Common Questions About Securing Your First Mortgage
Buying your first home can be equal parts exciting and intimidating, so you should never feel bad about asking what you might think are obvious questions. We encourage you contact us but to get you started, we’ve answered some of the more common questions we hear.
1) Who is Spin Mortgage?
We’re an online mortgage brokerage with licensing offices in British Columbia, Alberta and Ontario and have been operating since 1998. We handle one of the largest annual per-broker volumes in Canada through our online platform, which we have invested in heavily to deliver a mortgage process that is intuitive and easy to operate. We provide clients with the freedom they need to access mortgages on their terms.
2) Why the name SPIN?
We love bikes and all things bike-related. During our development phase, our team was enjoying a ride up Mount Fromme in North Vancouver and the idea for the name landed. It made sense to us and seemed to encapsulate a lot of our philosophies of long-term, repeat client relationships and full-service. We still start and finish most days on our bikes and most of our great ideas are conceived on two wheels.
3) How do I Apply?
First time home buyers can use our quick apply form that can typically be filled out in about five to ten minutes. If you don’t have all your information handy, no problem. Our applications have a “save for later” option that allows you start off from where you finished without having to begin again.
4) Why Online vs Traditional Broker?
The process for applying for a mortgage is the same, whether you wait inside an office to do it or do it online. We understand that our clients are busy and want to eliminate the unnecessary time constraints of in-person meeting. We can typically tell you in minutes what you can afford, rather than days or weeks down the road when you’re able to schedule an appointment that works for you and a traditional broker.
Our smaller footprint allows us to provide better rates and service than traditional channels, which have high overhead costs for offices, support staff and maintenance.
5) Which is Better: Banks or Brokers?
Naturally, we believe that Brokers are better, since banks only have access to their own in-house mortgage products and typically have limited information on what else exists.
Brokers have access to a multitude of products and lenders, which allows us to match your deal with the lender that is best suited for your borrowing profile and goals.
6) What is A Standard Mortgage Penalty?
A Standard Mortgage Penalty can be levied if you break the terms of your mortgage, such as deciding to sell a property before the term is up. There are Standard Mortgage Penalties and Restricted Mortgage Penalties.
A Standard Mortgage Penalty for a variable rate mortgage will never exceed three months’ interest.
A Standard Fixed Rate penalty will be the greater of three months’ interest or the interest rate differential (IRD), which can be substantial. Essentially, the bank will take a market rate for the number of years remaining in your term and compare it to your rate. This difference will be multiplied by your outstanding mortgage balance and then by the amount of months remaining in the term. Note: all lenders calculate this differently, so it’s important to know where your lender stands.
Restricted (non-standard) Mortgage Penalties can vary significantly. They can be an arbitrary percentage of your outstanding mortgage or change depending on the type of transaction.
7) What’s the Difference Between A Bank and A Mortgage Lender?
Mortgage Lenders, commonly referred to as Monolines, specialize solely in mortgages. They are typically underwritten by banks but have more attractive rates due to their singular focus.
Banks do handle mortgages but also a broad range of other, non-related services, which often adds to their mortgage lending fees.
8) What’s is the Difference Between A Full-Feature and A Restricted Mortgage?
A Full-Feature Mortgage has maximum prepayment privileges, is portable, assumable, and has standard discharge penalties and policies.
A Restricted Mortgage can impose a variety of limitations on customers, some of which are material. Increased penalties, clawbacks, stipulations that limit your options and flexibility are restrictions that generally don’t make sense for most home buyers and can create unwarranted complications (it’s important to note that the majority of the lowest mortgage rates seen online are restricted).
9) How Often Can I Pay My Mortgage?
You can pay weekly, bi-weekly, semi-monthly or monthly. This decision comes down to what suits you and your income situation best. Let us know and we’ll happily adjust it.
Alternatively, you can contact the lender anytime after funding and they can change it as well. It’s flexible and can evolve over time as your specific circumstances change.
10) What Are the Benefits of Bi-Weekly Payments?
Bi-weekly payments have a number of benefits, but the largest is that over the space of a year you wind up making one additional payment. It might not seem like a lot, but over the term of your mortgage, it can save thousands of dollars.
11) Can I Make Extra Payments On My Mortgage? Is there is penalty?
It depends. Typically, lenders offer anywhere from 5% to 20% pre-payments per year based on the original mortgage amount as well as the ability to increase payments by 5% to 100%.
The importance of this will vary amongst borrowers based on how much extra cash they’ll actually have to pay it down. If you have the ability to take advantage of this combination, you’ll likely be able to pay of the mortgage in it’s entirety without any penalty before the term is over.
12) Is Spin Mortgage Lending Me Their Money?
13) What Is Mortgage Insurance? Do I Have to Pay It?
If your down payment is less than 20%, insurance is automatically tacked on to your mortgage. There is no way around this. However, your insurance premiums will decrease as your down payment increases.
The three main insurers in Canada are Canada Mortgage and Housing Corporation, Genworth Canada and Canada Guaranty Mortgage Insurance, and CG.
14) What Is the Difference Between Term and Amortization?
Term is the contract under which you are bound when you sign up for a mortgage. For example: a five-year variable closed mortgage.
Amortization is the number of years it will take to pay off your mortgage. Amortization is somewhat irrelevant as you can effectively lower it by increasing your payments. For example, you can lower a 30-year amortization, by increasing your payments according to the lender’s policy.
In today’s mortgage world, the maximum amortization period is 25 years if your down payment is less than 20%, and 30 years if it’s more.
15) What’s the minimum down payment?
Currently, the minimum down payment is 5% of the first 500K and 10% of the balance for an owner occupant property.
16) Where can my down payment be from?
As a first time homebuyer, your down payment can be from your own savings, investments, RRSPs, gift, inheritance, etc. Please see our document section on downpayment for more specific information.