Understand Your Toronto Mortgage
All mortgages are not created equal. And because there are so many types of mortgages offered by various lenders, it is easy for the untrained individual to become confused. This confusion can result in costly errors if the wrong mortgage is chosen. Here are some of the differences to watch out for:
- Some mortgages are open while some are closed
- Some have variable interest rates while others have fixed interest rates
- Some mortgages are conventional while others are high-ratio and need to be insured
- Some are registered by a lawyer as a Collateral Charge (revolving home equity line of credit) while others are registered as a Standard Charge (amortized mortgages)
- Some have large and flexible pre-payment while others have limited pre-payment options
How Toronto Mortgage Brokers Help
Navigating through these options is simplified with the help of a professional Toronto mortgage broker like the Mortgage Coach. The process will be quick, direct and informative, offering you peace-of-mind while saving you both time and money.
To begin the mortgage process, clients complete an application online or via the telephone. Clients often fall into one of these categories:
- Mortgage Refinance
- Mortgage Renewals
- Mortgage Purchase
- Rental mortgage
- Commercial Mortgage
- 2nd Mortgages
Once the application is complete, our mortgage brokers interview Toronto based clients in person or over the telephone to assess their unique and specific needs. During this interview we will begin collecting the documents necessary to support the application. These documents could include some or all of the following:
- Proof of down payment
- Proof of income
- Property information, MLS listing, purchase agreement
As Toronto mortgage brokers, once the application is complete and the documentation compiled, we begin the process of “shopping” the application to find the most suitable lender for your new or refinanced Toronto mortgage.
Once a suitable lender has approved the mortgage, we fully explain the approval to the client, ensuring that he/she understands the mortgage and all of its conditions. After the customer accepts the approval, we work with the lender to complete all of the outstanding conditions.
We ensure the clients’ lawyer receives instructions from the lender and the transaction is successfully completed.
At the Mortgage Coach, we make certain our customers are informed and understand each step in the mortgage approval process. We are always available to answer questions and provide feedback.
Choosing a Toronto Mortgage Broker
While not all mortgages are created equal, the same is true for mortgage brokers in Toronto.
A mortgage broker can often get you a better deal on a mortgage than you could find for yourself. Brokers offer a simple, low-stress alternative to borrowing from a bank. But the mortgage brokerage business is developing in a way that calls for more vigilance on the part of customers. Inexperienced people are flocking to the profession. A new report from Taddingstone Consulting Group shows that even brokers themselves are concerned about all the newcomers in their line of business:
"Despite facing an uncertain interest rate environment and housing market, the threat posed by the flood of inexperienced mortgage brokers is viewed as one of the biggest challenges facing the mortgage brokerage industry," the report says.
There are now about 10,000 mortgage brokers and agents (employees of brokerage firms), up from several hundred in the early 1990s. Brokers must be licensed provincially, but agents may or may not require a license of their own.
Questions to Ask Your Mortgage Broker
1. Experience & Accreditation
When selecting a mortgage broker, always ask about experience and accreditation. The professional group for mortgage brokers, the Canadian Institute of Mortgage Brokers and Lenders, offers a designation called the AMP (Accredited Mortgage Professional), which is earned by successfully completing a recognized proficiency course or passing a CIMBL exam, and passing a CIMBL ethics course. There are approximately 3,200 AMP-accredited brokers listed on the CIMBL website. The Mortgage Coach hires only trained and licensed mortgage brokers in Toronto with an AMP designation.
2. Selling Based on Rates
The mortgage brokerage industry is building an advice-based relationship with its clientele instead of focusing strictly on providing low-rate mortgages. Given that the big banks, credit unions and alternative financial institutions routinely offer competitive mortgage rates, this is a wise strategy. But, there will always be those who want to build a business strictly by selling products to generate commissions.
When speaking with potential mortgage brokers always ask about the best interest rates they offer, and what advice they can provide on the best terms and other features. If it's all about the rate, then look elsewhere. At the Mortgage Coach you will not only get the best mortgage rate in Toronto for your situation, you will receive the most competitive rate out there.
3. What is Your Commission?
Other than situations where they work with credit-challenged clients, mortgage brokers in Toronto and throughout Canada provide a free service. They make their money from commissions paid by the lender ranging from 0.6 to 1.5 per cent of the amount borrowed. Invisible compensation works well in that the customer pays nothing while also receiving a low interest rate. Still, you should ask what commission your broker is making from a mortgage lender and how it compares with the compensation offered by comparable financial institutions. Many mortgage brokers find it difficult to make borrowers aware that they offer a credible alternative to the banks. Mortgage brokers actually do about two-thirds of their business with major banks. If a bank is the best choice for your application at the Mortgage Coach we will be sure to place your mortgage at a bank.
The 5 Cs of Credit
A qualified Toronto mortgage broker like the Mortgage Coach is skilled at choosing the correct lender. We examine the criteria that each lender uses to approve an applicant. In general, lenders assess each applicant on the 5 Cs of credit, allowing them to make a prudent decision on a mortgage application.
Character is determined by applicant stability and net worth. Degree of stability is determined by length of employment, type of job, length in residence, length of time reported on credit bureau and how credit has been repaid. Lenders generally look for a minimum of 3 years worth of history. If there is a break in the consistency, a reasonable explanation will be required. Net Worth is usually accumulated over time and lenders take this into account along with the age, job stability and income of the applicants. These factors will determine if the net worth is reasonable.
Capacity describes the ability to repay all current obligations plus the new mortgage request. Capacity is determined using certain standard mathematical calculations that consider personal income, existing debt load and the mortgage financing the customer is applying for. These ratios are commonly referred to as G.D.S.R. (gross debt service ratio) and T.D.S.R. (total debt service ratio).
Credit describes the manner in which the applicant has repaid existing and previous credit. A good credit history demonstrates the applicant’s willingness to repay a debt. This willingness to repay is essential.
Collateral is also known as security, in this case: the property being mortgaged. This component concerns the lender should they have to exercise their right to take action against the applicant for lack of repayment. They consider the marketability of the property based on type, condition, location, zoning, and value at the time of mortgage request. The listing as well as an appraisal report can verify this.
Capital reflects the amount of equity the applicant has or will have (depending on the purpose for which the credit is obtained) in the property. There are standard policies/conditions on the minimum amount of capital or equity that is acceptable in order to qualify for a mortgage. An individual who invests their own capital in a property will feel obligated to protect their own investment to prevent financial loss. This is why lenders insist that capital be from known sources and supplied from the applicant’s own resources.