Frequently Asked Questions When Applying For A Mortgage
While applying for a mortgage is fairly standard, there is a lot of paperwork needed to secure the right financing. To ensure the process is smooth, you often need to carry out extensive research. During this time, clients often have a ton of questions but find answers difficult to come by. To ensure you have all your doubts cleared and are armed with the most accurate information available, Stephen Spriggs has put together a list of frequently asked questions when applying for a mortgage.
1. Should I pick a variable or fixed rate mortgage?
Every mortgage borrower is unique, and so is the answer to this frequently asked question.
Here are two examples:
a. If you need to get out of a mortgage by selling a property or are looking to refinance before the mortgage term is up, then I recommend a variable rate mortgage because the penalty to break the term is usually only three months interest.
With fixed-rate mortgages, you risk paying a higher penalty, so you could spend thousands more to break the term.
b. If you rent an investment property then I recommend a fixed rate mortgage product for a five-year or longer term. Your rate and payments will be fixed, allowing you to budget for the required rental income and profits.
Variable rates have been a great way to save on mortgage interest payments for the past many years as rates have been low and the pressure for rates to go up has also been negligible.
However, things may change in the coming months and years as the rates may go up quickly when the economy changes, making variable rates more risky and costly.
If you’re in the market for a mortgage, it’s vital that you have an all-round understanding of the options you have. To get it, give me a call and discuss your specific situation so that I can help you decide your best plan of action, mortgage wise.
Alternatively, if you want to decide on your own, try the sleep test. Ask yourself “If I opt for a variable rate mortgage and the payment rate increases, will it keep me awake at night?” If your answer is yes, then fixed rates and payments are more of your style.
2. Can someone else (family, friends) have a mortgage loan in their name while my name is still on the title?
I get asked this question multiple times in different ways by borrowers who don’t qualify for a low rate mortgage because of income or buying out of their price range or due to poor credit. These borrowers usually want a third party to help them buy a property.
The short answer to this question is that whoever is on title must also sign full responsibility for the mortgage loan. This is due to the fact that the mortgage loan and the security for the loan, which is the property, are tied together. Therefore, the owner of the property must also sign the mortgage documents to allow the property to be security for the loan.
3. Why should I go to a mortgage broker when I can go to a bank?
Employees that work for the bank will only give you advice that will profit the bank, but it will not necessarily serve as the best advice for you as the borrower. Even the most approachable and friendly staff are responsible for bank profits as they are employees of the bank. Also, the bank only offers their products and rates, irrespective of whether they suit you. While some of the bank staff are warm and want to give you better advice, they put their job at risk if they don’t tell you what the bank wants you to know. As a broker, I am a third party with no binding agreement to any of the fifty plus banks, credit unions, and other alternative lenders. My goal is to give you the best possible advice for your specific situation, to save you money and help you reach your goals. My business depends on repeat clients, and the only way my clients return to do business with me is if I give them unbiased, real advice that helps the borrower and not the bank.
4. What am I approved for and what’s my rate?
Ever so often, potential borrowers tell me their situation over a quick phone call and expect me to answer their questions and get a mortgage approval at that moment. However, it takes much more than a phone call to get approved. Unfortunately, many people don’t understand the mortgage approval process.
To help you get a better idea, of what the process of getting approved entails, here’s a brief explanation.
When you apply for a mortgage, the lender reviews your story, income, property, credit history, future income potential, down payment, history of your down payment, and addresses any questions or concerns that may arise.
As your mortgage agent, I collect all the items the lender needs to make approval decisions, and I get to know your full story so I can help get you approved. I underwrite the mortgage application and everything required to get you approved, measuring you against my extensive knowledge of lenders, their products and their very risk-based underwriting systems.
I do all the heavy work upfront so going to a lender becomes a much easier step and no time is wasted by the lender or by you. If you want to work with me, you must be ready to take it to the next step when you enter my system.
If you have any more questions about the mortgage application process, reach out to Stephen Spriggs. As a trusted Richmond Hill Mortgage Broker at Mortgage Intelligence, I provide a range of mortgage solutions customized to suit your needs. I offer mortgage refinancing, debt consolidation, private and commercial mortgages, and other mortgage services across Toronto, ON.