Are you looking to start the process of receiving or renewing a mortgage? There are some questions you need to ask your mortgage broker in Kitchener before signing on the dotted line. With the right answers in hand, you can enter a contract, fully aware of the potential implications of your decision.
In this article, we will discuss eight essential questions to ask a mortgage broker so you can consider all the angles when making a final decision.
1. What is the fee for your services?
Before working with a mortgage broker, you should know how they are compensated. Most of the time, services are free. Generally, you only need to pay legal and appraisal costs.
However, how do they get paid if a fee is not required for their services? Sometimes, brokers earn finder’s fees when introducing new clients to a lender. Lenders can also offer similar fees. If there are no fees, this indicates you are receiving unbiased mortgage advice for free.
2. Can I obtain pre-approval?
Before looking at the property, you should obtain pre-approval. Mortgage pre-approvals notify you of the maximum amount you can spend on a property. Yet, it does not guarantee the ability to have financing. Consider incorporating a financing condition for further protection.
Note, also, that pre-approvals are done through mortgage brokers.
3. How does the approval process work?
Once pre-approved, you can think about where to live and look for a home using a realtor. You can also search by using a service. Once an offer is accepted, you will begin working with your mortgage broker to decide what lender to use for your application.
Once submitted, you will receive your initial approval in two to three business days. Then, the paperwork can be completed to secure your mortgage. Afterward, your lender sends legal instructions to the lawyer to begin the closing process.
4. Is there a way to save on interest?
There are three ways to do this. They involve:
- Making a larger down payment: This allows you to reduce the mortgage amount and receive a better rate.
- Checking out other financial institutions: A local branch may be a good starting point, but looking at other lenders may also be wise.
- Making additional payments: Most lenders allow you to make lump sum payments annually, double up on payments, or increase regular payments. This can be done through a mortgage contract. Ensure that you stay within the present limit outlined in your agreement.
5. Is a variable or fixed mortgage best for me?
Fixed-rate mortgages allow you to fix your interest rate and payment for the duration of your term. Each month, you will pay the same amount, making budgeting easier. Fixed rates are good for first-time buyers who don’t like the risk. However, you will pay higher initial rates.
Variable rates mean payments and interest can change anytime throughout your term. When rates decrease, payments are reduced. However, when they go up, your payments do as well. This type of rate has lower rates when compared to fixed rates. However, before selecting a variable rate, ensure you are comfortable with rates potentially increasing.
6. What are the penalties for breaking my mortgage?
Life always changes. You may need to break your existing mortgage due to a new job, refinancing, or needing a larger home. Variable-rate mortgages have lower penalties; most people only pay three months’ interest for breaking it. Fixed mortgages are more costly when compared to variable rates.
7. What are the closing costs?
Closing costs involve budgeting for real estate fees, land transfer taxes, appraisals, PST on mortgage default insurance, and home inspection. If you can’t afford these costs, you can use a cashback mortgage, thus allowing you to receive cash from the lender to go towards closing fees.
8. Are there refinancing restrictions?
Inquire about the limitations on your mortgage before signing the paperwork. Also, read the fine print. Lower rates may come with some restrictions. An example is being unable to refinance/switch lenders for the duration of your term.
Reach out to Northwood Mortgage for advice on what works best for you. Our mortgage brokers in Kitchener will address your questions and find the best mortgage for your situation. Call us at 416-969-8120 to set up an appointment, or contact us here.