DOWN PAYMENT AND MORTGAGE LOAN INSURANCE
The amount of your mortgage will be determined by the price of the home minus an initial cash payment (called the down payment) made up front. If the down payment is less than 20% of the value of your new home, your lender will probably require “Mortgage Loan Insurance”.
In addition to a lower down payment, Mortgage Loan Insurance will help you access interest rates that you otherwise wouldn’t have been able to negotiate. The cost for Mortgage Loan Insurance, called a premium, is usually offset by the savings you get from lower interest rates.
There are 3 Loan Insurers, CMHC Genworth and Canada Guarantee. CMHC is one of Canada’s leading mortgage loan insurer. They have helped newcomers with permanent resident status become homeowners with a minimum down payment of 5% regardless of how long they have been in Canada. Non- permanent residents can also purchase a home with a minimum down payment of 10% of the value of the home. type “mortgage loan insurance” in the search box. Mortgage Loan Insurance is not the same as mortgage life insurance, which pays off your mortgage in full if you or your spouse dies.
CREDIT SCORE AND HISTORY
Credit and work history are very important when trying to obtain a mortgage. Unfortunately, as a newcomer to Canada, you may not have a credit history that is accessible to Canadian lenders. If you want to buy a home, it is important to begin building a new credit history as early as possible. Talk with Dominion Lending Centres Westcor. We will be able to help you get a credit card and plan to build a credit history that will help you buy your home. Here are some tips that will help you show that you are able to repay a mortgage:
- Open a bank account and use it regularly.
- Consistently pay your bills on time, including rent, utilities, cable, and insurance premiums.
- Apply for small loans from your bank to begin proving that you can pay on time.
- Apply for a credit card.
- Try to remain with the same employer for an extended period of time.
SOURCES OF CREDIT HISTORY
Loan Insurers will consider factors other than a traditional credit history when processing the application for Mortgage Loan Insurance from your lender. For example, CMHC will consider the payment of rent or room and board for a 12-month period, plus proof of one additional payment (for example, a utility or cable bill) or documented regular savings for a 12-month period. If this is not available, CMHC will consider payment of any three bills for 12 months. These could include: utilities, cable, childcare, insurance premiums, or documented regular savings. CMHC will also consider factors that show you are able to repay debt, such as a history of dealing with your bank. Get more information. For a fee, you can obtain your credit score and report. Visit the website of one of the following credit reporting agencies to find out how to obtain your credit report:
Canada Mortgage and Housing Corporation.
MAKE YOUR MORTGAGE WORK FOR YOU
Dominion Lending Centres Westcor will offer you several choices to help find you the mortgage that best matches your needs. Here are some of the most common.
Amortization refers to the length of time you choose to pay off your mortgage. Mortgages typically come in 25 year amortization periods. However, they can be as short as 15 years. Usually, the longer the amortization, the smaller the monthly payments. However, the longer the amortization, the higher the interest costs. Total interest costs can be reduced by making additional (lump sum) payments when possible.
You have the option of repaying your mortgage every month, twice a month, every two weeks or every week. You can also choose to accelerate your payments. This usually means one extra monthly payment per year.
Interest Rate Type
You will have to choose between “fixed”, “variable” o “protected (or capped) variable”. A fixed rate will not change for the term of the mortgage. This type carries a slightly higher rate but provides the peace of mind associated with knowing that interest costs will remain the same. With a variable rate, the interest rate you pay will fluctuate with the rate of the market. Usually, this will not modify the overall amount of your mortgage payment, but rather change the portion of your monthly payment that goes towards interest costs or paying your mortgage (principal repayment). If interest rates go down, you end up repaying your mortgage faster. If they go up, more of the payment will go towards the interest and less towards repaying the mortgage. This option means you may have to be prepared to accept some risk and uncertainty. A protected (or capped) variable rate is a mortgage with a variable interest rate that has a maximum rate determined in advance. Even if the market rate goes above the determined maximum rate, you will only have to pay up to that maximum.
The term of a mortgage is the length of time for which options are chosen and agreed upon, such as the interest rate. It can be as little as six months or as long as five years or more. When the term is up, you have the ability to renegotiate your mortgage at the interest rate of that time and choose the same or different options.
“Open” or “Closed” Mortgage you to pay off your mortgage in part or in full at any time without any penalties. You may also choose, at any time, to renegotiate the mortgage. This option provides more flexibility but comes with a higher interest rate. An open mortgage can be a good choice if you plan to sell your home in the near future or to make large additional payments.
A closed mortgage usually carries a lower interest rate but doesn’t offer the flexibility of an open mortgage. However, most lenders allow homeowners to make additional payments of a determined maximum amount without penalty. Typically, most people will select a closed mortgage.