Residential Mortgages

FIRST TIME BUYERS / REPEAT BUYERS

Pre-Approval

Your pre-approval is a guarantee from the Lender of mortgage financing for the maximum amount that you qualify for. Depending on the Lender, this commitment will be good for 90 - 120 days from the time it is issued. The interest rate that is issued to you is also guaranteed for that time frame. If rates drop below what your pre-approval states, you'll get the lower rate and if they rise, you retain the guaranteed rate.

Your pre-approval will be subject to you providing certain documentation, which you will send on to us to pass onto the Lender. To help you prepare for this, here is a list of commonly requested documentation required to meet the conditions of your mortgage financing:

• An employment letter and pay stub for each applicant (Self-employed individuals may need Notice of Assessments for the last 3 years)
• A copy of the accepted Offer To Purchase and the land survey
• A copy of the Real Estate Listing if buying an existing home
• Confirmation of your down payment (i.e. bank statement or gift letter)
• If you are buying a home to be constructed, bring a picture of the property, a copy of the building plans and specifications, the land survey, plus your agreement with the builder.

When choosing the right Lender for you, once we have found you the best discounted rate, we also take other factors into consideration, such as pre-payment privileges, for example. These let you pay down your mortgage faster. Also be aware that the longer the amortization period (the time it takes to pay off a mortgage), the more interest you will end up paying. Amortization periods range from five to twenty-five years. Payment frequency also determines how much you will save over the years. For example, weekly or bi-weekly payments, rather than monthly, will save you a significant amount of money. Basically, you want to consider term length, fixed 'vs' variable rate, and whether or not you want a conventional or high ratio mortgage:

CONVENTIONAL MORTGAGE - A conventional mortgage is a loan for a maximum of 75% of the appraised value or purchase price of the property, whichever is less. Your down payment is a minimum of 25% of the purchase price.

HIGH RATIO MORTGAGE - A high ratio mortgage is a mortgage in excess of 75% of the appraised value or purchase price. You may contribute as little as 5% of the cost of the home as a down payment. This type of mortgage must, under the Bank Act, be insured through CMHC/GE Capital. This premium, which the borrower pays (see insurance premium chart below), can be added to your mortgage payments or paid in full on closing.

SHORT TERM MORTGAGE - A short term mortgage would be appropriate if you believe interest rates will drop come renewal time, but in many of these circumstances, they are inferior to a variable rate mortgage. With a variable/fluctuating rate, the borrower has the option to lock into a fixed rate anytime at the lender's best discounted rate.

LONG TERM MORTGAGE - A long term mortgage would be more suitable for you if, on the other hand, you feel that current rates are significantly low. You want to be sure that you will feel totally comfortable with your mortgage payments.

CLOSED /FIXED RATE MORTGAGE - A closed /fixed rate mortgage usually offers a lower interest rate than an open one of the same term. It also offers pre-payment privileges (i.e. make annual principal pre-payments from 10-25% or increase your monthly payments from 15%- double the original monthly payment. A fixed rate mortgage allows you to budget precisely for whatever term you select anywhere from six months to 10 years.

OPEN / VARIABLE RATE MORTGAGE - An open mortgage lets you pay off as much as you want, any time, without penalty. A variable rate is based on the prime rate and fluctuates with the market.

CMHC / GE CAPITAL - If you have less than 25% of the purchase price to put down, you will be required to purchase mortgage insurance through your lender. Mortgage insurance protects your lender against payment default.

By providing mortgage loan insurance to Lenders, CMHC/GE Capital enables you to finance up to 95% of the purchase price of a home. This means you can buy a property with as little as 5% down. So if the cost is $225,000, you would need a down payment of just $11,250. However, you must have an additional 1.5% of the purchase price to cover closing costs (i.e. land transfer, legal costs, etc).

Qualifying with CHMC/GE Capital

Once the following conditions are satisfied, you are eligible for CMHC/GE Capital Mortgage Loan Insurance:

• The home which is to be occupied as your principal residence is located in Canada.
• You have a down payment of at least 5% of the purchase price of the property.
• Your home-related expenses do not exceed 32% of your gross household income.
• Your total monthly debt load does not exceed 40% of your gross monthly household income.
• You are able to pay closing costs equivalent to at least 1.5% of the purchase price.

As long as your credit is good, you have a sufficient income, and you occupy the property, you can buy a home with a down payment as follows:

Minimum equity of 5% is required. Gifted down payments from an immediate relative are acceptable. Below are CMHC's premiums: