Mortgages in Canada
Choosing a Realtor
Finding the right realtor can be a big help for you to get the right house at the right price. Below, you will find sample questions to ask possible realtors before deciding to work with one.
Qualifications
Request personal brochure or resume. Look for experience and knowledge in your area, in your price range, and letters of reference.
Full-time realtor
Ask if this is their full-time career and whether they’re committed to it.
Track record
How many properties have they sold in the last 6 months? What is their ranking among the other realtors in their area? How many listings do they have at that moment? What has their ranking been over the last 5 years?
Strategy
Ask what they’ll do to find you the right house. Simply rely on MLS listings, or do they have other homes to show you?
Length of time for search
Ask them how long do they believe it will take. What’s the average length of time in your area?
Support staff
Ask if they have an assistant to help you in the process. This means another contact for you when you need it.
Finding and Purchasing the Right Home
When you’re ready to make one of the biggest purchases of your life, make sure you shop around.
Don’t forget to consider such things as transportation, distance to work and to schools, recreational facilities, shopping, healthcare, and whatever you can think of.
Next step is to find a real estate agent who you would trust with your home search. Try to work with the agent who is most active in your neighborhood. The right agent should call you regularly and keep you informed of listings and sales in your area.
Making House Hunting Fun
There’s no shortage of information available to help you make an informed purchase decision. Lenders, as well as CMHC, the Canadian Bankers’ Association, the Ontario Real Estate Association and the Home Builders’ Association all have brochures (even videos) to make house-hunting stress-free and fun.
Selecting the Right Mortgage
The basic choices in choosing a mortgage include:
Conventional vs. high-ratio mortgages
A conventional mortgage equals no more than 75% of the appraised value or purchase price of the property, whichever is less. A high-ratio mortgage is usually for more than 75% of the appraised value or purchase price. It’s often referred to as an NHA mortgage because it is granted under the provisions of the National Housing Act and must, by law, be insured through CMHC for which the borrower pays the insurance premium as well as application, legal and property appraisal fees.
Closed vs. open mortgages
Closed mortgages usually offer lower interest rates than open mortgages of the same term, but open mortgages let you pay off as much as you want at any time without having to pay penalty.
Short term vs. long term
The mortgage term you choose is also important. Short term mortgages are suitable if you think interest rates will be lower at renewal time. Long term mortgages are appropriate if you believe current rates are reasonable and you want the security of budgeting for the future. This is especially important for first time homebuyers.
Fixed rate vs. variable rate
You can select a fixed or variable interest rate. A fixed rate mortgage allows you to plan precisely for whatever term you select—from one to 25 years. A variable rate mortgage fluctuates with the market.
When you apply for a mortgage, make sure you have all the necessary documents:
- A copy of the accepted Offer to Purchase and the land survey
- A pay stub from your employer (self-employed buyers will need financial statements for the past three years as well as personal income tax returns)
- Verification that your down payment came from your own resources (e.g. bank statements)
- A list of all your assets and debts along with account numbers
- A copy of the Real Estate Listing if buying an existing home
- Condominium financial statements, if applicable
- If you are buying a home to be constructed, bring a picture of the property, a copy of the building plans and specifications, the land survey, plus your agreement with the builder.
Before You Sign the Offer
Find a lawyer. Look for competitive rates, outstanding service, knowledge, and value.
Before the Offer becomes a legal Agreement of Purchase and Sale, involve your lawyer. Make sure your lawyer reviews the document carefully and discuss it with you. Once it’s signed and accepted, your lawyer will order a series of searches from various municipal offices to ensure that the sellers haven’t been sued, that they’ve paid all of their property taxes and water, electric and gas bills, and that there’ll be no outstanding mortgages or liens on the property once you become the owner.
Your lawyer will also prepare a series of closing documents and review the closing documents prepared by the seller’s lawyer.
Your lender and lawyer will organize and draft the correct documents. Your lawyer will notify the property tax offices as well as the utility offices that you will be the new owner as of the closing day.
A couple of days before closing, you’ll go to your lawyer’s office and sign the closing documents. Bring a certified cheque for the balance of the closing funds, because the lawyer will pay the relevant parties on your behalf (land transfer to the government, balance owing to the vendor, etc.). Part of that amount covers the lawyer’s fee and disbursement costs. The lawyer obtains the mortgage funds from the institution that’s funding your mortgage.
On Closing Day
On closing day, your lawyer will meet a representative from the vendor’s law firm at the land registry office. Your cheque will be exchanged for the keys to your home and the two sides will trade closing documents. Your legal representative will then register the new deed and mortgage, so anyone doing a search will see that you’re the new owner. And then, you can grab your keys and go to your NEW HOME!
After closing, your lawyer will send you a reporting letter and copies of all the documents you signed including the deed, the mortgage and the survey, and a summary of the flow of funds.
