Lenders
When discussing your mortgage with your favorite mortgage originator, you can’t ask too many questions. It isn’t enough to speak about pre-payment privileges, or payment frequencies (e.g. biweekly). Many more features and special programs exist that require your attention to be sure you are proceeding in the right direction. Below is a great tool for learning more about what each lender offers. You can even compare a few lenders of your choice side by side.
Review and Compare Lenders
Click here to review real time lender rates, products, programs, and mortgage features.
Before using the analytical tool above you may want to refer to the detailed descriptions below for greater clarity:
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Lender Products and Programs
Use the following quick links to jump to the product/program you want:
ARM (Adjustable Rate Mortgage)
ORM (Open Rate Mortgage)
HELOC (Home Equity Line of Credit)
Bridge Loans
Pre-Approved Mortgage (PAM)
Self-Employed Mortgage)
Switch Mortgage
New Immigrant Mortgage
Multiple Term Mortgage
Income Property Mortgage
Second Home Mortgage
Cash-Back Mortgage
All-In-One Mortgage
ARM (Adjustable Rate Mortgage)
A mortgage for which the rate of interest may change if other market conditions change. This is sometimes referred to as a floating rate mortgage. This type of mortgage is more flexible than a fixed-rate mortgage. With some lenders the penalty to get out is zero. Lots of variation between lenders on this type of mortgage. Be sure and contact your favorite mortgage originator to discuss.
ORM (Open Rate Mortgage)
A mortgage which can be prepaid at any time, without penalty.
HELOC (Home Equity Line of Credit)
You can use the equity in your home that you have built up to purchase investments (writing off the interest), consolidate debts, finance home renovations, buy a car, or any other reasonable needs, with rates as low as prime. A HELOC can be arranged up to 80% of the purchase price or value of your home. If you need more than 80%, for a higher interest rate (dependent on your credit), a HELOC can be arranged up to 85%. Accessing the available credit is as simple as writing a cheque, or using the lender-issued credit and/or debit card. You only pay interest on what you draw down, and you can pay off your balance at any time without penalty. Alternatively, you can carry a balance and pay interest-only monthly payments. This being a mortgage, there are the normal legal and appraisal fees required to set it up.
Bridge Loans
When the house you sold closes after the closing date on the house you bought, and any amount of your down payment is coming from the house you sold, you need a bridge loan to cover your down payment shortfall. This is a must for anyone purchasing a “fixer-upper” who wants the house empty to do some work. How lenders cost out a bridge loan can vary significantly. Make sure you know in advance.
Pre-Approved Mortgage (PAM)
In the past, home buyers would typically leave arranging their financing last, after they purchased a property. Today this can cost you dearly. It may cause you to loose the house you find to someone who did get a PAM. It also protects you from an increase in interest rates during the term of your PAM (up to 120 days). The only cost to getting a PAM is your time. If you are looking buy, refinance, or renew your mortgage, contact your mortgage originator early (up to 120 days early) about getting a PAM.
Self-Employed Mortgage
If you have trouble with any of the following:
- Self-employed and cannot show enough income on paper.
- On commissioned sales and cannot show enough income on paper.
- Less than perfect credit
Your credit rating will ultimately determine how much money you can get from the lender. For self-employed and commissioned sales borrowers, you can get up to 90% financing. Some conditions apply. Contact your mortgage originator for details.
Switch Mortgage
When your mortgage comes up for renewal, you may want to take advantage of other lender’s “switch programs”. Too often your current lender is no longer interested in being competitive and will offer you a posted rate at renewal time. If a discount is offered off the posted rate, it likely will not match what you can get with another lender who is anxious to get your mortgage. Under the new lender’s switch program, they will pay the costs to bring your mortgage over. What’s more, to the new lender, you are new business so they will approve your mortgage up to 120 days prior to your renewal date. Your current lender will not likely lock a new rate in for you until 30 days prior to your renewal date. Take advantage of your popularity at this time and be willing to move to greener pastures if your bank will not compete.
New Immigrant Mortgage
To make it possible for individuals who have relocated to Canada to purchase a home with as little as 5 per cent down. Properties can be up to 2 units (one must be owner occupied). No minimum income requirement. Minimum Canadian employment history of 3 months. This program is only available to new Canadians for up to 24 months after their arrival. Contact your mortgage originator for more details.
Multiple Term Mortgage
If you wanted the lower rates of a short term mortgage but wanted the security of a long term, why not choose both. Yes, you can build your own mortgage product. You can split your mortgage in to as many as 5 parts, all having different terms, rates, and amortizations, but one total monthly payment. This way, you are spreading the risk. This mortgage is better suited to the borrower who likes to be hands on and in control of his/her mortgage.
Income Property Mortgage
Financing bona-fied rental or income properties (non-owner occupied) that are zoned residential. This would be an investment in real estate, and not your principal residence.
Second Home Mortgageg
Insurance companies like CMHC will now insure mortgage loans that are secured by a borrower’s second home. Second homes may be insured under any insured product (eg. 100% financing) with no additional underwriting requirements or mortgage loan insurance premiums. The property must be intended for occupancy at some point during the year by:
- The borrower OR
- A relative of the borrower on a rent free basis.
Contact your mortgage originator for other restrictions on this program.
Cash-Back Mortgage
This mortgage was first conceived as providing much needed help with closing costs for first-time-home buyers. Early versions of the loan gave the home buyer around 1 per cent of the mortgage amount to help pay for the closing costs like legal fees and land transfer tax. The cash back could not be used as part of the down payment and if you did not stay with the bank for the full term (a mandatory 5 year term) there would be a pro-rated claw back. Popularity with the program and market competition has taken this mortgage to new heights. For example, 5 per cent cash back is now available, and it can be used your down payment.
All-In-One Mortgage
Not to be confused with some lenders idea of picking up some of the closing costs associated with a mortgage. The real All-In-One Mortgage started down under in Australia and is starting to gain some popularity in Canada with a few lenders. This is a management tool that links a line of credit to one or more other accounts. For example, you can have a first mortgage, a line of credit, a transaction account, a source of investment and a high-yield bank account all rolled into one.
Mortgage Features
Again, before using the analytical tool above to compare lenders you may want to refer to the detailed descriptions below for greater clarity:
Extra Payments
Payment Frequency
Skip-a-Payment
Rate Hold
Rate Drop Policy
PAM: Term Specific
Early Pay Out
Guarantor Release
Penalty Calculation
Online Access to Mortgage
Blending
Portable
Assumable
Extra Payments
The ability to prepay all or a portion of the principal balance without penalty. Most prime institutional lenders offer you prepayment privileges expressed as, 20/20. The first 20 means you can increase your mortgage payment by 20 per cent. The second 20 means you can pay lump sums up to 20 per cent of the “original” amount of the mortgage. These privileges can be used on an annual basis and are not cumulative.
Payment Frequency
The choice of making regular mortgage payments every week, every other week, twice a month, or monthly. You may want the “accelerated” option which comes with most weekly and bi-weekly payments. This will pay down the principal faster, or “accelerate” the pay back period.
Skip-a-Payment
Some lenders offer the skip-a-payment option which allows you to skip, or miss a payment over the term of the mortgage. There is typically no fee for this option, your payments won’t change during the term of your mortgage, but any skipped interest is added to the principal balance. There may be limits to how often you can skip during the term and the option may not be available with certain terms or products (e.g. ARM).
Rate Hold
Also known as Commitment Period, this is the length of time the lender will lock-in your interest rate from the time of your application. This can be very important if you are trying to protect a rate before your renewal date and interest rate are expected to go up. Or if you want to be pre-approved and you need extra time to find a house.
Rate Drop Policy
Lenders have a specific policy on the number of times you can request a lower rate should their rates drop during your commitment period. They may also restrict the number of your requests. By default, most give you the lowest rate between date of approval and the end of your commitment period. However, when rates go down and come back up during your commitment period, that presents a potential problem. The best policy guarantees the lowest rate during your commitment period.
PAM: Term Specific
Getting a pre-approved mortgage (PAM) with most lenders will lock-in an interest rate on the term chosen only! For example, later on in your commitment period if you change your mind and want to go with a 3-year term even though your PAM was for a 5-year term, most lenders will allow the change but you would have to take the current 3-year rate. If rates went up, too bad. A better policy has you approved for all terms and you can change your mind without consequence.
Early Pay Out
If you sold your home, any lender must let you out of the mortgage. If you are midterm, and the mortgage is not open, they can charge a penalty. Most charge the greater of 3 months interest, and IRD. But if you are midterm and want to refinance, some lenders won’t let you break, others will but their penalty is steep. The best policy allows you to break any time, at worst, with a 3 month interest penalty. Make sure you know in advance.
Guarantor Release
Often times a young couple or applicant will need a parent or other strong guarantor added to the mortgage because they don’t have much credit, their credit is bruised, or they don’t make enough income to qualify on their own. If things change in a years time and the guarantor is no longer needed, the best lenders will put in writing up front, a guarantor release clause.
Penalty Calculation
Lenders allow you to pay extra towards the principal amount of your mortgage without penalty each year. When calculating an early discharge penalty, lenders may or may not include the annual prepayment privilege before calculating the penalty.
Online Access to Mortgage
More and more consumers are interested in having access to their mortgage account online to monitor the account and facilitate making extra payments.
Blending
If your getting a new mortgage but you need to break your old mortgage prematurely, some lenders will waive the penalty and blend your old rate with the new rate. This can happen when you move or want to refinance midterm. Choosing a lender that allows blending is a must!
Portable
This allows you to move to another property without having to lose your existing interest rate. You can keep your existing mortgage balance, term and interest rate plus save money by avoiding early discharge penalties.
Assumable
This allows you to move to another property and have the buyers of your property take over or “assume” your mortgage. Again, you will avoid early discharge penalties, however, in some provinces (e.g. Ontario) the lender will still have recourse to you, the original mortgagor, should the mortgage go into default.
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