Frequently Asked Questions

Frequently Asked Questions

What is a mortgage?
A mortgage is a loan in which property or real estate is used as collateral. The borrower enters into an agreement with the lender wherein the borrower receives cash upfront then makes payments over a set time span until the lender is paid back in full. The money received may be used to buy real estate, or to raise funds for another purpose.

Why use a broker?
Mortgage brokers understand what is happening in the market and have access to many lenders in order to find the best mortgage financing for you. As lenders offer multiple loan options, you work with your mortgage broker to decide which options and rate are best suited for you.

How will my previous bankruptcy affect a mortgage?
The mortgage specialists at First Canadian Mortgage Corporation have extensive experience and a proven track record for securing funds from lenders for borrowers who have had a previous bankruptcy. Don’t hesitate to reach out to discuss.

How much is the minimum downpayment?
The minimum amount required to purchase your house is 5%, and there are some restrictions on maximum price. A down payment may not be borrowed; it may be your own funds, or a gift from a family member accompanied by a gift letter.

What is mortgage loan insurance?
Mortgage loan insurance is insurance required by law to protect the lender in case you can’t make your payments. If you want to buy a home with a down payment of less than 20%, you’ll need mortgage loan insurance. This insurance may be purchased from Canada Mortgage and Housing Corporation (CMHC), a crown corporation, and GE Capital Mortgage Insurance Company, an approved private corporation. Mortgage loan insurance lets you get a mortgage for up to 95% of the purchase price of a home. It also ensures you get a reasonable interest rate, even with your smaller down payment. The cost is paid by the borrower and is calculated as a percentage of the mortgage (ranging from .50% to 3.75%), is based on the size of your down payment, and may be added to the mortgage.

What is CMHC?
Canada Mortgage and Housing Corporation (CMHC) is a provider of mortgage loan insurance.

What is mortgage life insurance?
Mortgage life insurance is a form of insurance designed to protect your family so that your loved ones are not left with the responsibility of repaying the mortgage after you are gone.

How much are Closing Costs?
Financing a mortgage may include the following expenses and approximate costs (up to 2.5% of the basic purchase price):

  1. Appraisal ($150-$250)
  2. Legal fees and disbursements ($700-$1500)
  3. Title insurance if a survey is not available ($225)
  4. Land transfer tax is a one-time tax based on a percentage of the purchase price of the property and/or mortgage amount.
  5. Mortgage loan insurance and PST (The cost is calculated as a percentage of the mortgage and is based on the size of your down payment, and may be added to the mortgage.)
  6. Early Renewal / Discharge fee - When you break your mortgage contract to renew your mortgage at a new rate and a new term, you are faced with a prepayment charge to reimburse your financial institution for the lost interest income. Typically, this prepayment charge is based on the greater amount of either 3 months interest, or, the interest rate differential (IRD).
  7. Brokerage fee
  8. Property insurance must be in place by the closing date.
  9. Moving costs.

What is the difference between a variable rate and a fixed rate loan?
A variable interest rate loan has varying interest rates charged over time as the market interest rates change, resulting in payments varying as well. With a variable interest rate loan, you benefit if the interest rate remains the same or decreases.

A fixed interest rate loan has the same interest rate charged for the life of the loan borrowing term period, no matter what the market interest rates do. Borrowers wishing to have a predictable payment, usually prefer a fixed interest rate loan.