Mortgage Broker

Consumer Guide 2015 mbabc.ca | 13 assumption that you have perfect credit, and don't take into account the source or stability of your income, or your other debt servicing, such as credit card debt or car loans. "There's always the nitty-gritty, there are always the fine details that are specific to each individual case," says Myint, and you'll need a mortgage broker to calculate exactly what you can afford the same way a prospective lender will. Not only can your mortgage broker help you evaluate your ability to qualify for a mortgage, but optimize it, too. He or she will advise you on what to do if you have weak credit, plan to co-sign on the loan, or will be receiving a gift from family to help with the down payment. There are closing costs to consider, too, including legal fees, property transfer tax, insurance fees and moving costs. Your mortgage broker will educate you about what fees you'll have to pay and when, and help you budget for them. Finally, adds Myint, it's imperative that you contact your mortgage broker early on, as he or she can get you preapproved for a loan for up to three months before you purchase – that way, you'll be guaranteed the best possible interest rate when you're ready to buy, even if rates go up while you're house hunting. Choosing the right mortgage product for you Once you've found a property you love (whether it's a house, condo, commercial property or even undeveloped land), your mortgage broker can help determine which mortgage product best meets your needs and your qualifications. "People often make the mistake of focusing on interest rate, but a broker will look at a number of different factors in choosing the right product for you," explains Invis mortgage broker Feisal Panjwani. "There are a number of 'no-frills' products with limited features out there. Their rates may look better on the surface, but they are inferior products because they're missing some of the most important options." Such key features include portability, which allows you to transfer your mortgage from one property to the next when it comes time to sell, and payment flexibility, wherein many lenders will allow you to skip a payment when you need to or make an extra payment when you can afford it. Likewise, almost all mortgages come with breakage fees or payout penalties, and different lenders have wildly varying methods of calculating this. "Some lenders will charge up to five or six times as much as others," says Panjwani. Your mortgage broker will also help you choose between a fixed-rate and a variable-rate loan. A fixed rate stays the same for the full term of the loan; a variable rate is generally starts off lower than a fixed rate, but will fluctuate along with the national prime lending rate. "It depends on the individual's situation and their tolerance or sensitivity to risk," explains Panjwani. "A variable rate suits people with good equity and a strong income compared to the amount of debt they're taking on, while a fixed rate suits first-time buyers with a smaller down payment." Another factor to consider is the length of term that suits you best, and Panjwani says a mortgage broker can ask the right questions to help you decide. For example, if you're planning to upgrade to a bigger place in the next couple years, a five-year term on your current mortgage could hit you with big payout penalties. Or if you're looking for a very-short-term solution, an open mortgage (as opposed to a traditional closed mortgage) comes with higher rates but lets you pay it off in full at any time without penalty. $ Putting together the down payment The first step in paying for your home is putting up the down payment. At a minimum, you'll need to put down five per cent of the property's total purchase price, but the more, the better. The greater the percentage you put down, the lower your mortgage insurance premium will be – making maximizing your down payment a cost-saving solution over the long term. One way to boost your down payment is by borrowing from your RRSPs. Through the federal government's Home Buyers' Plan, first-time buyers (or those who have not owned a principal residence within the past five years) can withdraw up to $25,000 from their RRSPs toward their down payment, up to a maximum of $50,000 per couple, provided they repay the money to their RRSPs within 15 years. Another option is to receive help from family. However, lenders will require a gift letter stating the money is non-repayable (proof that it's a true gift and not a loan), and gifted down payments can only come from an immediate family member. Your mortgage broker can advise you on how to maximize your down payment and which options are viable for you.

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