Buying Your Next Home Made Easy
Residential Home Purchase Without the Headache
Many Canadians aspire to be first-time home buyers. There are also Canadians that wish to sell or rent their current home and purchase a new home. Many Canadians believe they need to consult a typical A lender, like a big bank. Canadians have more options with a mortgage broker like Transparent Mortgages. The difference between a bank and using a broker is flexibility – banks have limited mortgage options whereas mortgage brokers have a variety of options. This is because mortgage brokers have access to multiple lenders.
What is a Residential Mortgage?
A residential mortgage is a loan granted to finance the purchase of a residential property, usually for a set period of time. Property that is zoned for single-family residences, townhomes, apartments; or any other type of non-commercial purpose is referred to as residential property.
Benefits of Using a Mortgage Broker for Your Residential Mortgage
Get the Best Mortgage
At Transparent Mortgages, we have access to a wide variety of lenders – not just the big banks. Brokers can help you avoid lenders that have onerous payment terms within their mortgage contracts. In fact, we can help you access certain lenders that would otherwise be inaccessible to get a retail mortgage. This is because of an exclusive working relationship we already have.
Competitive Interest Rate
Due to the large number of mortgage transactions that we fund, we can help you access the most competitive interest rate for your home purchase. Particularly for Canadians, mortgage brokers have access to more and lower rates from a variety of lenders. This is why mortgage brokers are becoming increasingly popular.
Saves You Time and Fees
You can forego the heavy lifting of dealing with big banks directly, because we can go directly to the source for you. Brokers can negotiate interest rates and fees from lenders that are less than conventional lenders.
A Larger Loan for Pre-Construction Homes
Transparent Mortgages has access to lenders that allow you to take advantage of price appreciations for pre-construction homes. The appreciated value can be used as part or all of the down payment. For example, If the value increased from $500,000 to $700,000 from the agreement to closing date, our lenders will lend based on $700,000. Conventional banks will calculate the loan based on the purchase price of $500,000. The benefit of using the appreciated value is that you do not require to use your own funds for the remainder of the down payment or closing costs to complete the purchase. You could use those funds to invest or save for something other than the property.
You simply get a bigger loan with an alternative lender. Using our previous example, our lender would lend $560,000 ($700,000 x 80%), but the builder, as per the agreement, only requires $500,000 (original purchase price), minus the deposits already paid, to close the transaction. This means after closing, you can have further funds in your back pocket.
With a conventional bank, they will only lend based on the original purchase price or appraisal value, if this is lower. This means the maximum mortgage would be $400,000. In this scenario, you need to ensure you have all the down payment available from your own sources.
What are the Components of a Home Purchase Mortgage?
Big banks, Credit Unions and monoline lenders (known as A lenders) give you a default insured mortgage when you put less than 20% down payment on a home worth under $1,000,000. In this scenario, a tiered payment approach is used for the down payment:
Minimum Down Payment Required
Home Purchase Price
Down payment $
5% of purchase price
($500,000 x 5% = $25,000)
5% of the first $500,000; 10% on the excess (up to $999,999 home value)
($500,000 x 5% = $25,000)
($100,000 x 10% = $10,000)
$25,000 + $10,000 = $35,000
When purchasing with 20% + or purchasing a home worth $1,000,000+, these are called uninsured, conventional mortgages. This is because there is no longer a requirement for default insurance. These mortgages are much more flexible and now you have the following options:
- 30 – 40 – year amortization (enabling you to reduce the mortgage payments)
- Proceed with B lenders that have less restrictive income and credit criteria
- Private equity lenders that have no formal income assessment
With default insured mortgages, you can have the lowest rates on the market, but with restrictive qualifying criteria:
- Maximum amortization 25 years (makes the payments higher compared to 30 and 40 years)
- Impeccable credit score 650+ with no derogative comments / issues on credit history
- Maximum income to debt ratio of 39% gross debt servicing and 44% total debt servicing
When you are approved for a mortgage, depending on the lender, you have the option of paying either weekly, bi-weekly, accelerated bi-weekly, or monthly. You can select your preference, and this can be changed by contacting the lender, directly. Your mortgage payoff will be sped up by selecting accelerated payments as you will pay 13 instalments rather than 12 over a single year. This can shorten the time it takes to pay off your mortgage, while saving you hundreds in interest costs.
Many Canadians want to be mortgage-free sooner. One way to make this happen is If you have additional cashflow from a pay-raise or investments, you can either increase your payments or pay a lump-sum by utilizing the pre-payment privilege. This is a set maximum percentage (usually 15-25%) of the original amount borrowed that you can payback for each year of your term without incurring a penalty. For example, if you borrowed $500,000 with 15% pre-payment privilege, this means in one year, you can payback a maximum of $75,000. When you start the next year of your mortgage, the 15% restarts again and you can then pay another maximum $75,000.
An interest rate is used to determine the total monthly payment you’ll make to your lender. This ensures that you cover the cost of the loan. Mortgage interest rates come in two forms: fixed-rate and variable-rate.
This is your best option if you want to rely on regular mortgage payments, without worrying about increasing monthly payments in the event of an interest rate increase. For the entire loan duration, your payments and interest rate won’t change. The downside to fixed mortgages is that if you wish to pay out / break your mortgage, there is usually a hefty penalty to pay.
This is a great option and most popular mortgage type with Canadians. You benefit from much lower interest rates than the best fixed rate mortgages, and the penalty to break the mortgage is much lower and an easy calculation. As a bonus, most lenders allow you to convert the variable into a fixed mortgage, if needed.
Your interest rate will fluctuate when the Bank of Canada changes its rate. This means there can be periods of paying less interest when rates decrease or paying more interest on your mortgage when the rates increase. Overall, most Canadians have saved thousands of dollars proceeding with a variable rate mortgage when compared with the fixed rate mortgage due to the lower starting rate and lower penalty to break the mortgage.
Why Choose Transparent Mortgages
At Transparent Mortgages, we help clients build equity in their home, or purchase a new home. We understand that buying a home is a substantial purchase for many Canadians. That is why we are committed to guiding them through the process. Our mortgage assessment includes a free quote without pulling your credit. We will take time to understand your financial situation comprehensively and provide you with the best solution.
What We Deliver:
How You Benefit:
· Unbiased advice
· Free quote
· Explain the different mortgage types
· Custom quote in under 24 hours
· Build equity in your home
· Grow your real estate portfolio
· Get the best residential loan
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