Mortgage FAQs.

About Valueland Mortgages

(1) What is Valueland Mortgages?

Valueland Mortgages is a mortgage broker who negotiates with lenders to get you the best deal possible. Valueland is licensed currently to arrange mortgages for consumers in Ontario, British Columbia, Alberta and a few other provinces in Canada.

(2) Why do you need to deal with Valueland instead of your regular bank?

Valueland Mortgages is independent from banks, trusts, financial companies. As such, Valueland searches the mortgage market and provides you with unbiased advice and a wide selection of mortgage plans. It also provides objective analysis on the strengths and weakness of certain products on the market.

Due to the volume and operating efficiency, Valueland Mortgages can obtain considerable discounts for your mortgages and pass the savings to you.

Mortgages for Home Purchases

(3) What are the steps to buy your home?

Step 1: Understanding Your Purchasing Power:
Step 2: Getting A Pre-approved Mortgage:
Step 3: Finding Your Dream Home:
Step 4: Finding Your Lawyer:
Step 5: Negotiating Your Offer:
Step 6: Conducting Home Inspection:
Step 7: Converting Your Mortgage Approval or Arranging Your Mortgage
Step 8: Closing Your Home Purchase with Your Lawyer
Step 9: Getting Your Home Keys and Happily Thereafter

 >> More Details >> See Home Purchase Basics

(4) How much can I borrow to purchase your home?

To determine the maximum mortgage amount you can borrow, you will first need to know your taxable income and your total debt outstanding and their monthly payments. Normally, only 32% of your income is you maximum spending towards your mortgage payment, property taxes and heating costs. Secondly, only 40% of your taxable income and deduct all of your monthly debt payments. The lesser of the first or second calculation will be your maximum mortgage payment.

 >> Calculate Your Maximum Mortgage Amount

(5) What is the minimum down payment needed for a home?

In most cases, a minimum down payment of 5% is required to purchase a home. In addition to the down payment, you must also be able to show that you can cover the applicable closing costs (i.e. legal fees and disbursements, appraisal fees and a survey certificate, where applicable).

Regardless of the amount of your down payment, at least 5% of it must be from your own cash resources or a gift from a family member. It cannot be borrowed. There is a new CMHC program that will allow some alternate souces of downpayment.

Lenders will generally accept a gift from a family member as an acceptable down payment provided a letter stating it is a true gift, not a loan, is signed by the donor. Where the mortgage loan insurance is provided by Canada Mortgage and Housing Corporation (CMHC), the gift money must be in the your possession before the application is sent in to CMHC for approval.

(6) What is a conventional mortgage?

A conventional mortgage is usually one where the down payment is equal to 20% or more of the purchase price, a loan to value of or less than 80%, and does not normally require mortgage loan insurance.

(5) What is mortgage loan insurance?

Mortgage loan insurance is insurance provided by Canada Mortgage and Housing Corporation (CMHC), a crown corporation, and Genworth Insurance Company, an approved private corporation. This insurance is required by law to insure lenders against default on mortgages with a loan to value ratio greater than 80%. The insurance premiums, ranging from .50% to 3.75%, are paid by the borrower and can be added directly onto the mortgage amount. This is not the same as mortgage life insurance.

(7) What type of documentation will be required to obtain a mortgage?

Some of the items you will need to provide are:

- Your personal information, including identification such as your driver\'s license
- Details on your job, including confirmation of income
- Your sources of income
- Information and details on all bank accounts, loans and other debts
- Proof of financial assets
- Source and amount of down payment
- Proof of source of funds for the closing costs (approximately 1.5% of purchase price)

(8) Can I use gift funds as a down payment?

Most lenders will accept down payment funds that are a gift from family as an acceptable down payment. A gift letter signed by the donor is usually required to confirm that the funds are a true gift and not a loan. where the mortgage requires mortgage loan insurance, Canada mortgage and housing corporation requires the gift money to be in the purchaser's possession before the application is sent in to them for approval. where mortgage loan
insurance is provided by GE Capital this is not a requirement. See 'what is mortgage loan insurance?' for further information.

(9) Should I wait for my mortgage to mature?

Lenders will often guarantee an interest rate to you as much as 120 days before your mortgage matures. And, as long as you are not increasing your mortgage, they will cover the costs of transferring your mortgage too. This means a rate promised well in advance of your maturity date, thus eliminating any worries of higher rates. And if rates drop before the actual maturity rate, the new lender will usually adjust your interest rate lower as well.

Most lenders send out their mortgage renewal notices offering existing clients their posted interest rates. The rate you are being offered is usually not the best one. Always investigate the possibility of a lower interest rate with the lender or another lender. If you don't you may end up paying a much higher interest rate on your renewing mortgage than you need to.

(10) What is a down payment?

Very few home buyers have the cash available to buy a home outright. Most of us will turn to a financial institution for a mortgage the first step in a potentially long-standing relationship. But even with a mortgage, you will need to raise the money for a down payment.

The down payment is that portion of the purchase price you furnish yourself. The amount of the down payment (which represents your financial stake, or the equity in your new home) should be determined well before you start house hunting.

The larger the down payment, the less your home costs in the long run. With a smaller mortgage, interest costs will be lower and over time this will add up to significant savings.

(11) How can you acquire a home with as little as 5% down?

Most lenders now offer insured mortgages for both new and resale homes with lower down payment requirements than conventional mortgages - as low as 5%. Low down payment mortgages must be insured to cover potential default of payment, and their carrying costs are therefore higher than a conventional mortgage because they include the insurance premium.

With all low down payment insured mortgages, you are responsible for:

:appraisal and legal fees
:an application fee for the insurance
:the payment of the mortgage default insurance premium (although the amount of the premium may be added to the mortgage amount).

(12) How can you pay off your mortgage sooner?

There are ways to reduce the number of years to pay down your mortgage. You'll enjoy significant savings by:

Selecting a non-monthly or accelerated payment schedule
Increasing your payment frequency schedule
Making principal prepayments
Making Double-Up Payments
Selecting a shorter amortization at renewal

(13) How can you use your RRSP to help you buy your first home?
Today, about 50% of first-time home buyers use their RRSP savings to help finance a down payment. With the federal government's Home Buyers' Plan, you can use up to $20,000 in RRSP savings ($40,000 for a couple) to help pay for your down payment on your first home. You then have 15 years to repay your RRSP.

To qualify, the RRSP funds you're using must be on deposit for at least 90 days. You'll also need a signed agreement to buy a qualifying home.

(14) What are the costs associated with buying a home?
First and foremost, you have to make sure you have enough money for a down payment - the portion of the purchase price that you furnish yourself.

To qualify for a conventional mortgage you will need a down payment of 20% or more. However, you can qualify for a low down payment insured mortgage with a down payment as low as 5%.

Secondly, you will require money for closing costs (up to 1.5% of the basic purchase price).

If you want to have the home inspected by a professional building inspector - which we highly recommend - you will need to pay an inspection fee. The inspection may bring to light areas where repairs or maintenance are required and will assure you that the house is structurally sound. Usually the inspector will provide you with a written report. If they don't, then ask for one.

You will be responsible for paying the fees and disbursements for the lawyer or notary acting for you in the purchase of your home. We suggest you shop around before making your decision on who you are going to use, because fees for these services may vary significantly.

There are closing and adjustment costs, interest adjustment costs between buyer and seller and (depending on where you live) land transfer tax - a one-time tax based on a percentage of the purchase price of the property and/or mortgage amount.

Finally, you will be required to have property insurance in place by the closing date. And you will be responsible for the cost of moving.

Remember, there will be all kinds of things you'll have to purchase early on - appliances, garden tools, cleaning materials etc. So factor these expenses into your initial costs.

What should the length of my mortgage term be?
The length of mortgage terms varies widely - from six months right up to 25 years. As a rule of thumb, the shorter the term, the lower the interest rate the longer the term, the higher the rate.

While four or five year mortgages are what most home buyers typically choose, you may consider a short-term mortgage if you have a higher tolerance for risk, if you have time to watch rates or are not prepared to make a long-term commitment right now.

Before selecting your mortgage term, we suggest you answer the following questions:

1. Do you plan to sell your house in the short-term without buying another? If so, a short mortgage term may be the best option.

2. Do you believe that interest rates have bottomed out and are not likely to drop more? If that's the case, a long mortgage term may be the right choice for you. Similarly, if you think rates are currently high, you may want to opt for a short to medium length mortgage term hoping that rates drop by the time your term expires.

3. Are you looking for security as a first-time home buyer? Then you may prefer a longer mortgage term, so that you can budget for and manage your monthly expenses.

4. Are you willing to follow interest rates closely and risk their being increased mortgage payments following a renewal? If that's the case, a short mortgage term may best suit your needs.

(15) What are the monthly costs of owning a home?
Needless to say, you'll have financial responsibilities as a home owner.

Some of them, like taxes, may not be billed monthly, so do the calculations to break them down into monthly costs. Below you will find a list of these expenses.

The Mortgage Payment

For most home buyers, this is the largest monthly expense. The actual amount of the mortgage payment can vary widely since it is based on a number of variables, such as mortgage term or amortization.

Property Taxes

Property tax can be paid in two ways - remitted directly to the municipality by you, in which case you may be required to periodically show proof of payment to your financial institution; or paid as part of your monthly mortgage payment.

School Taxes

In some municipalities, these taxes are integrated into the property taxes. In others, they are collected separately and are payable in a single lump sum, usually due at the end of the current school year.

Utilities

As a home owner, you'll be responsible for all utility bills including heating, gas, electricity, water, telephone and cable.

Maintenance and Upkeep

You will also have to cover the cost of painting, roof repairs, electrical and plumbing, walks and driveway, lawn care and snow removal. A well-maintained property helps to preserve your home's market value, enhances the neighbourhood and, depending on the kind of renovations you make could add to the worth of your property.

(16) What if I have a poor credit history?

While you may not be given immediate mortgage approval, Valueland Mortgages has access to many lenders and products which will probably work. The terms and interest rates will depend on your credit situation.

(17) What documentation is required to confirm my down payment?

For funds derived from a bank account, lenders require a bank statement confirming the down payment. For funds derived from RRSP, GIC, or stock portfolios, the most recent statement is required. For funds derived from the sale of property, a fully executed binding sale agreement is required.

(18) As a non-resident, can I qualify for a mortgage?

Yes, as a non-resident you are able to qualify for a mortgage. The maximum Loan to Value Ratio is typically limited to 65%, but can go as high as 75% in special cases.