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Mortgage FAQ's

October 31, 2013

Frequently Asked Mortgage Questions

 

 Q: Should I get pre-approved for a mortgage before I look for a home?

 A:  It is an excellent idea to get pre-approved for a mortgage before you start seriously looking for a home. It will help you determine how much home you can afford, plus it will hold the interest rate for up to 120 days, protecting you from rate increases while you shop.  It will also help you act faster when you do find that special home.

 

Q:  Is applying online secure?

 A: Yes. Your application goes through a secure server and your information is not exposed on the internet or revealed in email.

 

Q: When can I lock in my rate?

 A: On average, when purchasing or refinancing, you can get pre approved with a lender with a rate hold up to 120 days. Your purchase needs to close within the rate hold period to be guaranteed the quoted rate. This can be helpful if rates were to rise before your purchase closes, but if rates decrease you will get the lower rate.

 

Q: What happens if the rate goes down after I lock in?

 A: If rates are to decrease while you have a rate hold, the rate can be adjusted to the lower rate. Some lenders automatically float the rate down, while others require your Mortgage Professional to request the lower rate.

 

Q: What’s the difference between an open and a closed mortgage?

 A: An open mortgage allows the borrower to pay down or pay off the principal amount without having to pay any penalties. A closed mortgage usually has an annual pre-payment allowance of 10-25% without penalty, but if you pay more than this or pay the mortgage in full, then a penalty is applicable.

 

Q: What is a blanket mortgage?

 A: Also known as an Inter-Alia mortgage, a blanket mortgage is a single mortgage that is registered on two or more real estate titles. The real estate is held as collateral on the mortgage, but the individual pieces of real estate may often be sold without retiring the entire mortgage.

 

Q: How can I use my RRSP to help me buy a home?

 A: The Home Buyers' Plan (HBP) is a program that allows you to withdraw funds from your registered retirement savings plan (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability. To qualify, you must be a first time homebuyer, or have not owned a principal residence for at least 5 years at the time of the withdrawal. You can withdraw up to $25,000 in a calendar year. Your spouse can also withdraw up to $25,000 for a possible $50,000 in total.

Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP, or they may not be deductible for any year.

 Generally, you have to repay all withdrawals to your RRSPs within a period of no more than 15 years. You will have to repay an amount to your RRSPs each year until your HBP balance is zero. If you do not repay the amount due for a year, it will have to be included in your income for that year.

 

Q: What is the difference between a co-signer and a guarantor?

 A:  If you don’t qualify for a mortgage on your own you can use a co-signer or a guarantor.  A co-signer is a co-owner who is registered on title and equally responsible for the payments, although he will not be making the payments.  A guarantor personally guarantees the payments will be made if the applicant defaults, but has no claim to the property.

 

Q: What are closing costs?

 A: Closing costs are the additional fees and adjustments that you pay upon completion of your real estate purchase. These include legal fees, property taxes, strata fees, land title costs, title insurance and property transfer tax.

 

Q: Can I take my mortgage with me if I move?

 A: Yes you can and it can save you thousands of dollars!! When you move your mortgage it is called porting your mortgage. Porting your mortgage gives you the option to transfer the interest rate and all the existing terms and conditions of your current mortgage to your new home. Not only do you get to keep the lower interest rate, you can say goodbye to those nasty penalties the lender charges when you break the mortgage early. You may also qualify to add-on to the mortgage if you require a larger mortgage amount. Depending on current rates and your final blended rate with the add-on, your modified monthly payments could be more economical than they would be with a new mortgage. Keep in mind that each lender has different rules, so as always, before you go house shopping come see a Mortgage Professional who can help you figure out the best option for you.

 

Q: Can I borrow against my home for personal reasons?

 A:  Yes, if you own your own home you can use the equity you have built up to get a line of credit or home equity loan to finance other needs such as debt consolidation, renovations or for other personal reasons.  Most banks will allow you to borrow up to 80% of the appraised value of your house.

 

Q: What is a reverse mortgage?

 A: A reverse mortgage is a mortgage product for homeowners 55 and older. It allows the borrower to receive up to 50% of the current value of the home. The money is tax free and no payments are required while you or your spouse live in the home. You maintain ownership and control of your home as long as you maintain and stay up to date on property taxes, insurance and any other required maintenance fees. The loan is repaid when your home is sold and you keep all remaining equity in your home. (Information taken from CHIP www.chip.ca)

Information Brought to you from the Mortgage Centre Comox Valley Team Members!

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