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Questions to Ask Your Mortgage Broker
There are many questions to ask your mortgage lender. Vancouver home buyers focus on the mortgage rate, but what if you sell your property prior to the expiration of the term, can you port your mortgage to the next Vancouver property you purchase? The interest rate is definitely an important part of mortgage shopping, but it’s not the only one.
1) What is a Portable Mortgage?
To port your mortgage is to transfer the debt you owe on one property, to another property.
When Would you Want to Port Your Vancouver Mortgage?
If you wish to sell your current property and purchase a new one and you have a 5-year fixed mortgage loan with 3 years left on the term. What happens to your 5-year fixed mortgage contract?
The portability feature would allow you to transfer that mortgage and its remaining balance to your new property.
If your mortgage is not portable, you will likely have to pay the penalty for breaking your mortgage contract. Use a mortgage penalty calculator to estimate the amount you owe. If you are in an era of decreasing interest rates, it may be costly.
The best time to port a mortgage is when your current mortgage rate is lower than what is available on the market because you will save money on the lower interest paid as well as having a lower monthly payment.
Are All Mortgages Portable? No! Banks generally dont allow portable mortgages when rates are at rock bottom, as they wish to charge you higher rate when you move.
2) Can you really afford a mortgage? 
Calculate your cost of renting vs. owning by using an online calculator that compares your monthly expenditures. As a renter, you may be avoiding certain costs such as: utilities, taxes, home insurance, etc. but you could be building equity. Calculate your monthly mortgage payment and compare it to what you pay in rent, then decide which monthly expenses to chop in order to save the additiional amount required
3) How Much Can You Afford for a Downpayment?
In Vancouver, first time home buyers can qualify with less than 20% for a down payment. You can withdraw from your RRSP penalty free and apply for the $5000 First Time Home Buyer tax credit.  Consider if this will take all of your savings. A downpayment of less than 20% will incur mortgage default insurance know as CMHC fees.
4) Getting Pre-Approved?
Check your credit score as it will impact your mortgage application. Then, consider talking to a mortgage broker or specialist about pre-approval and ask for long it's valid for 
5) What Are Your Extra Costs?
When one thinks of buying a condo, one thinks of the downpayment and monthly payments. But you will need an additiional 3-6% to cover closing costs, such as house inspection, lawyer's fees, property transfer tax (if applicable), moving costs expenses, home inspections, etc.
Ottawa tightened the mortgage rules in June 2012 and self employed Vancouver home buyers will have a more difficult time getting a mortgage. Here are some suggestions to assist you.
Alternative lenders: although the rates maybe a bit higher than prime; financing can be arranged with at least 15% down.
Genworth Alt A Program: customers can continue to purchase with a minimal of 10% with stated income (self-employed) however; the Mortgage Insurance premiums can be high.
2nd Mortgages: available up to 85% of property value and proof of income is not required.
Construction financing: available in most cases up to 75% of property value, however, clients should ensure that company Financial Statements are available.
Equity lending: available at prime rates, but limited to 65% of property value.
Rental programs: available at prime rates and up to 75% financing available and can be offered with stated income clients.
6) What is a Downpayment?
If you are a Vancouver home buyer, you will have lots of questions regarding mortgages. Below are some mortgage tips.
When you buy Vancouver property the bank will ask you for a downpayment of a specific amount and will also ask for verification of the downpayment. The downpayment is paid to your real estate lawyer when the transactiion closes.
How much do i need for a downpayment? 5% down up to a maximum purchase price of $250,000. After that 10% downpayment.
7) What is a term?  The term is the period for which your current payment obligations are valid. You may choose a one to ten year term  This would mean that your interest rate, your payments, and your pre-payment options would be the same for the length of the term.  At the end of the term, you would re-negotiate the term, and the amortization would now be 20 years if you selected a five year term.  
How long should the term be? that depends on you. if rates are lower, a longer term is prudent. if rates are higher and may fall, then a shorter term may be better. if you take a fiver year term, will you be staying in your home for five years? if not, the bank will charge a penalty to pay off the mortgage, or it may be portable.
8) What is the amortization? the length of time that it will take to pay off the mortgage
9) What is a fixed rate mortgage? The interest rate on a fixed-rate mortgage is set for a pre-determined term,  offering the security of knowing what you will be paying for the term selected
10) What is a varible rate mortgage? A mortgage in which payments are fixed for a period of one to two years although interest rates may fluctuate from month to month depending on market conditions. If interest rates go down, more of the payment goes towards reducing the principal; if rates go up, a larger portion of the monthly payment goes towards covering the interest. Open variable rate mortgages allow prepayment of any amount (with certain minimums) on any payment date.
11) What is a conventional mortgage?A conventional mortgage is where the down payment is equal to 25% or more of the purchase price, a loan to value of or less than 75%, and does not normally require mortgage loan insurance.
What if the value of my home drops so i have an upside down mortgage? You are still obligated to the terms of the mortgage.
12) What is mortgage loan insurance? Mortgage loan insurance is insurance provided by Canada Mortgage and Housing Corporation (CMHC) and GE Capital Mortgage Insurance Company. This insurance is required by law to insure lenders against default on mortgages with a loan to value ratio greater than 75%. The insurance premiums, ranging from .50% to 3.75%, are paid by the borrower and can be added directly onto the mortgage amount. This is different to mortgage life insurance.
13) How can you pay off your mortgage sooner? Select a non-monthly or accelerated payment schedule . Increase your payment frequency schedule 
Making principal prepayments or double-Up Payments or selecting a shorter amortization at renewal.
14) What is an Open Mortgage? you can pre-pay some, or all of, your outstanding mortgage at any time, without penalty.  Open mortgages have a six-month, and a one-year term option with higher interest rates than closed mortgages of the same term length. 
15) What is a Closed Mortgage? Closed mortgages are offered in terms ranging from six months to ten years. They offer more stringent pre-payment options subject to various pre-set regulations. These pre-payment options are important to reducing the amortization of your mortgage and should be discussed with your lender.
16) Can I use my RRSP for Down Payment? The federal government's Home Buyers' Plan, allows you to use up to $20,000 in RSP savings ($40,000 for a couple) to help finance a down payment on your first home. You then have 15 years to repay your RRSP.
17) When you apply for a mortgage the interest rate is front and centre. However, there are many other items on the list to consider and here are the questions to ask your lender.
flexible payment options
prepayment options and penalities
lender fees, if applicable
portability and assumability
miss payment flexibility
length of amortization
open or closed
fixed term or variable
Interest Savings If you pay off your mortgage faster by increasing the amount or frequency of your regular mortgage payments,how much interest will it save you?
Talk to a Mortgage Broker It's always a good idea to keep your bank honest by talking to a mortgage broker as well. I recommend Alma Pasic
18) Purchase Plus Improvement Program
The Canadian government's new mortgage rules have been in place since June 2012. The new rules have made it much harder to qualify for a mortgage and buyers are looking at options to obtain their dream home within their budget. A Purchase Plus Improvement program may help realize that dream. Have you considered buying a fixer upper to renovate? Buyers can now include the cost of renovations into your mortgage resulting in one preferred mortgage with as little as 5% down payment.  This option eliminates the need to obtain secondary financing after the purchase to pay for the improvements, thereby eliminating an additiional cost. Visit CMHC for more info.
19) Five Money Saving Tips for Mortgages
When you decided to buy a Vancouver property, perhaps you are a first time buyer or you are already in the market and wish to trade up, and you have been pre-approved for one of the current low mortgage rates, but there's more to know about a mortgage than the rate. Here are some tips:
Am I allowed to break the mortgage if I need to consolidate debt? There are a few options for those who are considering a debt consolidation.  You can increase your current mortgage, or increase/blend your mortgage, refinance your mortgage, or add a second mortgage for your debt consolidation.  A mortgage expert can help you calculate which options makes the most financial sense. 
What will it cost me? Depending on the value of your home there may be extra insurance fees, legal and appraisal fees.  If you have a collateral mortgage registered on your home already then your fees will be minimal.
How much extra can I pay down on my mortgage every month? every year? Depending on your bank, you can increase your monthly payments from 10-20%.  Some banks allow you to double up your payment each month and in addition pay down your principal each year from 10-20%.  Check with your lender what your pre-payment options are.
What if I want to buy a second home or rental? In most cases you will need 35% down, if the applicant is strong some lenders will consider 20% down.
How can I make my mortgage interest tax deductible Check with your financial advisor.  In most cases if you buy an investment (not including your RRSP) and use your home equity to finance the purchase of those investments you may be eligible for a tax deduction.
Have a mortgage question? Contact Alma Pasic 604-729-4611
20) What is the Gross Debt Service Ratio?
When applying for a mortgage to purchase a Vancouver property, the Gross Debt Service Ratio will be calculated by your lender. This determines your capacity to repay a mortgage and qualify for a loan. The GDSR estimates the maximum home related expenses you can afford to pay each month, as a percentage of your gross monthly income. The GDSR takes into account mortgage payment, property taxes, heating costs and half of the condo maintenance fee. Currently you are allowed up to 32% of your gross monthly household income.
21) How To Pay Off Your Mortgage Faster
When you take out a mortgage the compounding interest is the killer! Here are ways to minimize the interest paid over a long period-
Choose bi-weekly accelerated mortgage payments
Take a 25 year amortization or less.  Or, take a 30 year but make your payment the equivalent of the 25 year amortization, then you can revert to the lower payment if need be
If you get a raise at work, add that money towards your mortgage payment, the additional payment will go towards the principal
Use the pre-payment payment option. When you get your tax return or bonus, pay down your mortgage. A $5,000 lump-sum payment on a $300,000 mortgage with a 25 year amortization will save you $8,249.75 in interest cost. That is over a 40% return on investment
 Perhaps settle for a smaller property in order to pay off the mortgage faster
22) Vancouver Mortgage Credit Score
Vancouver real estate is the biggest investment most of us will make. Your beacon score aka credit score ranges from 300 (low) to 900 (high). Your credit score is monitored by Equifax who says 700 is considered nothing special but by mortgage lending standards, this will get you pretty much anything you want. What is the minimum requirement for a mortgage with great rates? 620 – 650 (through a mortgage broker) depending on the mortgage product you require.
23) How to Establish Credit
Without an established history of payments and at least two trade lines (line of credit, student loan, credit card, car payment, etc), a high credit score can mean nothing. It takes time to establish a good credit score so start today if you haven’t already.
Your Equifax credit report is a compilation of information about you and your credit history that has been reported to Equifax by others, mostly by those who granted you credit. Your credit score, on the other hand, is a number calculated using the information in your credit report.
24) What is a Credit Score?
A credit score is a statistical formula that translates personal information from your credit report and other sources into a three-digit score. For example, when you fill out a loan application, pieces of information from the application along with information from your credit report will be used to compute a score that indicates to the lender the statistical probability that you will become delinquent on the loan.
There is no quick fix for removing past aspects of your credit history that may be negatively affecting your credit score.
25) Tips to keeping a good credit score
Never go over your limit and try to keep your balance below 75% of the limit
Always pay your bills on time
Avoid applying for credit unless you have a genuine need for a new account. Minimize your inquiries
What are the most common factors that can negatively affect a credit score?
Public record or collection field
Time since delinquency is too recent or unknown
Level of delinquency on accounts is too high
Number of accounts with delinquency is too high
Amount owed too high on accounts
Ratio of balances to credit limits on revolving accounts is too high
Length of time accounts has been established is too short
Too many accounts with balances
Will inaccurate information in my credit report affect my credit score? It certainly can depending on what is reported. If you want to correct inaccurate information on your Equifax report, download the Consumer Credit Report Update Form which is used to correct inaccuracies. You can fax the completed form to (514) 355-8502. courtesy Jesse Johnson
26) Fixed Rate Mortgages
Now you've bought your Vancouver condo and its time to make a decision about mortgages, short or long, fixed or varible.  Here are some common fixed-rate questions you may be asking yourself.
What does a Fixed Rate mean? 
The interest rate on a fixed rate mortgage stays the same throughout the life of the loan. Typically, the standard for fixed-rate loan is for 20-25 year fixed rate loan. You can also find fixed-rate loans with shorter pay-off periods. When loan periods are shorter, you will have higher monthly payments, but slightly lower interest.
When are Fixed Rate Loans better? 
The advantage of the fixed rate mortgage is that the payment is the same each month. This is important especially when interest rates are unpredictable. When interest rates rise, people with adjustable rate mortgages are faced with increasing monthly mortgage payments.
What is the downside of Fixed Rate Loans?
The disadvantage is that the interest is generally a little higher than an adjustable rate. With a fixed-rate loan, you’ll always pay the same amount of interest. That is great when interest rates are climbing, but if they drop below your interest rate, you will continue paying the higher amount of interest. But, you can always refinance a fixed-rate loan in order to get down to the best fixed rate mortgage. Find out if this may not always be an option.
Over the life of your fixed-rate loan, you will pay a substantial amount of interest.  There are ways to manage your mortgage so that it is an investment that works for you, and you should consult with a mortgage broker and ask them to crunch the numbers.
Should you have a Fixed Rate Mortgage?
Generally, you'll find that fixed rate mortgages are the right choice if:
• You think interest rates are low
• You can afford the payment for the house you want
• You need to budget for and predict monthly payments
• You will keep your home for a relatively long period of time
Choose a fixed-rate mortgages when interest rates are low and are expected to rise.
27) When you apply for a mortgage the interest rate is front and centre. However, there are many other items on the list to consider and here are the questions to ask your lender.
flexible payment options
prepayment options and penalities
lender fees, if applicable
portability and assumability
miss payment flexibility
length of amortization
open or closed
fixed term or variable
Interest Savings If you pay off your mortgage faster by increasing the amount or frequency of your regular mortgage payments,how much interest will it save you?  It's always a good idea to keep your bank honest by talking to a mortgage broker as well. 
28) How to Calcutlate Your Mortgage Penalty
The Federal Government has passed new rules that require mortgage lenders to permit their clients to view their penalty to cancel their mortgage early, rather than having to go through a lengthy process to obtain this information
The follow are some of lenders who have started this new federal requirement:
• TD
• Laurentian
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Contact Info:
Amex Broadway West Realty
201-1055 W. Broadway
Vancouver, BC
V6H 1E2 Canada
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