Buying a place and arranging a mortgage can be daunting, but it really doesn’t need to be. Actually, in reality, it’s rather simple. Here are some of the most common mortgage questions we get asked on a day-to-day basis.
What is a pre-approval?
Mortgage questions come up time and time again about what it actually means to be pre-approved. A pre-approval is a bit of a misnomer these days. It used to mean a lot more, but now it’s a rate hold at best – that is if the lender allows you to hold the rate. Often, clients will request a letter of approval, which really isn’t worth a whole lot. We’re happy to provide one, but it’s imperative that you understand its worth and that it ultimately comes down to broker/banker’s knowledge. At Spin, if we tell you-you’re “pre-approved” for a certain amount, you will qualify it. No question. However, banks look at both your borrowing profile and the property. You could be the best borrower in the world, but if your property is undesirable/unmarketable, you won’t likely get financing anywhere.
Is it important to get a pre-approval before shopping?
Absolutely. It’s important to determine what you qualify for. The problem remains that pre-approvals are not controlled in the mortgage business so you need to be sure that it’s coming from a reputable source – to us, there is no difference between a formal letter, an email or a phone call confirming what you are qualified/pre-approved for.
Can I change my payment frequency?
You betcha. Most lenders will allow you to pay weekly, bi-weekly, semi-monthly and monthly. You don’t have to decide this right away, as you can change it after the mortgage funds as well.
I’ve never heard of Spin Mortgage, what happens to my mortgage if Spin ceases to exist?
That would be unfortunate for us but would have no impact on your mortgage. As mortgage brokers, we place you with one of the lenders where we can get you the best rate in an efficient manner. We don’t lend our own money to you. We’re not a bank.
How much can I afford?
Beware of calculators. Frankly, a lot of them are not very good. They don’t account for current underwriting guidelines and can provide misleading answers. Use our affordablity calculator – it actually works. If you’re honest about the numbers you put in, you’ll be rewarded with accurate answers. It does, however, assume you have good credit. If you don’t, then it’s probably best to call us and see what options you have. This is one of the most common mortgage questions; however, the answers can vary wildly!
What is a fixed rate vs variable rate?
Simply put, a variable rate fluctuates according to the prime rate set by the banks (prime rate is based off the overnight rate set by the Bank of Canada). The most common term is a 5 yr term. Occasionally, we’ll offer a 3 yr term as well if the rate makes sense. Fixed rates are fixed for the term. They don’t change. Common term lengths include, 1,2,3,4,5,7 and 10 years. A key difference between variable and fixed rates is the penalty calculation to discharge the mortgage. For standard mortgages, you’ll pay a 3-month interest penalty to break a variable term, while you’ll pay the greater of 3 months interest or the interest rate differential (IRD) for a fixed term. Visit our current mortgage rates.
Are the rates I see online too good to be true?
Yes and no. Oftentimes, the lowest rate will be a restricted mortgage, implying that you are willing to trade some flexibility for a lower rate. Restrictions vary in severity and can include terms such as; elevated penalties, no sale clauses, no ability to blend or port, hidden fees/policies, etc. Not all restrictions are bad and depend on your goals and profile. On the flip side, you’ll see some rates that appear too good to be true but are not. They’re just heavily discounted for strong borrowers. It’s important to review the terms and understand the pros and cons of each. Read What do mortgage rates even mean these days.
What will my mortgage payment be?
This is a simple request, yet apparently, it’s possible to get different answers! Oftentimes, people will ask why our calculations are different than what they saw on another site. The answer is that not all calculators factor in current rules and guidelines. They assume that people are mortgage gurus. Visit our payment calculator.
What happens if I break my mortgage?
You’ll pay a penalty. This penalty will depend on whether you took a variable or fixed rate and if it was restricted or full feature. You can also port or blend a standard mortgage to avoid a penalty altogether (Refer to the above paragraph on fixed vs variable mortgages).
Where will rates be in a couple of years?
Not sure. Nobody really knows and top economists are routinely wrong. We’re in a new low rate environment and all factors suggest rates will rise over the next couple of years. That being said, increases will be very calculated to not threaten an already fragile economy.
