If you are looking at obtaining a mortgage, it can be difficult to know where to begin. With so many factors to consider and information available, the process of shopping for a mortgage and choosing a lender can be intimidating. As a leading provider of lending solutions for residential and commercial properties, the team at PHL Capital Corp knows how complex the mortgage process can be if you do not have the right information. That is why we have put together a list of common mortgage questions and answers to provide you with the facts you need to make an informed decision.
Learn about 3 common mortgage myths.
When it comes to mortgages, borrowers often ask the following questions:
While many people are under the impression that a 20% down payment is required when purchasing property, this is not the case. In most situations, buyers can pay a 5% down payment for their home. While this amount is significantly lower than a 20% down payment, your mortgage payments will be significantly higher over the course of your term. This means that you will need to determine if it is best to pay more up front or more over time based on your needs, budget, and preferences.
Mortgage pre-qualification is a process where you provide a mortgage lender with information on your income, debt, and assets. With this information, the lender will give you a tentative assessment as to how much they would be willing to lend you toward a home purchase. It is crucial to note that pre-qualification is not a guaranteed loan and should not be treated as a binding agreement.
In the mortgage pre-approval process, a lender has checked your credit and verified your financial information. If you are pre-approved, a lender is making an actual commitment (subject to conditions such as a property valuation) to loan you money. It should be noted that pre-approval is not a guarantee that you will receive a specific rate or mortgage from that lender as circumstances may change from the time you are pre-approved to the time you are ready to make a purchase.
There are many types of mortgages available in Canada, each with their own unique qualities. The most common types of mortgages include:
In addition to the type of mortgage you choose, it is important to consider if a fixed or variable interest rate is best for your needs and budget, as this decision can affect your payments and the amount of time it will take to pay off your mortgage.
Variable Interest – With a variable-rate mortgage, your mortgage payment will stay the same throughout your mortgage term, but the interest rate can go up or down depending on the prime rate and increase the amount of interest you pay each month. To offset this, your payments will typically be lower than fixed-rate mortgages.
Fixed Interest – With a fixed-rate mortgage, the interest rate and your mortgage payments will remain the same throughout your term. While this is more stable, the interest rate—and your payments—will typically be higher than variable-rate mortgages.
While most buyers will look to their bank for a mortgage, there are many other options available. To ensure that you are getting the best mortgage for your needs and budget, be sure to check multiple lenders and banks to see what they are offering. It is also worth looking into alternative mortgage lenders—like PHL Capital Corp—to see how they can help you reach your goal of home ownership. Once you have collected information from various banks, alternative lenders, and mortgage brokers, you can determine which option is best for your situation.
In addition to your down payment (5% of the purchase price or more), there are several closing costs that must be accounted for. These costs typically include notary fees, insurance, and land transfer tax. These fees can combine to account for roughly 3-5% of the total purchase price, so be sure to factor them into your budget.
To learn more about our lending solutions, get in touch with the team at PHL Capital Corp. We can be reached by phone at 604-579-0847 and will be happy to answer any questions you may have regarding mortgages or our application process.