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Getting a mortgage
As a newcomer to Canada you may find shopping for a mortgage to be confusing. While some of the terms used will probably be familiar, there are new ones peculiar to Canada. It can all be rather too much at first.
One reassuring note is that generally you can expect to get a mortgage provided you put 35% down.
Shopping for a mortgage in Canada is changing. More lenders are competing for your business. New features and options are being introduced every day. Knowing what’s right for you – and how much to pay – is becoming increasingly complicated.
Bank mortgages
This is probably the most common means of obtaining a mortgage in Canada today. People expect to go to their bank or credit union and get a mortgage.
The advantage of using a bank is it is likely to be quite a simple process, particularly if you are already a customer.
The disadvantage is that you are limited to the mortgage products and rates on offer from your bank. Or you have to shop around from bank to bank.
In addition banks have a reputation of being cautious lenders and, if your circumstances are unusual, you may find them slower or less willing to help.
If you already have a Canadian bank account, by all means contact your bank and discuss what they can do for you. Alternatively if you are selecting a bank, then it is simple enough to find out about their mortgages while looking at the different accounts they offer.
Credit Unions are also a source of financing. These are like the Building Societies in the UK, and seem to be willing to consider a wider variety of situations - e.g. finance for recreational property, for self-employed etc.
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Mortgage brokers
A growing alternative to banks are the independent mortgage brokers. More than one in five Canadian mortgages is now handled by mortgage brokers. Consumers are increasingly discovering they just don’t have the time to shop from one lender to the next, trying to figure out which deal is the best.
Rather than working for one financial institution, a mortgage broker is independent and deals with several different financial institutions. This allows them to offer you more choices and more competitive rates. It also means their advice is in likely to be in your best interest.
And best of all, mortgage brokers do not charge for their services since they get a “finders fee” from the lending institution when you take out the mortgage.
We recommend that you consult a mortgage broker. You are not forced to go with them, but as there is no charge you can easily compare what your broker finds with anything your bank might offer. And more than likely you will find it an easier and quicker way to get your mortgage.
Mortgage Tip
When making mortgage payments, it is always more beneficial to make bi-weekly payments i.e. every 2nd week rather than monthly payments. The benefit arises from the fact that you are decreasing the principal balance and reducing the interest debt faster by paying bi-weekly.
On a 25 year amortization (the typical amortization period chosen in Canada) and over a 5 year mortgage term (also a typical mortgage term), you will have 16 years and 7 months amortization remaining whilst making bi-weekly mortgage payments versus 20 years amortization remaining whilst making monthly payments. So, this simple change in how you pay your mortgage will typically reduce your mortgage term by over 3 years.
Contact Details :
David
Sherman
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