For a lot of Canadians, purchasing your first home is the largest purchase you will ever make. Alongside the excitement and nerves, the process can be quite stressful. What’s the best way to manage during such a time? Get professionals in the know to assist every step of the way with the best possible options. This is what we do at Dominion Mortgage Pros. We pride ourselves in taking the time to ensure you are aware of, and comfortable with the many mortgage options available to you.

Interest-only loans, self-employment programs and rental purchase programs among a number of financing alternatives are available to Canadians making first-time homeownership easier than ever before. These programs are designed to make it effortless to get into that first home sooner. Give us a call to find out what’s available to you and you can take advantage of our access to top products and the very best rates available!

Here are some things you need to know about your first mortgage:

Mortgages 1.1 - Getting a Mortgage Pre-Approval

When you are looking for a new home, pre-approval is an important step. With a mortgage pre-approval, a licensed mortgage broker can do a more complete verification prior to sending you shopping for a home. This means the dollar figure you are going shopping with is actually what you can spend.

In order to get pre-approved for a mortgage, you would need to provide a short list of information that will allow the mortgage broker to determine your buying power. A good mortgage broker will explain to you the implications and benefits based on the following:

  • shorter or longer mortgage terms
  • the latest programs available
  • which mortgage products they believe will most likely meet your needs the best
  • review all of the other costs involved with purchasing a home

As mortgage professionals, we use our industry expertise on lender and insurer criteria to let you know what you can afford and what your payments on a specific mortgage will be. To make sure we assist you in the best possible way, we can lock-in an interest rate for you for anywhere from 60 – 120 days while you shop for your perfect home.

What does a locked-in interest rate mean for me?

  • If interest rates drop, your locked-in rate will drop as well.
  • If the interest rates go up, your locked-in interest rate will not, ensuring you get the best rate throughout the mortgage pre-approval process.

We ensure that you are guaranteed to get a mortgage for at least the locked-in rate or better!

To sum it up, getting pre-approved for a mortgage is highly recommended as something every potential home buyer should do before going shopping for a new home. A pre-approval will give you the confidence of knowing that financing is available, often putting you in a very positive negotiation position against other home buyers who are not pre-approved.

Mortgages 1.2 - Fixed Rate vs. Variable Rate

Fixed rate and Variable rate are two mortgage types. The decision to choose between a fixed and variable rate is not always an easy one. One of the best ways to make an informed decision on what to choose between the two is to learn more about them.

Fixed rate mortgage

A fixed rate mortgage charges a set interest rate that does not change throughout the term of the loan. Fixed rate mortgages often appeal to clients who want stability in their payments, manage a tight monthly budget, or are generally more conservative.

Variable rate mortgage
The interest rate for a variable rate mortgage varies over time. This means mortgage payment amounts will change. Variable rate mortgages often allow the borrower to take advantage of lower rates – the interest rate is calculated on an ongoing basis at a lenders’ prime rate minus or plus a set percentage.

Both types of rates have their pros and cons which can make it challenging to choose between them. Typically, some of the following considerations are made when working out the best way forward:

  • your tolerance for risk as well as your ability to withstand fluctuations in mortgage payments
  • preference for more stable mortgage payments
  • the term of the loan
  • timing and economic environment at the time

Ultimately, the best option as a consumer is to have a candid discussion with your mortgage broker. The mortgage broker will ensure you have knowledge and understanding of the risks and rewards of each type of mortgage based on your situation. Our door at Dominion Mortgage Pros is always open to discuss your needs in order to make the best decision.

Mortgages 1.3 - Understanding your Credit Report

Many Canadians wonder how much a credit rating can really affect them. A credit rating can affect the job you get, the apartment you rent, and even the ability to open a bank account. With mortgages included, your credit rating will influence all aspects of your financial activities when it comes to borrowing money, thus, it is important that you know and understand your credit report and rating (or score).

A credit report is a listing of your payment and spending habits as reported to the credit agencies or bureaus by lenders who have extended credit to you. In addition to credit information, you will also find liens and judgments on your credit report as well as your address and possibly your work history. Here in Canada, the two main credit reporting agencies are Trans Union and Equifax. Both agencies have a credit history file on anyone who has ever borrowed money. It is good to note that your credit report is a working document. This means that you have the ability over time, to repair any damaged credit and increase your credit score.

A credit score (or beacon score) is a number calculated from your credit report. Generally, it is used to determine your creditworthiness for a mortgage, loan or credit card. Mortgage lenders use your credit score to get an idea of your lending risk. This is the chance the lenders take that they might not be repaid either in part or in full. Credit scores range from 300 to 900, the higher your credit score the better. The mortgage products and interest rate that you will qualify for are often determined by your credit score.

Canadians have the legal right to obtain a copy of their credit report. Dominion mortgage brokers can help you obtain a copy of this report and go through it with you to verify that all of the information is true and correct.

Mortgages 1.4 - Determine the Right Term

A ‘mortgage term’ refers to the length of time in which the mortgage agreement has legal effect. Simply put, it is the length of your mortgage contract and determines the cost of borrowing for you. As a homebuyer, you can have a difficult task in picking the right mortgage term given that it is one of the most important home buying decisions.

By understanding mortgage terms and what they mean for you financially, you can choose the term that is right for you and save a reasonable amount of money. It is recommended to compare short, medium and long term factors to evaluate the financial implications when considering your mortgage term length. Factors to consider, among others, include your credit, the financial markets, and future plans which can have an impact on mortgage term length.

If paying your monthly mortgage payments place you close to the edge of your financial comfort zone, you may want to opt for a longer term mortgage. In this instance, a longer mortgage term can ensure that you will be able to afford higher mortgage payments should the interest rates increase. By the end of a longer mortgage term, for example 10 years, most buyers are in a better financial situation and have a lower principle balance due.

If you are shopping for a mortgage for an investment property, you will likely want to consider choosing a longer mortgage term. This allows you to know that the mortgage payments on the property will be steady for a long time. In turn, you can project your future income from the property more accurately which is good for planning and strategy.

As shown by the examples above, the right mortgage term will vary from person to person. It pays to spend some time choosing the mortgage term which can save you a fair bit down the road in borrowing costs. We can help you to arrive at this important decision through our friendly Mortgage Brokers at Dominion Mortgage Pros.

Mortgages 1.5 - Pay Off Your Mortgage Faster

Mortgages in Canada are generally amortized between 25 and 35 year terms. Amortization refers to the process of paying off your mortgage debt over time through regular payments. While 25-35 years seems a long time, you do not have to take that long to pay off your mortgage if they choose to do so.

With a little bit of thinking ahead, and a small bit of sacrifice, most people can manage to pay off their mortgage in a much shorter period of time by taking positive steps such as:

Making frequent mortgage payments – Making mortgage payments weekly or every other week lowers your interest paid over the term of your mortgage. This can result in the equivalent of an extra month’s mortgage payment each year. Frequent mortgage payments in this way can reduce the length of your mortgage from 25 years down to approximately 21.

Increase amount of mortgage payments – Let’s use a day-to-day example; say you get a 5% raise each year at work. If you put that additional 5% income towards your mortgage, your mortgage balance will drop much faster without feeling like you are changing your spending habits.

Lump sum payments – Generally, mortgage lenders allow you to make extra payments on your mortgage balance each year. Every once in a while we find ourselves with extra money we were not expecting. Maybe you inherited some money from a distant relative or you received a holiday bonus at work. It could be wise to apply this money to your mortgage as a lump-sum payment and watch the results.

By applying the above strategies consistently over time, you will save money, pay less interest and pay off your mortgage years faster!

Mortgages 1.6 - Self-Employed Solutions

Generally, current mortgage rules mean the assessment of a self-employed applicant by lenders is a rigorous process. For self-employed Canadians, this means they sometimes face roadblocks when they are in the market to obtain personal financing, such as a mortgage or vehicle loan. One of the underlying issues is that self-employment income can be difficult to prove. It’s common practice among self employed Canadians to lower their taxable income by maximizing business expenses and personal deductions. This can cause a discrepancy between what they actually earn and the information on their Notice of Assessment.

In order to obtain a self-employed mortgage, most lenders require some or all of the following documents among others:

  • Personal tax Notices of Assessment from the past 2-3 years
  • Proof of business ownership
  • Business financial statements
  • Contracts to show expected future revenue
  • Proof that your HST and/or GST is paid in full
  • Your personal credit score
  • Your business credit score

As the list above shows, the requirements can be challenging to obtain. Thankfully, Canadian mortgage lenders are starting to understand the importance of self-employment in our culture, and are making great mortgage programs available to the self-employed.

At Dominion Mortgage Pros, we have the expertise in assisting self-employed individuals with getting a mortgage. Our mortgage brokers will ensure you get the best mortgage available. With our professionals to assist you, obtaining a mortgage if you’re self employed has never been easier. The mortgage products available today are structured to help you succeed in your business and your personal life.