Mortgages
Below is a MRR and PLR article in category Finance -> subcategory Mortgage.
Understanding Canadian Mortgages
When it comes to buying a home in Canada, you'll likely need a mortgage, and the process can differ significantly from systems in other countries like the UK. Here’s a look at the unique methods of financing a home purchase in Canada.
Key Mortgage Types in Canada
1. Assuming a Mortgage
This option allows you to take over the seller's existing mortgage. It can prevent the hassle of securing your own financing. Often, the interest rate you inherit might be lower than current rates. Additionally, you might skip appraisal and other setup fees, and in some cases, not even need to qualify for the mortgage. However, this depends on the original lender's terms. Typically, you’ll need to cover the portion of the mortgage already paid off by the seller.
2. Standard Mortgage
For newcomers to Canada, many major banks offer to lend up to 65% of a home's appraised value before you secure permanent employment. This is part of a "Welcome to Canada" package, contingent on individual circumstances. Once you have full-time employment, standard lending rules apply.
3. Vendor Take Back
In this arrangement, the seller of the property lends you part or all the funds needed to buy, with terms negotiated directly between both parties. This is attractive for buyers who might not qualify for traditional mortgages. Even if the debt is sold to a third party, the original terms remain in place.
Why Use a Professional Mortgage Broker?
Given the complexities and options available, working with a Professional Mortgage Broker can be highly beneficial. A broker can explain all financing options, provide personalized advice, and help secure favorable terms for your situation.
Financial Documentation
Under international money laundering laws, you need to provide proof of the origin of any funds used to buy property. Be prepared with lawyers’ closing statements, money transfer receipts, savings statements, and bank records when applying for a mortgage. Ensure you have a clear "paper trail" for your finances.
Payment Tips
Many Canadian employers pay bi-weekly, so consider arranging your mortgage payments this way. This results in 13 payments a year instead of 12, helping you pay off your mortgage faster.
High Ratio Mortgages
If you borrow more than 75% of the home's appraised value, it’s considered a high ratio mortgage, which requires Mortgage Loan Insurance.
Navigating the Canadian mortgage landscape can be complex, but understanding your options will help you make informed decisions and secure the best possible terms.
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