Buying a Home FAQ

General Mortgage FAQs :
Home Buying FAQs:
  • What is the minimum required down payment when purchasing a home?

    You will need a minimum of 5% of the home purchase price as a down payment on an owner occupied property. Mortgage default insurance is required on any property with less than 20% down payment. If you are purchasing a rental or income producing property, you will require a minimum of 20% of the property purchase price to qualify.

  • Are there restrictions on where the down payment money comes from? For example, can I borrow my down payment money or have my parents lend me the money?

    There are many resources you may be able to use in order to achieve your down payment sooner. Down payment resources are broken into two categories: traditional and non-traditional down payment options.

  • What is a mortgage amortization?

    Amortization is the estimated number of years it will take to pay off your mortgage entirely. Amortization periods range up to 30 years. The longer your amortization is, the lower your mortgage payments will be, but the higher the total amount of interest you’ll pay over the life of the mortgage. An amortization is made up of a number of mortgage terms.

  • What is the difference between fixed rate mortgages and adjustable rate mortgages?
    Rate Option: Maybe a good
    choice if:
    Benefits: Drawbacks:
    Fixed rate mortgage
    Your rate will be set at the start of your term and will not change
    You’re uncomfortable
    with rate changes
    You’ll have the security of knowing what the rate and payment amount will be for the duration of the mortgage term. Your rate is locked in so you’ll be protected from rising interest rates. Mortgage rates can go up, but they can also go down. With a fixed rate mortgage your rate is locked in. You won’t benefit from lower interest rates if they drop during the term of your mortgage.
    Adjustable rate mortgage
    Your rate will “float” with the prime rate throughout the term, with the potential to go up or down at any
    time.
    You’re okay with your mortgage rate changing over the course of the term Your rate will change throughout the term of your mortgage. You can take advantage of lower interest rates if rates do drop. In the event that rates go up, your mortgage rate and your payment amount could increase.
  • What is the difference between open and closed mortgages?
    Term Type: Maybe a good
    choice if:
    Benefits: Drawbacks:
    Closed mortgage:
    cannot be prepaid, renegotiated or refinanced before maturity, except according to its terms.
    You’re comfortable
    staying with your
    mortgage for the full term. You don’t expect
    to pay it out before the term ends.
    Closed mortgages typically
    have lower rates than open
    mortgages.
    If you want to pay out your mortgage before
    the term is done or make a large prepayment,
    you may be have to pay a prepayment charge.
    Open mortgage: allows you to pay back the borrowed funds any time during the term, without having to pay a prepayment charge. There’s a chance you’ll want to pay out your mortgage during
    your term.
    With an open mortgage, you
    can prepay or even pay out
    the entire balance of your
    mortgage at any time during the term without having to pay a prepayment charge.
    Open mortgages typically have higher rates than closed mortgages.
  • What is a mortgage term?

    It is the length of time a lender will lend mortgage funds to a borrower. Most mortgage terms run from six months to five years. Certain lenders may offer longer terms, e.g., 6, 7 or 10 years.
    After this period, the borrower can either repay the balance the remaining principal plus interest of the mortgage or renew the mortgage for another term. The total length of a mortgage is usually made up of several terms.

    Term Length: Maybe a good
    choice if:
    Benefits: Drawbacks:
    Shorter term – typically two years or less You believe that mortgage rates will drop before renewal time. You want to be able to take advantage of these future lower rates.

     

    You expect to sell your home in the short term and don’t want to be
    tied to a longer mortgage term.

    Typically shorter mortgage terms have lower interest rates.

     

    If you need to pay out your mortgage early, you’ll pay less of a prepayment charge if you have a shorter mortgage term.

    Rates can be tough to predict. They may rise by the time your mortgage term ends. In this case you’d have to renew at a higher rate.
    Longer term – typically three years or more You believe that the current rates are reasonable and could possibly rise, so it feels like a good time to commit. You’ll know what your rate
    will be further into the future, so you can make longer term financial plans.
    There’s a risk for unexpected payout charges due to situations like changes in your financial circumstances or having to move unexpectedly.
  • How long does it take to get a mortgage?

    Typically you should allow for a minimum of 30 days and as much as 90 days to complete your mortgage qualifying and approval process.

  • What other costs should I consider when buying a home?

    There are several possible extra costs involved in purchasing a home. Some are one-time closing costs, such as land transfer taxes, legal or notary fees, fire insurance, survey fee or title insurance, and applicable sales tax. Others, such as property insurance, are ongoing monthly expenses. We recommend that you budget 1.5% – 4% of the price of your new home to cover these types of costs.

  • How do I know my credit rating and is there a minimum credit score that I need to qualify for a mortgage?

    You can ask for a free copy of your credit report by mail or access an online version usually for a small fee. There are two main credit bureaus in Canada: Equifax Canada and TransUnion Canada.

  • I just got a job. Can I get a mortgage?

    Under most circumstances, you must be employed for a minimum of 3 months and be past the probationary period at your place of employment for the lender to consider your current employment and salary.

  • What is a Mortgage Registration?

    Your lender will register what is known as a “charge.” This process provides a means of securing a mortgage or other loan against your property. There are two types they may use: standard and collateral. Bridgewater Bank registers all mortgages as a standard charge mortgage.

  • What is an Anniversary Date/Interest Adjustable Date?

    Interest adjustment date (IAD) is your term start date. Your anniversary date is every 12 month period following the interest adjustment date.

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