Discussing Your Needs
- How long are you planning to live in this home?
- How are your finances likely to change over the next few years?
- How soon would you like to be mortgage-free?
- When will your children (if any) be entering college or university?
- When are you thinking of retiring?
Now that you have your needs and some goals in mind, you’re ready to start shopping around for mortgages.
Today’s mortgage market is very complex. There are more choices than ever before, new features being introduced every day, and unexpected conditions and fees hidden in the fine print.
If you want to make sure you’re getting the very best deal available – you have to do your research!
Here is a list of questions to ask each lender:
- Will you give me a detailed outline of the costs associated with my mortgage? Most lenders will give you a Disclosure Statement that outlines the financial terms of the mortgage, including amount of loan, interest rate, repayment schedule, etc.
- Can you give me an estimate of my closing fees? These fees are part of every loan and cover the services provided by the lender and other companies involved in the loan process. You will want to budget approximately 2% – 4% of the purchase price for closing costs. This includes legal fees, appraisals, land transfer taxes, title insurance, CMHC insurance, and other adjustments on closing.
- What’s the minimum down payment for this loan? A typical down payment is between 5% and 20% of the property value. If your down payment is less than 20%, you’ll be required to pay an additional premium for mortgage default insurance.
- Would you recommend a closed mortgage or an open mortgage? This depends on your needs, financial situation, and how soon you hope to pay the mortgage off. An open mortgage gives you freedom to pay off the full amount at any time, but you pay a higher interest rate in return for this flexibility. A closed mortgage has a lower interest rate, but your term is locked in for a set number of years.
- Is there a prepayment penalty on this loan? If you choose a closed mortgage, you’ll be required to pay a prepayment penalty if you pay off the mortgage early. But an open mortgage lets you pay off the full amount at any time without penalty.
- What documents will I need to provide? Every mortgage requires you to provide some documents, but the number of documents can vary. At the very least, you will need to provide the Purchase & Sale Agreement, confirmation of your down payment and employment verification (T4, pay stubs, employment letter and/or your Notice of Assessment).
- How long does it take to process a loan? Make sure the lender gives you the most accurate timeline possible. The approval process can be completed in as little as a few hours, and the funding of the loan will take a few days. If you’re on a tight schedule though, be sure to ask if your lender can accommodate your needs.
- What are some of the things that could slow the approval process? Nobody likes surprises — especially lenders! If the information you’ve provided is complete and accurate, there should be no delays.
- What if my information changes before the loan is funded? If during processing, your income changes, you take on a new debt, you get married or divorced, or an undisclosed credit problem comes to light, your loan will be delayed. Make sure you know exactly what the lender needs, so you don’t accidentally leave anything out or forget to update some information.