It is vital to choose the right mortgage broker when purchasing a home, even if you’re a second or third-time buyer. As a leading Ontario mortgage firm, startMYplan works with Canadians from all walks of life as you embark on this journey. Part of the way we support our clients is by ensuring you have all the tools and information you need to be successful.
To help you choose the right mortgage broker for your family, we have created this list of five questions to ask during your initial consultation. Remember, your broker is working for you, not the other way around, so you want to be sure to hire the best fit for the job.
1. What is the best type of mortgage for me?
One of the reasons you need a mortgage broker is to help you understand all the fine print and jargon involved buying a new home. One of the crucial factors to consider is the type of mortgage you want. There are two main types of mortgages for homes in Canada: fixed rate and variable rate.
Working closely with your broker will help you determine the best mortgage type for you based on your financial standing, feelings on risk, and plans for your home. If you select a fixed-rate mortgage, your interest rate will never increase. On the other hand, it will never decrease either.
However, a variable rate mortgage fluctuates with the market, which means it’s generally not the best option for a first-time home buyer or an individual looking for a low-risk means of financing. With this said, any mortgage broker worth their salt will tell you that a variable rate mortgage has a better chance of saving you money in the long run. This is why the choice is a personal one.
Personal or not, your mortgage broker should be able to walk you through your options and explain the pros and cons of each.
2. What is the cost of using your service?
You must ask your mortgage broker about their service rate. What are they getting out of the transaction? Fortunately for you, most of the money a mortgage broker earns comes from the financial institutions they work with, rather than your pocket.
Of course, some fees need to be paid during the brokerage process, such as appraisal fees and costs toward legal work. However, these fees would need to be paid either way.
3. What is the difference between pre-approval and approval?
Getting approved for a mortgage is a big deal, and of course, it’s the deal you’re looking for as a potential homeowner. Many buyers choose to get pre-approved before talking to a bank about a loan to ensure they meet the qualifications necessary to start house hunting.
Pre-approval is a simple process that can be carried out online in moments. It helps you see how expensive a home you can purchase while still managing daily finances. It doesn’t, however, guarantee you the amount you are preapproved for. Many factors go into the approval process, including your credit score.
With your pre-approval in tow, you can browse for a new home and even make an offer. You then take the accepted offer to your mortgage broker, who will make an official application for your mortgage to the lender. The approval process is quick but not as fast as the pre-approval process. You can expect to wait 3-5 business days to hear back.
4. Can I break my mortgage before the end date?
Like life, the world is continuously changing, which means some decisions may turn out to be wrong in a decade. While you may not plan to break your mortgage, life could take you to a place where it makes more sense to get a different home or refinance. Breaking your mortgage early is a tricky business, and you must ask your mortgage broker what the penalties are before you agree.
Penalties vary between mortgage types, lengths, and loan amounts. Knowing potential downfalls to an early termination early will protect you and your family in the event of unforeseen circumstances.
This is another reason your broker might recommend a variable rate mortgage over a fixed rate, especially if you think breaking your mortgage early might be in your future.
5. What is the benefit of a bigger down payment?
The down payment is an integral part of any home buying interaction, and for a good reason. It takes off a large chunk of change you would be paying down the road and shows your lender that you’re serious about spending on your future. The more you pay toward a down payment, the less you spend on the overall mortgage amount. This could work out toward a better rate, a bigger loan, and a more luxurious home.
You may want to speak to your lender or mortgage broker in Mississauga before deciding on the final amount of a down payment. It is good to have all the information on your mortgage before you make any lasting decisions.