Looking to purchase your first home? An investment property? Or maybe you’d like to take advantage of the low interest rates and refinance your house? Check out our interview below with our friend and mortgage broker, Anita Malik!
Q: Let's start with the basics: What does a mortgage broker do and how might your job differ from someone working at a bank?
A: A mortgage broker is an intermediary between a borrower and a lender. Think of it like a concierge service. A mortgage broker has access to a multitude of different lenders, various products, and rates whereas a mortgage specialist at a bank is limited to that one institution’s products and rates.
Brokers can handle buyers who do not meet banking lending guidelines such as self-employed individuals, bruised credit, new to Canada or those in need of construction financing. Many brokers work evenings and weekends in addition to regular office hours to accommodate clients’ schedules and needs.
Q: At what stage should buyers contact you?
A: A mortgage broker should be the first stop for buyers whenever possible. This will help set realistic expectations regarding budget and rates. Given the current market, it is particularly important to obtain a pre-approval first so you and your agent can make quick offers and decisions with confidence.
Q: What are some of the important numbers that first-time home buyers should keep in mind?
A: The minimum down payment required will depend on the purchase price of your home. Any home $500,000 or less requires a minimum 5% down payment.
When the purchase price is above $500,000, the minimum down payment is 5% on the first $500,000 and 10% on the remaining portion up to $1,000,000.
You will also need to prove to the lender you have an additional 1.5% of your purchase price available for closing costs. For example, on a $500,000 purchase you would need a minimum down payment of (5%) $25,000 + (1.5%) $7,500 for closing costs= $32,500.
Homes of $1,000,000 and above, require a minimum 20% down payment; most lenders have a sliding scale as well. It may be 80% of the first $1,000,000 and 60% of the balance. Exceptions are possible.
All high-ratio mortgages have premiums which are added to the amount borrowed. At 95% loan to value, the premium is 4% of the mortgage amount.
First-time home buyers have access to the Home Buyers Plan which allows tax-free withdrawal of up to $35,000 from their Registered Retirement Savings Plan (RRSP) to use towards the purchase of an owner-occupied residence. It is important to note that the funds must be repaid over a 15-year period. Any amounts not paid in a calendar year are added to your personal income for that year.
Q: Everyone is talking about the low interest rates. Is now a good time to consider refinancing? What are the experts predicting? Will the rates go back up?
A: It may be a good time to refinance to take advantage of the lower rates.
If you have a fixed rate mortgage and plan on refinancing before your mortgage is up for renewal, you will incur pre-payment penalties. It is important to speak with your mortgage broker to determine the penalties you would incur and if breaking your mortgage is worth the lower rate.
Early in the pandemic, the Bank of Canada was hinting not to expect rates to rise until 2023. However, with vaccinations starting to roll out, we are expecting to see rates go up over the next 12 months. It is good news for the economy as it is showing signs of rebounding, but bad news for those carrying a heavy debt load on a variable rate. If you have a variable rate mortgage it may be time to consider locking in or consolidating the debt into one lower-rate mortgage.
Q: How can buyers contact you?
A: Buyers can contact me by phone 613-899-5946 or email firstname.lastname@example.org. I am available 7 days a week for your financing needs.
For general mortgage information, tips, and resources you can check out my Instagram and Facebook, both, @anitamalikmortgages or my website www.anitamalik.ca
Looking to buy or sell this year? Give us a call! Until next time, STYFiRE out!