Frequently Asked Questions

The most frequently asked questions before, during and after buying a new condo or townhouse

– A mortgage broker acts as an intermediary between the borrower and the mortgage lenders.

– His/her role is to find a mortgage loan according to the borrower’s needs.

– They inform and guide their clients through all stages of the process (preparation, presentation, approval, and acceptance of a mortgage application).

Your relationship with your mortgage broker is an important factor in the outcome of your mortgage application.   When there is a good connection and you feel confident, the most delicate subjects are more easily discussed and clarified.  The mortgage broker is in a better position to represent you and to negotiate your conditions with the lenders.

Be a good listener and be honest

A mortgage broker must understand your financial situation, your expectations, and your needs.  His/her transparency and honesty will allow you to receive information that is truthful, even if there is a risk of sometimes disappointing you.

Accessibility

The mortgage broker will be easy to reach (or will contact you as soon as possible), because he/she is aware that your time is precious.

Competent

The mortgage broker knows the current mortgage market thoroughly.  He/she will therefore be able to advise you on the mortgage product that best suits your financial situation, your objectives, and your expectations.

Negotiator

Negotiating mortgages on behalf of his clients is the mortgage broker’s daily job.  He/she knows how to address and what to say to the various lending institutions.  His/her knowledge of the market allows him/her to obtain the lowest interest rate as well as clauses and other provisions that will be most advantageous to you.

Conscientious

The mortgage broker will accompany you until the last step of obtaining your mortgage loan, when you go to the notary.

Informative

Whether you want to talk about mortgage rates, mortgages or the real estate market, the best mortgage broker will speak to you in plain language.  He/she will be able to answer your questions clearly and explain the various mortgage terms and conditions to you, so that you can make your choice with confidence and without any fear of unpleasant surprises.

– A mortgage broker knows the range of mortgage products offered by lenders. He or she will find the mortgage that suits your objectives and your financial situation, considering the interest rate and the characteristics of the loan.

– They save you valuable time.  A mortgage broker negotiates a mortgage with institutions on your behalf, avoiding tedious and stressful procedures

– He/she quickly obtains the information sought from lenders, which is not to be overlooked given the current shortage of resources.

– You have access to a wider range of lenders (some only available through mortgage brokers).

– The services of the mortgage broker are free of charge.  They are paid by the lenders.

There are many variables to consider when selecting a mortgage product and lender.  People often think that a mortgage broker’s job is to negotiate a good rate, but it goes much further than that. He or she takes a complete financial picture of you to find the product that meets your needs and your reality.  Once your financial picture and your needs have been established, the mortgage broker will be able to advise you on the mortgage product and lender that is best suited to you.

– You can obtain a mortgage pre-approval from lenders and mortgage brokers.

– They will determine the maximum loan amount that the borrower can afford.  The maximum amount is calculated based on the following

– Income

– financial commitments

– Credit history

– The amount of money you have available for a down payment

Effective June 1, 2021, the Government of Canada introduced mortgage stress testing to protect lenders and borrowers from sudden increases in interest rates leading to excessive debt.

The stress test involves confirming that the borrower could pay the negotiated mortgage interest rate + 2% (for example, a 5-year fixed rate of 5.14% + 2% = 7.14%). All buyers must go through this process, except for those wishing to renew an insured mortgage by default.

This depends on whether the mortgage product is fixed or variable.

– Variable rate: Three months interest payment will be required.

– Fixed rate: The penalty amount is the greater of the 3-month interest payment or the rate differential.

Rate Differential: Financial institutions calculate the difference between the rate you were given and the rate you could get today. Banks often consider the posted rate, without the discount, to make their calculation.

In conclusion, it is strongly recommended that you contact your financial institution and confirm the amount of your penalty before breaking your mortgage contract.

Several factors are considered.  Economic factors, your financial situation, your risk tolerance and medium to long term changes.

– Fixed Rate – Features:

The mortgage rate remains the same throughout the term you have chosen (1 ,2, 3 or 5 years). The current economic situation with rate increases favours fixed rate mortgage products.

Fixed rates make it easier to plan your budget because they do not fluctuate.

Fixed rates are generally a little higher than variable rates.

The penalty amount is the greater of the 3-month interest payment or the rate differential.

– Variable Rate – Features:

The rate varies according to the financial institutions’ prime rate generally linked to the key rate set by the Bank of Canada.

The amount of your mortgage payment may vary according to fluctuations in your rate.  If the interest rate decreases, you will benefit from a decrease in your mortgage payment for most variable products. Keeping your payments, the same is a good way to pay off your mortgage faster. On the other hand, an increase in the interest rate will increase your payments.

Variable rates are generally lower than fixed rates, but you must have the financial means to absorb a possible rate increase.

The penalty is the payment of 3 months interest.

One of the major factors in interest rates is the level of risk associated with the borrower.  When you seek financing, the creditor will do an analysis to determine if they are interested in lending you money and at what interest rate the loan would be granted.  This analysis is based mainly on 5 aspects that are called the 5 Criteria of financing.

Capacity

Capacity is the estimated amount of debt you could take on. To calculate your borrowing capacity, you need to make a calculation that includes financial data such as your monthly payments and your monthly income.

Equity

The lender wants to determine if you have additional cash-flow after the purchase. The reason for this is simple. If, for example, something unforeseen were to happen such as the loss of your job, the onset of an illness, the removal of a tenant if you own income properties, the lender will want to determine if you have the cash-flow to deal with this type of eventuality or if you would quickly default.

Security

The security is the amount of money you put up as collateral for the loan. In the case of the acquisition of a financed building, there will be a mortgage on the building, which means that if you do not pay, the lender can legally seize your building, regardless of the amounts you have injected for the acquisition, renovations, or maintenance.

Financial Characteristics

This financing criterion is specifically related to your credit records and scores. The financial institution will do a credit check to determine your credit history and credit score to verify your payment history. They want to determine if you are paying your other accounts regularly. Credit reports include your payment history on your various credit accounts for the past seven years.

Consistency

This criterion is adopted to determine your stability. Lenders want to lend to people who are the least risky and most stable. They look to see if you are the type of person who moves often or changes jobs frequently. If you are, it demonstrates inconsistency in their eyes, which represents an additional risk to the lender. A person who moves frequently or changes jobs often may appear more likely to default on payments.

In conclusion, these five criteria are all important to consider when applying for financing.  It is best to be prepared before applying for financing and to make sure the lender is willing to finance you. You can schedule a phone call with your real estate broker to discuss your financing challenges and determine options to ensure you are in the best position to obtain financing.

– This depends on the type of property and whether the property is owner occupied.  Here are the details.

– The minimum down payment is 20% of the purchase price for a non-owner-occupied property (100% rental).

– For an owner-occupied property

5% down payment for a single-family home or condominium or duplex (for the purchase price portion up to and including $500,000 and 10% down payment for the purchase price portion between $500,000 and $1,000,000).  Thus, for the down payment on a $600,000 single family home that you would occupy, the down payment would be $35,000:

– 500 000 * 5% = 25 000$

– Excess of 100 000 * 10% = 10 000$.

Down payment of 10% of the purchase price for a triplex or a quadruplex

– Down payment of 15% of the purchase price for a 5 unit or more (owner occupied or not)

There is no one right answer.  It depends on your needs and your personal situation.  Here are some guidelines to help you make your decision.

– A fixed rate is right for you if:

– You have a low risk tolerance.

– You have little flexibility in your budget.

– A short/medium term interest rate increase is likely, and you want to protect yourself from it.

– A variable rate is right for you if:

– You have a good tolerance for unexpected market fluctuations.

– Your budget allows you to absorb an increase in your mortgage payments if interest rates rise.

– A drop in interest rates is likely and you want to take advantage of it.

– How do you choose?

– No one can predict the future.  It’s best to assess your financial situation and risk tolerance and determine your priorities.  If you prefer financial stability, the predictability of a fixed rate will suit you better.  If you want lower payments, a variable rate will help you achieve that goal.  If the rate increases, most mortgage contracts allow you to change to a fixed rate down the road.

Is there a penalty fee for prepayments?

– There is no penalty if you meet the prepayment terms in your mortgage agreement.  Prepayment options vary by lender.

– Check the terms of your mortgage agreement to find out:

– If your lender allows you to make prepayments

– When your lender allows you to make prepayments

– Whether there is a minimum or maximum amount for prepayments

– If you refinance your loan at the end of your term, you will not have to pay a penalty.  However, there will be a notary fee because the mortgage deed is changed.

– If you refinance during the term, a penalty fee for termination of the contract will be charged in addition to the notary fees.

– If possible, yes!  There are several steps in the home financing process.  Lenders prioritize the processing of mortgage applications according to the buyer’s delay in obtaining financing.  But be careful! It is important that the buyer cooperates by providing the necessary documents and information quickly to process the application.

– It usually takes 10 days for the buyer to find financing.  With the shortage of manpower in all fields, it is common to give the buyer 15 days to find his financing.

– A buyer who has been pre-approved for a mortgage will have the best chance of obtaining financing on time.

– Mortgage default insurance is required when the down payment is less than 20% of the purchase price of your property.  This insurance protects the lender in the event of default by the borrowers.

– The cost of the premium is calculated on the amount of the loan based on the percentage of the down payment

– The premium amount can be added to the mortgage amount.

– The premium is only taxable at the provincial rate (QST) of 9%. It is not possible to finance the taxes.  The amount of the tax must be paid at the notary.

Down payment (%) Premium Mortgage loan insurance
5%  4,00% 
10%  3,10% 
15%  2,80% 

– A mortgage pre-approval is a process that allows you to

– Know the maximum amount of a mortgage you may qualify for.

– Estimate your mortgage payments

– To guarantee an interest rate for a period of 60 to 120 days depending on the lender.

– Please note!  A pre-approval does not automatically mean a final approval from the lender.  The pre-approval was made by considering the parameters of your financial situation at a specific time.  A lender may re-evaluate its decision if there are changes in your income, financial commitments, or credit.

There are several costs to anticipate when buying a property.

Inspection fees

Evaluation fees (sometimes required by institutions)

Notary fees

Title insurance (if necessary)

Moving expenses

Transfer tax (welcome tax)

9% QST on the mortgage insurance premium (if applicable)

Adjustment of municipal and school taxes (will be adjusted at the notary)

– Multi-Prêts mortgages

– Autorité des marchés financiers