this is a mortgage that is registered for the full amount of the subject property, as opposed to the loan amount, which is the case for conventional mortgages. There are pros and cons to both types of mortgages. Please contact us for more information.
when purchasing a property, a minimum down payment of 5% down is required.
with a down payment between 5-20% down, you will be required to have mortgage default insurance added to the mortgage. This is arranged by the lender and the premium is added to the mortgage amount – this is called a high-ratio mortgage.
when you have more than 20% down, you avoid any mortgage default fees. This is called a conventional mortgage.
certain types of properties have different down payment requirements. On a single family dwelling, 5% is the minimum while on a rental/investment property, 20% is required.
If your IAD and your closing date are not the same date you will be required to pay the interest on your mortgage for the period between your closing date and the IAD. In the example where you took possession on the 27th, assuming a 30 day month, you would be responsible for 3 days of interest on the mortgage amount. Some lenders will deduct this from the original mortgage advance meaning that you will have to make up that shortfall at your lawyers. Some lenders will just deduct this amount directly from your bank account.
the purpose of mortgage default insurance is to protect the lender.
with high ratio mortgages (mortgages over 80% of the home’s value), there is less equity retained in the property, resulting in higher risk for the lender if the property goes to power of sale. In these cases, the lender will require the mortgage be insured through CMHC or Genworth in order to protect their investment. As such, the cost is passed on to the consumer and is added to the mortgage amount.
a pre-approval functions largely as a rate hold where the interest rate in the market at that time is held for 120 days, protecting your from any rate increases until the end of that 120 day period, giving you the opportunity to purchase a home within that timeframe.
a pre-approval is not a guarantee that you will be approved for a mortgage. Instead it’s a preliminary analysis that has determined you are eligible for a mortgage as long as the details that have been provided in the application can be verified to the lenders satisfaction.