Frequently Asked Questions
Over the past 30 years, I've heard a lot of questions! If you have a question about the mortgage process, please feel free to contact me - that's what I'm here for! I've included some of the most common questions and answers below. Do you have a question you think I should add to this list? Let me know!
What is a Financial Adviser & why should I use one?
Financial Advisers offer advice to people wanting to buy a house or property. We find mortgage options and finance that best suit you and your family. Every family is different, so having an expert help you with this process is a very good idea.
What is the difference between a fixed and variable rate?
Fixed and Variable rates relate to the interest rate that you are charged on your mortgage.
A fixed rate is set for a pre-determined length of time, which is the length of term you sign your mortgage for. Fixed rate terms range from 6 months to 5 years.
The benefit: by having a fixed rate mortgage, you never have to worry about the interest rate changing as your rate stays the same for the entire length of the term. If the rates go up, you still receive the lower interest rate you signed up with.
The drawback: if by chance interest rates drop significantly during the term of your mortgage, your rate stays the same.
A variable rate mortgage is just that: variable. With a variable rate mortgage, your monthly payment stays the same, but as the interest rates rise and lower, the amount of monthly payment going towards the interest and principle changes.
The benefit: if the interest rate lowers, a larger portion of your payment goes toward paying off the principle amount of the loan, and a smaller amount goes towards interest.
The drawback: if the rates go up, a smaller portion goes towards paying off your mortgage and a larger portion goes towards the interest payments.
How do I decide between a fixed and variable rate?
It depends on what your financial situation and lifestyle is. Many people prefer the security that comes with a fixed rate mortgage as they are always aware of how much of their payment is going to both principle and interest. In addition to this, the interest rate is guaranteed to stay the same. Those who choose the variable rate do so because posted rates for variable mortgages are lower than fixed rate mortgages. If rates are forecasted to stay low, you can realise greater cost savings with a variable rate mortgage. However, if the rates go up, you could end up paying a much higher interest rate than that of a fixed rate mortgage.
What is a deposit?
A deposit is money that you invest into the purchase of a home. When applying for a mortgage, banks will not give you 100% of the home purchase price. Many require you to provide a deposit of at least 20% depending on many different circumstances, however there are options available if you have less than 20%.
How much can I afford to pay?
The amount you can afford to pay for a home differs on a case to case basis. It takes many things into account including your employment and wages, any debts you currently have, your deposit amount, your credit score, the assets you own, and the current interest rate.
What is Pre-Approval?
A pre-approval means that you have begun the mortgage application process, and have initially been approved by a lender for financing based on your income, your debts, your employment history, and your property value (if applicable).
Why should I get pre-approved?
Pre-approvals are perfect for people who want to either purchase a new home, or move to a new home, and are not sure what they can afford to pay for a house. By getting pre-approved for a mortgage, you will have a better understanding on how much you can afford to borrow, what size of deposit you will require, and what price range you can house shop for.
Pre-approvals give you the peace of mind that when you are searching for that perfect house, you will already know if you can afford it and that you will have access to financing once you do find it.
What steps can I take to increase the chances I get approved for a mortgage?
The first and most important step you will take during the mortgage process is to be honest with your financial adviser! I can’t help you if you don’t provide me with accurate information. It does not matter to me where you work or how much you make, what your bills are or how many credit cards you have. I just want to ensure that if I get you a mortgage that you will be able to afford it and still live happily.
The next step to take to increase the chances you get approved for a mortgage is to get your debt under control! Pay down those credit cards, and don’t miss payments or make late payments! Banks like to see that you have the ability to pay your bills, and pay them on time.
Have stable employment. If you can show you have stable employment, such as being with the same employer for at least two years, banks will be much more willing to lend you money.
Go to a financial adviser. When you talk to a financial adviser, we pull your credit rating once. Once we have your credit rating we can shop around and find the best mortgage rates for you. If you decide to shop around yourself and go to multiple banks, each bank you go to will pull a credit report. This lowers your credit score and is a bad thing!
Know how much you can afford for a deposit. If you know how much you can pay for a deposit you will roughly know how much you can afford to spend on a house. If you talk to a financial adviser, we can give you a much better idea. You can also talk to family members about the possibility of receiving a gift from them as a deposit.
The steps above do not guarantee that you will obtain a mortgage, but they are likely to increase your chances of having a smooth application process
How long does the mortgage process take?
The length of time that it takes from initial application process until a deal closes and you receive a mortgage varies from deal to deal. The initial meeting with your financial adviser is a fairly quick process, usually taking a maximum of an hour. If you fill out the forms ahead of time this process is even quicker.
After our first meeting, I'll send the deal to a number of lenders for approval. Depending on the lender, an approval or decline can take anywhere from 24 hours to 4 business days.
Once an approval is received, you'll need to gather the required documents to meet all of the conditions required by the lender. I highly recommend trying to locate as many of these documents prior to our meeting. By having these on file, I can speed up the process and take a lot of the work load off of you.
During the document gathering phase, the timeline begins to vary greatly. For well-organised clients, all forms can be delivered within a day, or even a few hours. For some other clients, it takes a few weeks to get all of the documents together.
Once all of the documents are received and approved by the lender, all subjects are said to have been removed. This basically means that you have met all conditions set forth by the lender. After this is done, it usually takes at least ten business days to sign the final paper work with the lender, as well as any required legal documentation with a lawyer. Once this is completed, the funds will be forwarded to the respective party on the date of closing.
All-in-all, the mortgage process can take anywhere from a couple of weeks to a few months depending on the situation.
What is credit?
Credit is a another way of saying reliability. It is the reliability that you will pay off your debts and pay them on time. Therefore your credit score is a number which is applied to you to reflect how likely you are to pay off your loan in a timely and reliable manner.