Frequently Asked Questions About Mortgage Services
Whether you’re looking to expand your business, raise money for land acquisition, a financial windfall to buy equipment or materials, mortgages are an easy way to raise the necessary capital. However, when it comes to the mortgage and finance sector, you may have many questions but often find answers difficult to come by. Coast2Coast Mortgages wants to arm you with the most accurate information to help you make informed decisions. To do this, I’ve answered some of the most frequently asked questions about mortgage services.
1. What is the difference between variable and fixed-rate mortgages?
In a variable-rate mortgage, your interest rate changes when the lender’s prime rate changes, which happens when the Bank of Canada (BoC) decides to increase or decrease its prime rate. If you have a fixed-rate mortgage, your interest rate and monthly payments stay unchanged through the entire mortgage term. Your mortgage agreement explains how and when your interest rate will change. This said, your regular payments may stay the same if you have a variable-rate mortgage (VRM). If you have an adjustable-rate mortgage (ARM), your payments will fluctuate.
2. What is the difference between your mortgage term and mortgage amortization?
The mortgage term is how long you commit to your mortgage type, rate, terms, and conditions with a lender. Mortgage terms can range from six months to ten years. When a term ends, you may have the option to renew it for another term with your lender, or you can switch to another lender. On the other hand, mortgage amortization is the period of time it takes to pay off a mortgage, including interest. It varies between five and thirty years.
3. What is the difference between an open and a closed mortgage?
Open mortgages usually have higher interest rates, and they can be pre-paid in part or in full, without a prepayment charge. They are also flexible, so you can easily switch to a closed mortgage if rates start to increase. Closed mortgages usually have better interest rates than open mortgages. However, if you pre-pay a closed mortgage before the end of the mortgage term, you’ll have to pay a prepayment charge.
4. What is a home equity line of credit or HELOC?
A HELOC is a secured line of credit that lets you access up to 65% of your home’s appraised value upon approval. You can use the funds you need and pay them back with no penalties.
Your Mortgage and HELOC combined cannot exceed 80% of your home’s appraised value.
Both a HELOC and a mortgage loan are secured by a registered charge on the title to your property.
5. What is the minimum down payment requirement?
This can vary depending on where the property is located in Canada. Minimum down payment requirements generally range from 5% to 20% of your home or property’s appraised value.
6. Can I use gifted money for a down payment?
Most lenders will accept gifted down payment funds from your family members, such as a parent, grandparent, or siblings. A gift letter signed by the family member is usually required, and the lender or insurance provider may require the gift money to be in the purchaser’s possession before the application is submitted to them for approval.
7. Does child support payments affect mortgage qualification?
When you pay child support and alimony to another person, this amount is typically deducted from your total income and will affect how much you can be approved for. If you receive child support or alimony, the amount is generally added to your total income, and you can qualify for a larger mortgage amount.
If you have any more questions about mortgage and lending options, get in touch with the expert at Coast2Coast Mortgages. As a professional mortgage consultant with years of experience, I am dedicated and committed to helping you own your dream home. I have access to over two hundred and thirty lenders, including major banks, credit unions, life insurance companies, trusts, and other national and regional lenders. You can avail my top-notch mortgage services across the Greater Toronto Area, York Region, Peel Region, Halton Region, Cambridge, Kitchener, Waterloo, Barrie, Innisfil, and Durham Region.