Left Brain: Gather All Your Documents
Take Charge and Get the Right Mortgage: Make buying a home or renewing your mortgage easier with your questions and answers. The mortgage lender wants to know a lot about you to decide if you are a reasonable risk with their money. Remember, if you were the lender, you would like a good idea of who you were lending money to. You need to know how much you want to pay; they may want you to pay more.
Here is a comprehensive list to help you:
1. Mortgage Loan Identification
The lender needs to know you are who you say you are.
A government-issued ID (with current address)
Your SIN number
2. Proof of Income and Employment for your Mortgage Loan
These details show the lender your ability to meet debt servicing ratios to the mortgage lenders. In particular, lenders will calculate your monthly mortgage payments to ensure your monthly housing costs don't exceed 39% of your gross monthly income. Additionally, your income has a direct effect on your maximum mortgage affordability.
If you are:
Salaried/ Hourly - Letter of Employment, two recent paystubs, T4
Self-Employed - Proof of Business for Self-income via 2 years of T1 Generals with Statement of Business Activities, plus last 2 years CRA Notice of Assessments
Incorporated - 2 years of business Financial Statements with Notice To Reader
Seasonal/Commissioned/Fluctuating Income - last 2 years T4 slips, 2 years CRA Notice of Assessments, Letter of Employment and 2 recent paystubs
Rental properties: Canada's real estate investors may be eligible to include rental income in their mortgage applications. Make sure to have rent or lease agreements handy.
A Letter of Employment provides lenders with a sense of your job stability. Ensure the letter is on company letterhead, signed by HR or a manager, and no older than 30 days. The letter must include:
How long you have worked for the current company
Employment status (permanent, temporary, or probationary employee)
Whether you are full-time, part-time, or seasonal
Hourly or annual salary rate
Guaranteed hours (for part-time or hourly employees)
Current role and title
3. Basic Mortgage Financial Information
This data type will provide a picture of your overall financial situation, precisely what you have compared to what you owe. Your credit score and credit history will highlight your money habits.
Three years of bank statements or the most recent 3 months will be needed.
A list of assets, such as cars, boats, real estate, RRSPs, stocks, etc., will show the value of your investments and property. Lenders will use this to calculate your net worth.
The lender will access your credit score. There are many ways to check your credit score for free to prepare you for their response. If you have had a life transition, a letter explaining the change in your credit score might help.
A mortgage pre-approval letter states that you have enough income and credit to meet the lending requirements. This is optional, but it speeds up the process!
4. Mortgage Down-payment Confirmation
Lenders want to ensure you have the funds to cover your down payment.
The Sale Agreement/ Contract regarding the property you sell or have sold. If you can’t sell your home fast enough, you may need to use a HELOC or a bridge loan. Caution - these loans affect your debt servicing ratios.
Statement of savings or investments you plan to use, which must be less than 90 days old, and list the account holder, account number, type of account, and current balance.
Withdrawal slip from your FHSA, First Home Savings Account
Withdrawal slip from your RRSP through Home Buyer’s Plan
If you are using gifted funds from an immediate family member, confirmation of the deposit accompanied by a signed and dated Gift Letter is required.
If someone is co-signing your mortgage, they must also provide their identification and financial information.
5. Property details for your Mortgage
Final Purchase and Sale Agreement with all Addendums.
The MLS listing estimates your property taxes, utility costs, and condo fees (if you buy a condominium). This data will be used to calculate your gross debt service ratio.
The Property Disclosure Statement is the legal description of the home.
Homeowners insurance policy.
Lenders' title insurance to protect your lender if someone else has a claim on your property.
Gain confidence: Book a Life Together Boot Camp or Coaching by the Hour session
with Fenske Financial Coaching to implement strategies to reduce debt for this transition.
Right Brain: Ask Your Questions & Be Confident
YOU CAN ASK ABOUT:
Your Frequency of Payments
Depending on how often you make payments toward paying down your mortgage, you could pay less in your lifetime. With more frequent payments, you’ll save money on interest while working toward paying off your mortgage at an increased rate. Another way to look at this is that throughout the mortgage, you will pay more annually to your lender if you only make monthly payments compared to biweekly.
That extra payment can reduce the amortization period by a few years.
For example, if your monthly payment is $1,295 and you opt for an accelerated biweekly payment plan, you will pay $647.50
Most institutions offer biweekly, monthly, semi-monthly, bi-weekly, weekly, accelerated bi-weekly, and accelerated weekly.
Caution: Bi-weekly payments can impact your ability to pay down other debts or live life.
On the other hand, if you want or need the lowest payment, you can choose a more extended amortization period. NEW!! The federal government is expanding eligibility for 30-year amortizations for insured mortgages to all first-time homebuyers and all purchasers of new builds and increasing the $1 million price cap for insured mortgages to $1.5 million, effective December 15, 2024. Read more: https://www.canada.ca/en/department-finance
Your Interest Rate:
Depending on the length of your mortgage, 15, 20, or 25 amortization period, what is the difference in interest rates, i.e., 1, 3, and 5 years?
Your Cost of Borrowing:
Ask the lender to show the difference in the amount of interest you will pay over the life of your mortgage at different payment frequencies.
Example: Choosing accelerated bi-weekly payments instead of monthly payments on a $350,000 mortgage would save you more than $43,000 in interest costs and cut more than 3.5 years off the life of your mortgage.
You can save interest (the cost of borrowing) by increasing your payment frequency.
OR you can plan to follow through with one of the pre-payment options below.
How can you pay down your mortgage faster?
You can pay down your mortgage faster if you have a lump sum or increased cash flow. Each institution has slightly different Pre-payment Options (ask, don’t assume):
You can make a Lump Sum Payment of 10%—20% once a year, which goes directly toward reducing your principal.
The Double-Up Option means you can prepay an amount between $100 and the equivalent of the principal and interest portion of your regular monthly mortgage payment on any or every payment date.
You can make principal prepayments of any amount you wish on your mortgage principal at renewal time.
Tip: Know your mortgage stuff. Check your bank’s website for terminology. Save the list or print it.
Decide how much you want your payment to be.
Build your home equity faster. Save money on your mortgage!
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