Frequently asked questions
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Take a browse below and find some common asked questions with answers to better inform your homeownership journey.
1. Basic Questions
1What does a Mortgage Broker do?
A good mortgage broker will first and foremost listen to the needs of their clients to better understand their situation. This involves finding out about their immediate and longer term objectives for housing, their general knowledge of the mortgage process and their current status in that process (e.g. wanting to get pre-approved, already purchased, their mortgage is coming up for renewal, etc.). The next step is to review the clients’ financial information including income, employment, debts, down payment, credit report, and other factors. With this information, a broker can determine which financing options are available to the clients, based on products and lenders that match their criteria. Based on all of this research a broker will provide clients with a financing strategy that suits their needs and also discuss options such as which lender to consider for their financing and why. The key ingredient in this process is helping to educate the client about their choices, as needed, and determining a strategy that addresses a clients specific circumstances.
2How is a Mortgage Broker different than going to the bank?
If you go to a retailer that carries only one brand, you will be limited to only those products in that one store. The same applies when you go to your bank. They can only offer you their products, but nobody else’s. Mortgage brokers offer financing solutions from banks as well as many other lenders, giving the consumer the option to compare their choices across multiple brands and therefore multiple solutions. Brokers work directly with Banks, Credit Unions, Monoline Lenders, Commercial lenders and Private lenders. Simply put, Brokers are your one-stop-shop for upwards of 30 different lenders, which means you have access to all of those products as well. Because of this, brokers often have solutions for clients that they might not get at a bank.
3Are the financial services a Mortgage Broker uses less than what a bank can offer?
No, in fact, the opposite is true since clients will have the benefit of learning the details of multiple lenders, multiple mortgage products and multiple financing strategies whereas a bank will offer only their brand of products and services.
4Does it cost to use a Mortgage Broker?
For the vast majority of situations, the answer is “No”, because Brokers usually get compensated directly by the lender in the form of a finders fee. A Broker might charge a fee if they are working with a private lender or a specific type of mortgage product that is not offered by most other lenders. A Broker must disclose to the client in writing if they are charging a fee in accordance with Provincial regulations, and the clients must acknowledge that by signing the form as well.
2. Mortgage Details
1I hear about "features " in a mortgage - what does that mean?
By definition, all mortgages are “closed”, meaning you cannot make changes to them without incurring a penalty or cost of some kind. Mortgage features such as prepayment privileges or lump sum payment privileges allow for changes in payment terms to be made without penalty or fee. Other features in a mortgage can include a line of credit (often referred to as a HELOC), cash-back mortgages, interest-only mortgages, and so on. There are also programs offered by insurers like CMHC, Genworth or Canada Guaranty that offer consumers access to unique features such as the Purchase Plus Improvements, Stated Income deals, flexible down payment features, home warranty features, and more. Not all lenders offer the same privileges or programs, so it’s important to speak with a broker that has access to, and knowledge of, these many options.
2Are mortgage features important?
Mortgage features are incredibly important, and should always be understood and reviewed with your broker to ensure you are getting the most out of them. Sometimes a specific feature can mean the difference between getting an approval or not, or paying down your mortgage faster than you otherwise might be able to, saving potentially thousands of dollars in interest over time.
3What is a fixed vs variable mortgage?
A fixed rate mortgage is one where the interest rate does not change at all during the term of your mortgage and is determined almost exclusively by the bond market. A variable rate mortgage has an interest rate that can go up or down during the term of your mortgage and is based almost exclusively on the Bank of Canada overnight lending rate (the rate at which the Bank of Canada lends money to other financial institutions).
4How often do i have to make my mortgage payments?
The minimum payment requirement is monthly, although most mortgages allow you to choose a payment frequency of monthly, semi-monthly, bi-weekly, accelerated bi-weekly, weekly or accelerated weekly. The more frequent your payments are, the quicker you pay off your mortgage over time.
5Should i be worried about paying off my mortgage?
That depends in part on your financial situation, your personal circumstances and also your financial strategy. Your financial situation may mean that you are living from one paycheck to another, with not much left over once all your bills and necessities are paid for. If you intend to stay in your house after you retire, it is definitely important that your mortgage is paid off before then since you will otherwise not have enough income to pay your mortgage. Your personal circumstances may determine the answer to that question as well, for example, if this is your first home and you are just starting your career or if you are buying an investment property and can write off some of the mortgage interest and associated costs. Finally, some people don’t want to pay off their mortgage in a low interest rate environment because they can make a higher return on their money by investing it in other things like commodities, bonds, etc. In all cases, it is important to manage your risks versus the rewards and speak to your broker about your options.