A mortgage broker can find you a lower mortgage interest rate than banks and other financial institutions. Because mortgage brokers network with a number of mortgage lenders, they can shop around and negotiate on your behalf. Since mortgage brokers are paid by lenders, they can almost always offer their services for free. If you deal directly with a financial institution and your mortgage is not approved, you must begin the application process all over again. When working with a mortgage broker, your broker can simply forward your application to another lender.
Because lenders pay mortgage brokers, there is no charge for a mortgage broker’s services. The exception is if you have very poor credit and your application requires submission to private or non-traditional lenders. In that case you may be charged a brokerage fee.
Lenders will use the lesser of the following calculations to determine how much you can afford per month for mortgage payment, property taxes, heating costs and strata fees (if applicable):
1. 32% of your taxable income
2. 40% of your taxable income less your monthly debt payments (car loans, credit cards, credit lines etc)
This amount is not necessarily your ideal monthly payment amount. You may prefer to pay less per month to leave money for savings or other purchases and investments.
The minimum down payment is generally 5% of your purchase price.& There are some lenders that offer 0% down payment with higher interest rates. Talk to Hossein Pejman to find out more.
A pre-approved mortgage tells you how much you can afford when buying a home and what your maximum monthly payments will be. The benefit of using a pre-approved mortgage is you secure an interest rate for 90-120 days and, should interest rates rise, you will be able to keep your pre-approved rate. Should rates fall, you can take a lower rate.
A pre-approval also shows sellers you are able obtain the necessary financing to go through with a sale.
Some lenders offer financing to individuals who have declared bankruptcy. Contact Hossein Pejman for more information.
If your down payment is less than 25% of your purchase price, your mortgage is considered “high ratio.” High ratio mortgages require mortgage loan insurance to protect the lender against default.
If your down payment is above 25% of the purchase price, your mortgage is conventional.& Conventional mortgages do not require mortgage loan insurance and typically have lower mortgage interest rates.
Mortgage loan insurance protects the lender from default. Premiums range from 0.5% to 3.5% and are added to the mortgage principal. It is only required on high ratio mortgages (down payment less than 25% of purchase price) and is offered by the Canada Mortgage and Housing Corporation (CMHC) or GE Capital.
A fixed interest rate will not change during the term of your mortgage.
A variable interest rate “floats” with the market.& Your monthly payment remains the same each month, but the amount of your payment applied to principal and the amount applied to interest changes.& (If interest rates fall, more of your payment is applied to your principal).& Most variable rate mortgages give you the option of switching over to fixed rate if you believe interest rates will begin to rise.
A building inspector will examine a property to check for existing problems in the structure (roof, ceilings, walls, floors etc) and systems (plumbing, heating, electrical etc).& Although not required, this can help you decide whether or not to go ahead with a purchase.
How can I pay off my mortgage sooner?
1. Contact Hossein Pejman to find the best mortgage interest rate in BC.
2. Choose the shortest amortization period (term length) possible.
3. Choose weekly or biweekly payments instead of monthly.