Q What is a High Ratio Mortgage?
A Any mortgage that requires the mortgage applicant to purchase mortgage insurance. This occurs primarily when the loan to value ratio of the property is more than 75%. For example the property is worth $400,000.00 and the mortgage applicants are wanting to finance more than $300,000.00 or 75%.

Q Is there a government provided mortgage guarantee? 
A Yes there is but for the lender only on mortgages that are insured by CMHC, Canada Mortgage and Housing. This means that if the borrower defaults on the mortgage that the lender will be reimbursed for any losses.

Q Which is better short term or long term?
This really depends on what someone is purchasing and the borrower’s situation at the time of purchase. For instance someone purchasing a property with rental income would be more suited to a long term rate to fix this part of the expenses for a longer period. On the other hand someone who is planning to move in the next 1-2 years would be better off going into a short term mortgage to avoid a early payout penalty.

Q Aren’t the banks all the same?
This once again depends on what the borrower’s situation is and what they are purchasing? For example some lenders will give better terms and rates to borrowers who have a high net worth. This is because they are looking for clients who can afford to purchase other investment products, Some lenders will offer financing to first time buyers who can not save a down payment but have good income and credit, etc.

Q How can I adjust my mortgage payments?
A This largely depends on the lender’s prepayment privileges that you are working with which can range from a low of 10% right up to 25%. It also depends on the lenders guidelines concerning these prepayment privileges. For instance some lenders will allow you to increase your payments several times per year up to a maximum amount while others may only allow this once per year. In addition to this some lenders will allow you to decrease your payments back to the original amount prior to the increase while others will not once you have increased them, etc. You can also adjust your payments by refinancing your mortgage if interest rates have decreased.

Q Should I go for a fixed or a variable rate mortgage?
A When deciding on whether someone should take a variable or fixed mortgage they should ask themselves the following questions. Do you like knowing what your payment will be over a longer period of time? Do you want to avoid the need to constantly watch rates? Do you have less than 25% down? If you answered yes to most or all of these questions a more conservative fixed rate mortgage may be the better choice for you?

Q Are all variable rate mortgages the same?
A No some calculate interest monthly while others calculate it less frequently. Some allow only a monthly payment schedule whereas others allow other options such as weekly, bi-weekly, or semi-monthly. Some are closed versus open meaning that if paid out early you will be charged a large prepayment penalty, etc.

Q How does a commercial mortgage differ from a residential mortgage?
A The main difference is that the lending guidelines are different. For example depending on the type of commercial property the lender may not lend as much money because of the higher risk involved such as a warehouse property which is only suited for certain uses. A home on the other hand is more of a necessity which is why lenders will lend more money on these.

Q What are private mortgage providers and are there risks?
A Private mortgage providers are anyone who is not regulated such as a commercial bank. The majority of risk in dealing with a private lender is that they charge higher interest rates and usually have shorter mortgage terms such as a year.

Q When is a full appraisal required when purchasing or refinancing my property?
A A full appraisal is usually only required when the financing is conventional which is 75% or less and above 60%. Below or above this amount no appraisal is needed or only a drive-by appraisal is required?

Q What is the property purchase tax and who pays it?
A The property purchase tax is a property transfer tax levied by the provincial government when someone purchases a property in the province of BC. A first time buyer who has never owned a property and a number of other qualifications may be exempt on all or a portion of this tax depending on the purchase amount. The tax is 1% of the first $200,000.00 property value and 2% of the balance of the purchase price.

Q What is title insurance and who needs it?
A Title insurance is an insurance that protects either the lender or purchaser or both against property defects such as Fraud and Forgery, errors in existing surveys, unpaid taxes by the vendor, etc. It is usually a requirement of the lender that is paid for by the purchaser and is usually needed when a survey can not be found or is to costly to do.

Q What is the Home Buyer’s Plan?
This is a Federal Government Plan that allows first time buyer’s to withdraw up to $20,000.00 of RRSP Savings to be used as a down payment without triggering taxes if they meet the plans qualifications.

Q When should I go to a mortgage broker?
A Someone should seek the services of a mortgage broker under the following situations: 1. They don’t have the time or expertise to evaluate all the current options available to them from all the banks, trust companies, insurance companies, credit unions, etc. and 2. They have a unique situation such as they are self-employed, impaired credit, small down payment, property purchases other than residential, etc.

Q What should I expect from a mortgage broker?
An honest and unbiased evaluation and recommendation as to the best financing options for the applicant’s current situation.

Q How do I get mortgage quotations and information outside of my usual bank?
A Contact us at : paulknibbs@shaw.ca