In recent there has been a lot of chatter going on regarding BMO’s spring interest rate special. At the same time there has been a lot of chatter from other people in the industry warning you about that “special rate”. It doesn’t matter if it’s BMO’s special rate or not, you should always question the mortgage product that you’re getting as most likely your mortgage will be the largest debt you will ever have.
The BIG question is “how do you know what questions to ask when everything is new to you?” Below we have compiled a list of questions to ask your broker to make sure you are getting the best mortgage product on the market. We have also listed what is “common” for the majority of Mortgage Lenders.
1) How many years can I amortize my mortgage for?
Common: 25 years for high ratio mortgages (When your down payment is less than 20%)
30-35 years for conventional mortgages (When your down payment is 20% and more)
2) What are my pre-payment options?
Common: Majority of lenders will allow you to increase your mortgage payment up to 15%-20%.
– Majority of lenders will allow you prepay an additional 15%-20% annually based on the total mortgage loan at the beginning of the year.
– Some lenders will only allow you to make one pre-payment per year
– Some lenders will allow you to make multiple pre-payments throughout the year in increments of $100 or $1000
– Some lenders will allow you to “double up” your payments. Depending on the lender you can double up every payment or just once a year.
3) If I need to break my mortgage prior to the term being over, what kind of penalty do I expect?
Common: 3 month interest rate penalty (click on link for more information regarding penalty)
Interest rate deferential (click on link for more information regarding penalty)
Uncommon: The only way to break your mortgage is with a bona fide sale to an individual of no relation.
4) Who pays my property taxes?
Common: Depends on the lender. Some will pay it for you – they collect an addition amount of money at the same time your mortgage payment comes out and put it into a separate account. When your property tax notice arrives you will only have to claim your home owners grant and the lender will take care of the rest. If you lender doesn’t collect your property tax for you, it will be up to you to pay the bill each year.
5) Is my mortgage assumable?
Common: Majority of lenders will allow you have your mortgage “assumed” (What does “assumed or assumable” mean?)
6) Is my mortgage portable?
Common: Majority of mortgage lenders will allow you to port your mortgage. (What does “port or porting” mean?)
7) How is my mortgage secured against my property?
Common: Standard mortgage charge is how most lenders secure the mortgage to the property. This allows the mortgage to be transferable. So if at renewal time you would like to move your mortgage to a new lender, you can do so without incurring new legal costs.
Uncommon: Some lenders secure the mortgage as a collateral charge. For example TD, National Bank & RBC. These mortgages cannot be switched to a new lender like a standard charge mortgage. However they are re-advanceable which allows you to have the ability to refinance your home without having to pay for legal fees again.
8) After my Mortgage is complete, will you still be the one I communicate with?
Mortgage Broker: Absolutely. As a Mortgage Broker we are here to help you during the mortgage process, once you mortgage is set and again when it’s time for renewal.