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What is a downpayment?
Very few homebuyers have the cash available to buy a home outright. Most of us will turn to a financial institution for a mortgage. However, even with a mortgage, you will need to raise the money for a downpayment. The downpayment is that portion of the purchase price you furnish yourself. The larger the downpayment, the less your home costs in the end. With a smaller mortgage, interest costs will be lower and over time, this will add up to significant savings.

How much do I need for a downpayment?
According to the guidelines of the Canadian Mortgage and Housing Corporation (CMHC), one must have a minimum downpayment of at least 5% of the total cost of the prospective property. Regardless of the amount of your downpayment, at least 5% of it must be from your own cash resources or a gift from a family member. It cannot be borrowed.

Can I use gift funds as a downpayment?
Most lenders will accept downpayment funds that are gifted from family as an acceptable downpayment. A gift letter signed by the donor is usually required to confirm that the funds are true gift and not a loan. Mortgages with less than 20% down must have mortgage loan insurance provided by CMHC, Genworth, or AIG.

How can you use your RRSP to help you buy your first home?
With the federal government's Home Buyers' Plan, you can use up to $20,000 in RRSP savings ($40,000 for a couple) to help pay for your downpayment on your first home. You then have 15 years to repay your RRSP.

What is mortgage loan insurance?
Mortgage loan insurance is insurance provided by Canada Mortgage and Housing Corporation (CMHC), a crown corporation, and Genworth, an approved private corporation. This insurance is required by law to insure lenders against default on mortgages with a loan to value ratio greater than 80%. The insurance premiums, ranging from .50% and up depending upon your downpayment & amortization, are paid by the borrower and can be added directly onto the mortgage amount. This is not the same as mortgage life insurance.

What is a pre-approved mortgage?
A pre-approved mortgage provides an interest rate guarantee from a lender for a specified period of time (usually 60 to 90 days) and for a set amount of money. The pre-approval is calculated based on information provided by you and is generally subject to certain conditions being met before the mortgage is finalized. Conditions would usually be things like 'written employment and income confirmation' and 'downpayment from your own resources', for example. A pre-approved mortgage is one of the first steps a homebuyer should take before beginning the buying process.

Do I need to be pre-approved before I start shopping?
Most real estate professionals will want to ensure you have a pre-approved mortgage in place before they take you out looking for a home. This is to ensure that they are showing you property within your affordable price range.

What is a fixed rate mortgage?
The interest rate on a fixed-rate mortgage is set for a pre-determined term. This offers the security of knowing what you will be paying for the term selected.

What is a variable rate mortgage?
A mortgage in which payments are fixed to bank prime rates, which can fluctuate several times a year. If interest rates go down, more of the payment goes towards reducing the principal; if rates go up, a larger portion of the monthly payment goes towards covering the interest.

What is title insurance?
Protecting purchasers against loss is accomplished by the issuance of a title insurance policy, which states that if the status of the title to a parcel of real property is other than as represented, and if the insured suffers a loss as a result of title defect, the insurer will reimburse the insured for that loss and any related legal expenses, up to the face amount of the policy. Title insurance differs significantly from other forms of insurance. While the functions of most other forms of insurance is to guard against future events (such as death or accidents or in the case of property, fire or flood), the primary purpose of title insurance is to eliminate risks and prevent losses caused by events that have happened in the past. To achieve this goal, title insurers perform an extensive search of the public records to determine whether there are any adverse claims to the subject of real estate. Either those claims are eliminated prior to the issuance of a title policy or their existence is exempted from coverage.

What is a home inspection?
A home inspection is an examination of the structure and systems: heating and air conditioning, plumbing and electrical, roof, attic, insulation, walls, floors, ceilings, windows, doors, foundation, and basement. If the inspector finds problems, it does not mean you cannot sell your house, but you can be certain a buyer's inspection will find them too. Finding problems before you list your property can avoid accusations of misrepresentation, low offers, and even lawsuits. A home inspection can also help sellers comply with new, tougher disclosure laws enforced in many states. You may or may not want to make the repairs and you can always adjust the selling price or contract terms if the problems are major. This information will also help you determine what type of financing will or will not be available for your home. You can find home inspectors under Professional Services section.

What is an appraiser?
A real estate appraiser is an impartial, independent third party who provides an objective report on the estimate of value of real estate. The appraisal is supported by the collection and analysis of data. Most licensed appraisers will provide an advance estimate of the cost to perform the appraisal, and many will commit to a fixed fee for the appraisal. It is always wise to obtain a written contract for services that includes a description.

What is a conventional mortgage?
A conventional mortgage is usually one where the down payment is equal to 20% or more of the purchase price, a loan to value of or less than 80%, and does not normally require mortgage loan insurance.

What is the difference between Term and Amortization?
The "term" of the mortgage should not be confused with the "amortization". The amortization of the mortgage refers to the entire length of time that it will take for the mortgage to be paid and the house to be "free and clear". The term is the period for which your current payment obligations are valid. In other words, you may choose a five-year term and a 25-year amortization. This would mean that your interest rate, your payments, and your pre-payment options would be the same for the next five years. At the end of these five years, you would re-negotiate the term, and the amortization would now be 20 years.

Should I wait for my mortgage to mature before renewing?
Lenders will often guarantee an interest rate to you as much as 90 days before your mortgage matures. Moreover, as long as you are not increasing your mortgage, they will cover the costs of transferring your mortgage too. This means a rate promised well in advance of your maturity date, thus eliminating any worries of higher rates. In addition, if rates drop before the actual maturity rate, the new lender will usually adjust your interest rate lower as well.

I just got a renewal notice, what should I do?
Most lenders send out their mortgage renewal notices offering existing clients their posted interest rates. The rate you are being offered is usually not the best one. Always investigate the possibility of a lower interest rate with the lender or another lender. Or contact your local a Mortgage Architect's Mortgage Broker. Otherwise, you may end up paying a much higher interest rate on your renewing mortgage than you need to.

What happens if I am not satisfied with a mortgage offer?
Do not accept it. You have no obligation to accept any of the offers that are made to you by Mortgage Architects or any of our affiliated lenders.