b) no part of the financial gift is being provided by any third party having any interest (direct or indirect in the sale of the subject property)
The Approved Lender is not required to forward this confirmation to CMHC, but is expected to retain the Information in its paper or electronic loan record.
- Down Payment from Your Own Resources
You must supply verification satisfactory to C.M.H.C. or GENCOR and the lender of accumulated savings from non-borrowed funds. This may be in the form of a copy of your bank book confirming a
balance equivalent to your down payment including the amount of deposit confirming the savings of said amount for a period of not less than 3 months. Should a substantial deposit have been made recently, the source of such funds, i.e. Bonds, Stocks, G.I.C.’s or RRSP receipts will also be required.
- To avoid any delay in funding your transaction we suggest that you provide a form of the above noted confirmation at least 14 days prior to your closing date.
What is the Purchase Plus Plan?
The Purchase Plus Plan lets you add the cost of upgrades to your mortgage before you move in! Eligible upgrades include – a new electrical service, a new roof, central air, a new furnace, new siding, eaves, soffits, facia, doors, windows, a new kitchen, carpeting… or any other renovation that would increase the value of the home.
The way it works is like this… Let’s assume that you are a first time buyer and have 5% down payment. Before the mortgage financing is arranged, written quotes are obtained from licensed contractors for the repairs and or the improvements to be done to the home. When the application for mortgage financing is made, the request is made for 95% of the purchase price PLUS 95% of the cost to complete the improvements.
Note: The lender will “hold-back” on closing the “improvement” portion of the mortgage until the work has been completed, normally within 30 to 60 days of closing. Once the work has been completed, the lender will advance the balance of the funds and the contractor can be paid.
What does this mean? . . let me give you an example. . .
The purchase price is: $150,000 X 95% = $142,500
The quote for the improvements is: $ 11,000 X 95% = $ 10,450
Total Mortgage is: $161,000 X 95% = $152,950
Therefore, an application is made for a mortgage in the amount of $152,950 which is 95% of the purchase price plus 95% of the improvements.
On closing this is what happens… The Mortgage advanced to complete the purchase is $142,500 plus the original 5% from the purchasers down payment ($7,500) sufficient funds to complete the purchase of $150,000.
After closing the contractor completes the improvements (normally within 30 to 60 days after the closing) the lender advances the hold-back of $10,450, the purchaser pays the additional 5% of the cost of the improvements ($550) and the $11,000 owed to the contractor can be paid as per the original quote for the work.
And you will get $11,000 of improvements done to your home with a cash outlay of only $550 (the balance was financed with your mortgage)!
What costs will I have to pay on closing?
To avoid any surprises on closing, a good rule of thumb is to set aside an amount equal to 2-3% of the purchase price to cover expenses like these:
- The Offer
- The Deposit: Part of your down payment, a deposit is due upon acceptance of your offer.
Prior to Closing
- Home Inspection: Prepared by a qualified inspector to assess the property for defects and poor maintenance.
- Appraisal: Prepared by an appraiser chosen by the lender, by CMHC or GENCOR if the mortgage is insured by either company.
- Closing Costs Legal Fee/Disbursements: Your lawyer will quote his fee for closing the purchase and mortgage(s) plus an approximation for his disbursements, which includes registration fees, courier costs, photocopies, etc. Ask for an estimate.
- Land Transfer Tax: See the chart enclosed in this package to calculate the Land Transfer Tax which is due on closing and reflected in the “Statement of Adjustments” which your lawyer prepares prior to closing day.
- Interest Adjustment: Monthly mortgage payments are due on the first of the month. Unless the closing date is the first of the month, you must prepay the amount of the interest accruing up to the 1st day of the following month, the Interest Adjustment Date.
- CMHC or GE & PST: If your mortgage is insured by CMHC or GENCOR the insurance premium will usually be added to the mortgage so it is not a cash requirement on closing. However, the premium is subject to 8% PST, and the tax must be paid on closing.
- Prepaid Expenses: If the Vendor has prepaid any other expenses such as utilities, water and sewage taxes, oil in tank or taxes, he must be compensated. This will be reflected in the Statement of Adjustments.
- Property Tax Hold-back: If the lender is collecting and paying property taxes you may be required to pay to the lender an amount to ensure sufficient funds are available to pay the next installment of property taxes when due.
- Other Fees: Occasionally, a lender or the broker will charge a fee for providing the mortgage. If so, these costs should be disclosed to you at the time the Statement of Mortgage is issued to you.