Ontario Mortgage News– Types of Mortgages Part 3: Zero Down Mortgage

Are you getting ready to buy a home and obtain mortgage financing? Knowing your options before jumping in is important. This is part 3 of a 4 part series that gives you important Ontario mortgage news and information about the various types of mortgages available in Ontario. Getting a mortgage does not have to be stressful, and knowing what mortgage types are available to you can help keep the search for your perfect home stress-free.

This third Ontario mortgage news blog will focus on the zero down mortgage. So what is a zero down mortgage? As its name suggests, it is a mortgage that requires you to put no money down as a down payment on a house. In Ontario, according to Canadian Mortgage and Housing Corporation guidelines, a minimum 5% down payment is required for every house purchase in the province. But sometimes saving is easier said than done, and so a zero down mortgage can be the ideal option if you are ready to buy a house but are lacking the funds for that necessary 5% down payment.

How does a zero down mortgage work? A zero down mortgage is a mortgage that combines traditional mortgage financing with your down payment. This means that the interest is usually a bit higher (usually 1-2% above prime) to allow the bank to recoup its financing of your down payment. Furthermore, it is set for a period of no less than 5 years so that the bank can get back those down payment funds.

Are you asking yourself will I get approved for a zero down mortgage? Well, here are some things to keep in mind. Qualifying for a zero down mortgage means having a great credit score and pristine credit history. Since the bank is fronting the entire mortgage rather than just a portion of it, they want to make sure that they are protected – so if your credit is not great it is unlikely that you will get approved for a zero down mortgage.

What about flexibility? Well, a zero down mortgage offers less flexibility than say a variable rate mortgage or a fixed rate mortgage. Because you are relying on the bank to back you, they give far fewer options, such as setting the length of the mortgage or setting a variable versus a fixed rate. However, as far as giving you the chance to buy without a down payment, it is an important option.

If you are ready to buy a house but are without the required minimum 5% down payment, but do have good credit history, a zero down mortgage may be an option for you. Instead of stressing over where to find that down payment or having to wait until you have saved it all, speak to a mortgage broker about the benefits of qualifying for a zero down mortgage right now.

For more Ontario mortgage news or for more information about a zero down mortgage, please contact Paul Mangion of The Mortgage Centre at 416-204-0156 or visit www.themortgagecentretoronto.com.

Ontario Mortgage News – Types of Mortgages Part 2: Variable Rate Mortgage

Are you getting ready to buy a home and obtain mortgage financing? Knowing your options before jumping in is important. This is part 2 of a 4 part series that gives you important Ontario mortgage news and information about the various types of mortgages available in Ontario. Getting a mortgage does not have to be stressful, and knowing what mortgage types are available to you can help keep the search for your perfect home stress-free.

This second Ontario mortgage news blog will focus on the variable rate mortgage. What is a variable rate mortgage? A variable rate mortgage is a type of mortgage financing that fluctuates according to rising or falling interest rates. This means that, when your mortgage broker finds a lender to approve your variable rate mortgage, your payment is not static and may change if interest rates change. There are many advantages to this type of mortgage.

Firstly, if you tend to follow the philosophy that no risk means no reward, you understand that taking some risks could equal major savings in the long run. A variable rate mortgage can provide this. Since it is based on the rate of interest, if this decreases, so does your monthly payment. If it decreases substantially, then this could equal big savings for you.

Another big benefit to a variable rate mortgage is the fact that variable rate mortgages usually offer the lowest mortgage rates available. Since the bank or lender approving your mortgage recognizes the risks that are inherent in a variable rate mortgage, they offer the lowest rate to you. This means that even if the interest rate does increase slightly over the term of your mortgage, you will likely not feel the sting.

It is important to remember though that as the Canadian economy improves, interest rates may increase if the prime lending rate is increased by the Bank of Canada. That being said, many lenders do provide options with variable rate mortgages that will allow you to lock in your variable rate mortgage if interest rates do increase.

Why choose a variable rate mortgage. If you are not afraid to take a bit of a risk in exchange for the chance to save, or if you are planning of staying in your house for a very short period of time, a variable rate mortgage may provide the best financial solution for you. However, if your plans are more long-term, you may want to discuss the option of a fixed rate mortgage with your mortgage broker.

Mortgages don’t have to be complicated, and you should avoid getting stuck in a mortgage you don’t understand by visiting a mortgage broker and getting them to explain all of the different options available to you.

For more Ontario mortgage news or to find out more about the benefits of a variable rate mortgage, please contact Paul Mangion of The Mortgage Centre at 416-204-0156 or visit www.themortgagecentretoronto.com.

Ontario Mortgage Financing A-Z – What You Need to Know to Get Approved for the Best Mortgage

Ontario mortgage financing can be complex so it pays to be an informed consumer. If you want to get approved for the best mortgage, start doing research in advance of house shopping to make sure that you understand everything you will need to know. This will reduce the likelihood of finding a home and then finding out that you don’t qualify for Ontario mortgage financing. 

Before looking to buy a home, the first thing you need to know to get approved for the best mortgage is that you are going to shop around for a house that you can afford. Lenders will require that your mortgage payment does not exceed 32% of your gross monthly income. A great way to find out how much of a home you can afford to finance is to perform the following steps: 

1.       Take your gross monthly income and then multiply it by 32%.

2.       There are mortgage calculators online that you can use to calculate mortgage payments.

3.       Input the amount of mortgage that you are looking for and then compare it to your initial calculation of 32% of your gross monthly income.

4.       If your mortgage is producing a payment that is greater than the above calculation, reduce it until the monthly payment fits within the 32% guideline.

5.       The difference in the amount of the mortgage within the 32% guideline and the amount of mortgage you had initially planned on financing will be the increased amount of down payment that you will need to purchase a home at the amount of purchase you had initially intended. 

The above exercise may be a rude awakening but a worthy one because this will reduce the chance of making an offer and deposit on a home and then getting to closing only to learn that you cannot get a mortgage in the amount of money that you need. 

You also should request your credit report from Equifax and Trans Union. You want to ensure that you address any issue or errors on your credit report before making an offer and deposit on a home.

Another thing you need to know to get approved for the best mortgage in Ontario is that a bank will require you to verify your income on closing. This means that they may ask for a paystub and job letter. If your bank has any concern over the income verification that you provide, they may ask you to provide two years of Notice of Assessments from The Canada Revenue Agency.

The bank will also ask for proof of down payment. Proof of down payment consists of proof that you have the money for your down payment in the bank, proof of an investment or if the down payment is being made to you as a gift, they will ask you for a gift letter from the individual who is gifting you your down payment.

As a good rule of thumb, speak with a Mortgage Broker before you start house shopping. A Mortgage Broker cannot only prepare you for what will be needed to get approved for a mortgage but can also obtain a mortgage pre-approval from a bank before you start house shopping. They can review your credit and income to ensure that you qualify for a mortgage to finance a home and provide you with a list of the items that you will need to ensure that you can get approved for the best mortgage.

For more information about Ontario mortgage financing and what you need to know to get approved for the best mortgage please call Paul Mangion at 416-204-0156 or visit www.gtamortgagematters.com.