Frequently Asked Questions about Mortgages
1. Why do I need to deal with Valueland instead of my regular bank?
2. What are the steps of buying a home?
3. How much can I borrow?
4. What is the minimum down payment for home purchase?
5. What documents will be required to obtain a mortgage?
6. What are the costs associated with buying a home?
7. What is Collateral Mortgage/Charge?
8. What is First Time Home Buyer Incentive Program?
9. What is Stress Test?
10. What is current prime rate?
1. Why do I need to deal with Valueland instead of a regular bank?
At Valueland Mortgages, you will have the benefits of:
• Timely and dedicated professional service;
• Have access to a wide range of mortgage products;
• Be informed throughout the mortgage process;
• Professional advices that will save your time and money.
2. What are the steps of buying a home?
Step 1: Understanding Your Purchasing Power
Step 2: Getting A Pre-Approved Mortgage (Optional)
Step 3: Finding Your Dream Home
Step 4: Finding Your Lawyer
Step 5: Negotiating Your Offer
Step 6: Conducting Home Inspection (Optional)
Step 7: Arranging Your Mortgage With Valueland
Step 8: Closing Your Home Purchase with Your Lawyer
Step 9: Getting Your Home Keys and Happily Thereafter
For more details, Please see Home Purchase Basics.
For salaried borrowers or pensioner with stable consistent income, the maximum loan amount is typically ~4.5 time of your gross income.
For self-employed or commission based borrowers, the maximum income calculation varies from lender to lender. Please contact us and we can assist you with finding out your borrowing power.
The Maximum Mortgage Calculator can be used as a reference to find out how much you can borrow.
4. What is the minimum down payment for home purchase?
In most cases, a minimum down payment of 5% is required to purchase a home. In addition to that, you must have ~1.5% of purchase price to cover closing costs (i.e. legal fees, land transfer taxes, appraisal fees and a survey certificate, etc.).
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 direct family member. It cannot be borrowed. There is a new CMHC program that will allow some alternate sources of down payment.
5. What documents will be required to obtain a mortgage?
Typical documents required for a mortgage application are:
• Letter of employment and a recent pay stub;
• 3-month bank statements to prove source of down payment;
• Signed purchase agreement and MLS listing, if applicable;
• Appraisal report prepared by approved appraiser;
• Your lawyer information;
• Property tax bill/mortgage statement for existing properties.
Additional documents maybe required.
6. What are the costs associated with buying a home?
First and foremost, the required down payment for your purchase.
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 need some funds for closing costs (roughly ~1.5% of 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.
7. What is Collateral Mortgage?
A mortgage, or a charge in legal terms, can be registered on title as regular charge or collateral charge, depends on the lender’s instruction to the solicitor.
With regular charge, the provisions regards to the mortgage details matches with your actual mortgage details such as loan amount, balance due date, etc.
With collateral charge, the registered mortgage amount can be higher than the actual funded mortgage amount and balance due date is usually On Demand.
The common Collateral Charge Mortgages in the market today are:
- TD mortgages – Starting on Oct. 18, 2010, all new TD mortgages are collateral mortgage;
- Scotia’s STEP mortgage
- CIBC Home Power Plan
- BMO Homeowner Ready Line
- RBC Homeline Plan
- National Bank Mortgages
- Manulife One Mortgage
- FirstLine Matrix Mortgage
- MCAP Fusion Mortgage
The main advantage of collateral mortgage is that you can refinance/take out the equity from your existing home at any time without legal fees.
The main disadvantage of collateral mortgage is that it is not transferrable. The mortgage can not be assigned to another lender. In another words, if a customer would like to switch mortgage lenders, it has to be done as refinance.
For more detailed information concerning the products we are offering, please contact us by phone or email.
8. What is First Time Home Buyer Incentive Program?
The program offers qualified applicants up to 10% interest free loan in order to lower mortgage carrying costs and making home ownership more affordable. After property is sold or 25 years, whichever comes first, homeowners must repay the borrowed percentage back to the government.
The program launched in Sept. 2019, government earmarked $1.25 billion funds and expected to help 100,000 families purchase their first home in 3 years. However, according to data from CMHC (Canada Mortgage and Housing Corporation), only 9,530 applications approved in its first year.
One of the biggest restrictions of program is that purchase price is limited at $505K currently. In cities like Toronto and Vancouver, it is difficult to find a property below that price.
In end of 2020, government planned to make some changes to the program. One of the changes is to increase purchase price from $505K to $722K in 3 cities – Toronto, Vancouver and Victoria. Other cities in Canada will remain the same at $505K.
To find out if you are eligible for the program, please use the eligibility calculator here: https://www.placetocallhome.ca/fthbi/eligibility-savings-calculator
As of January 01, 2018, all the federally regulated banks have to implement the Stress Test on ALL mortgages across the board. That means, you have to qualify based on higher interest rate than your actual contract rate. Therefore, your maximum borrowing power will be reduced to 4 - 5 times of your income, provided no other major debts.
Most of our lenders are regulated federally; therefore, they have to comply with the new Rules.
However, we do have access to Non-Federally Regulated lenders who might have less stringent qualifying rules. Please contact us for more details.
10. What is the current prime rate?
Today’s prime rate is 6.70% with most lenders.
TD’s prime rate is at 6.85%.