Frequently Asked Questions About Mortgage Financing
Over the years, the mortgage requirements and lending rules have become stringent and more complicated for borrowers to comprehend. Therefore, while trying to secure suitable financing, clients often have a ton of questions about the process but find answers difficult to come by.
To simplify things, Kirk Eaton Mortgage wants to arm you with the most accurate information available, so you can make more informed decisions while choosing a mortgage solution. For this reason, we’ve answered some of the most frequently asked questions about mortgage financing.
1. What is your best mortgage rate?
Mortgage rates and mortgage financing in general, are not as straightforward as they used to be. The B-20 guidelines changed the pricing of mortgage financing, and therefore, many variables affect mortgage interest rates. Different rates will apply depending on the type of transaction (purchase, refinance, or transfer), down payment or equity, amortization, closing date and mortgage flexibility or pre-payment penalties, just to name a few. The best thing a borrower can do is to let their mortgage broker know all the small details related to what they are looking for. The worst thing they can do on the other hand is Google “best mortgage rate” and assume that this is the rate they are going to get.
2. Can I purchase a second house with 5% down payment?
Yes, of course, you can. The number of homes you have owned does not affect whether you can apply less than 20% down payment. The 5% down payment or high-ratio mortgage is not just for first-time buyers. Remember, the minimum down payment on owner-occupied properties is 5% for the first $500,000 of the purchase price and then 10% of the difference after $500,000. For example, the minimum down payment on a $600,000 purchase is $35,000 ($25,000 + $10,000).
3. Can I get a mortgage if I am self-employed?
Yes, you can. There are many options for this type of borrower. Without giving away our secrets, we will say Kirk Eaton Mortgage specializes in this type of mortgage financing. Just because a borrower conducts business for self and shows a lower net income on their tax returns, that doesn’t mean they cannot obtain financing.
4. Can I get a mortgage if I have bad or bruised credit?
Yes, we have a wide variety of lenders who will lend to borrowers with subprime credit history. If a borrower doesn’t qualify with an “A” lender or bank due to bruised credit, then a mortgage broker will typically go to an alternative or “B” lender. These types of lenders will charge a rate premium and typically a lender fee. The term is also usually, one to three years as the goal is to rebuild a borrower’s credit and then switch them back to “A” lending. In some cases, borrowers think they have bad credit, but their credit is actually fine or average, which means they are eligible for “A” lending or bank rates.
5. Should I choose a variable or fixed rate?
This is an excellent question. Many factors contribute to this decision, and they typically include current market conditions, how comfortable the borrower is with risk and possible fluctuating payments and ultimately how important flexibility is to the borrower. However, a mortgage broker should be asking the right questions to know the borrowers’ financial situation before recommending any mortgage.
6. Do you do mortgage pre-approvals?
Yes, we do many pre-approvals. Pre-approvals are a critical part of the home buying process. How would anyone know what they can afford or qualify for without a mortgage pre-approval? Kirk Eaton Mortgage can typically issue a fully underwritten mortgage pre-approval on the same day or within twenty-four hours of receiving the borrowers’ application and information.
7. I heard if you pay bi-weekly instead of monthly, you pay down your mortgage faster. Is this true?
Yes, but even more so if the payment is an accelerated payment. Whenever you speed up the payment frequency, you will pay the mortgage faster over time since there is less compounded interest, but you make a real dent if you choose an accelerated payment frequency. With an accelerated payment frequency, you actually pay a little more for every payment, and that extra amount gets applied towards the principal of your mortgage. An accelerated bi-weekly payment will consist of dividing the monthly payment in half and paying that amount twenty-six times per year. Conversely, a normal bi-weekly payment is the monthly payment amount times twelve and then divided by twenty-six.
If you have any more questions about mortgage financing, get in touch with the experts at Kirk Eaton Mortgage. As the best mortgage broker in Burlington, Ontario, we ensure the entire mortgage application process is simple, understandable and stress-free. As a team, we are passionate about finding mortgage solutions for our clients and are experienced in personalized, strategic approaches which allow us to create optimal mortgage solutions for different situations.