Purchase

Mortgage Purchase Guide

We have created a mortgage purchase guide to help you navigate the process and avoid the common mistakes people often make.

Whether you’re a seasoned buyer or a first-timer, being up to speed on the process of purchasing a home can help save you money and provide a more enjoyable experience.

Before You Get Started

One very important consideration is to ensure that you have a competent group of professionals working for you. This includes mortgage brokers and bankers, realtors, lawyers, appraisers, inspectors, insurance agents and several other potential services. Each individual on your team plays a key role in the purchase of your home – and if everyone works together, it will create a seamless process that is exciting and enjoyable.

As such, we suggest that you consider the following questions and apply them to your search when building your team, including your choice for a mortgage broker.

Remember: the most important person in this process is you, the purchaser, so it’s important to select people that are a good fit.

Key Questions for Potential Team Members:

  1. How long has the individual been in the business?
  2. How much volume do they do annually?
  3. Is their website easy to understand?
  4. Are they able to answer your questions?
  5. Are they up to date with industry trends and regulations?
  6. Do they have online reviews?
  7. Is their process laid out clearly?
  8. Will they offer unbiased advice or do they charge a fee for every interaction?
  9. Have they ever had a mortgage as an individual?
  10. Do you know someone who’s worked with them that can give you a personal recommendation?
  11. Are they able to connect you with other professionals involved in the process with good reviews?

Often times, your home buying team will be with you for years, as you move onto your second, third or fourth purchases. It’s a lifelong relationship that can pay dividends.

Advice, understanding and friendly service are the backbone of everything we do at Spin Mortgage and we’re excited by the chance to help you get into your home.

Steps

Steps to Purchasing

We have outlined the key mortgage steps to ensure you are well prepared for your purchase.

Step One

Knowing What You Can Afford

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Understanding what you can afford is an important first step for any property purchase. Our affordability calculator will help you determine what is in your scope based on a series of factors including income, down payment, taxes, regulations and a host of other items that are part of every real estate purchase.

If the calculator doesn’t provide you with enough information, we’re available to help you determine what is possible over the phone. Our experienced team can conduct a thorough assessment and ensure your information is accurate according to current Canadian Mortgage Guidelines, which you can then use to apply.

When you apply online, you’ll receive an immediate response that includes a list of required documents based on your profile. Once everything is submitted, our team will speak with you directly about your mortgage possibilities and how much you can afford – a process known as “pre-approval”.

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Step Two

Understanding Mortgage Rates

Mortgage rates are not one size fits all, so it’s important to understand what suits you and your goals best. As experienced mortgage brokers, we know it can seem like a lot to learn in a small amount of time – which is why we’re here to help.

We’ll work with you to answer the questions that many people have, like the difference between open, closed, fixed and variable mortgages, how rates are determined, how mortgage penalties work, what restricted rates are and how all rates are determined.

This part of the discussion can be somewhat intimidating for buyers, especially with so much competition clouding the conversation and vying for your business. We’re not here to convince you to go with us or that you should spend more than you have. We are simply here to act as a guide to help you understand the complexities of the mortgage market and find a solution that best suits you.

Step Three

Time to Buy

As with all parts of the process, finding a knowledgeable realtor that you trust is important. Too often we see people using a realtor simply because of a personal connection and while sometimes that works out, it can also present challenges.

No matter your connection to a realtor, always ask for trusted referrals. Due diligence is crucial, as buying a home may be the single largest transaction of your life. Don’t be afraid to challenge your realtor and ask hard questions. At the end of the day, they work for you.

When you choose the right realtor and are ready to make an offer be sure that you are protected through proper processes. This can include but is not limited to, having approved financing, ensuring any strata documents have been reviewed, the home has been appraised accurately and a third-party inspection has been completed.

All of this is vitally important as at this stage, your realtor will send us the required paperwork to initiate the formal mortgage approval process.

If all your ducks are in a row, everything should go smoothly and you could be signing that day.

The final part of the purchasing process is for our team to review the mortgage structure and rates to ensure everything is still aligned. We then submit to the lender and secure your financing.

Once approved, and we’re happy with all the terms, we’ll advise you that the financing condition can be satisfied, after which you can safely provide your non-refundable deposit to be held in Trust. You receive the Mortgage Commitment paperwork to review and sign and – boom – you’ve just bought your first home (something we call a firm sale).

Step Four

Taking Possession of Your Property

The big moment. You get to take possession of your property. It’s something to feel proud about, although we know for some people it can be bittersweet knowing that you now have a mortgage.

(It behooves us to point out that technically possession and completion are not actually the same thing. Possession means you can move into your home, while completion means money has changed hands.)

Completing the sale is a legal process that works differently in different provinces. Your Notary (in BC) or Lawyer (in AB, ON, BC) will arrange to have you sign all the real estate documents, typically a week prior to possession. You’ll provide a bank draft for the remainder of your down payment, as well as other important documentation such as property insurance.

FAQ

Frequently Asked Questions

We have compiled a list of the most common mortgage questions during the process purchasing your home.

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.

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.

How do I Apply?

We’ve created a 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.

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 meetings. 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.

Which Are 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.

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.

What’s the Difference Between a Live Deal and a Pre-Approval?

A Live Deal means you are actively renewing or refinancing your mortgage. For a purchase, it implies that you have an actual accepted offer and completion date. A Pre-Approval, also known as a Rate Hold, means that you have the intention to purchase, but have not yet found a property or made an offer. Under this scenario, you are looking to hold a rate in the event that it increases prior to finding a place.

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.

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

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).

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.

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.

Is Spin Mortgage Lending Me Their Money?

No. We’re a broker, so our job is leverage our knowledge, relationships with lenders and understanding of the market to get our clients the best possible rates.

What Is Mortgage Insurance? Do I Have to Pay It?

If your down payment is less than 20%, insurance is automatically added 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 CMHC, GE, and CG.

What Is the Difference Between Term and Amortization?

The 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.

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.

Where can my down payment be from?

When buying a home, 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.

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