The Mortgage Checklist – Advice (Part 9 – Final)

November 13th, 2013

If you’re applying for a mortgage, there are some things you will need to know. As a result, we have created a mortgage checklist, so you can ask your lender/broker the right questions. Here is part 9 of 9, featuring questions about advice from your mortgage professional.

Advice

59. What are your qualifications as a mortgage adviser?

How long have you been a mortgage adviser? (The more experience, the less chance for costly mistakes. Look for two years minimum experience.)

Do you specialize in mortgages or are you a generalist who sells many financial products but is a master of none?
Have you closed over $10-million of financing in the last 12 months? (That’s a minimum rule of thumb for professional mortgage advisers.)

Are you the right mortgage adviser for me? (Read this)

60. Given my lifestyle and savings, will you be honest with me about whether I can truly afford this mortgage?

Just because a lender approves you doesn’t mean you can safely afford the payments. Moreover, alternative down payment options may not be worth the trade-offs.

61. What methods will you use to help me pick the right term?

Proper term selection saves you way more than small rate differences, almost every time. Find an adviser that does more than glibly quote industry research or ask if you can “sleep at night” with a variable rate. At a minimum, your adviser should compare the estimated interest cost of various terms, given sample rate increases over the next five years.

62. Will you help me stress test my mortgage?

Be sure you can afford your mortgage if rates jump 2 to 3 per cent.

63. What mortgage strategies will you provide to help me retire faster?

Your mortgage can be used as a key financial planning tool to accelerate your savings, create future equity and build your investment portfolio.

The Mortgage Checklist – Service (Part 8)

November 11th, 2013

If you’re applying for a mortgage, there are some things you will need to know. As a result, we have created a mortgage checklist, so you can ask your lender/broker the right questions. Here is part 8 of 9, featuring questions about the lender’s service.

Service

55. If I have a problem with my mortgage, who do I call?

Large mortgage providers like banks often have live chat or 24-hour telephone support, all tracked and recorded in case you have a problem later.

Large lenders also have systems that enable multiple agents to work on your file. This yields faster service if your main contact is unavailable.

56. Will I get a dedicated mortgage adviser, or talk to someone different each time I have a mortgage question?

You should always have the email address and direct number of your primary mortgage contact.

57. How long do I have to wait on hold to speak to my mortgage adviser? What are his/her hours?

58. Will my mortgage adviser contact me annually for a mortgage check-up?

This service ensures that your rate is still competitive and that your mortgage type still makes sense for your changing needs.

The Mortgage Checklist – Extra Costs (Part 7)

November 6th, 2013

If you’re applying for a mortgage, there are some things you will need to know. As a result, we have created a mortgage checklist, so you can ask your lender/broker the right questions. Here is part 7 of 9, featuring questions about the extra costs.

Extra Costs

41. Will you pay my appraisal fee?

Appraisal fees are usually $225 to $325, but can be significantly more based on location and property-type. There is usually no appraisal cost if your mortgage is insured.

42. Do you have any processing fees?

43. Do you have any cancellation fees?

44. How is the mortgage compounded?

Semi-annual compounding costs you less than monthly compounding.

45. Do you charge “reinvestment fees” on top of the penalty if I break my mortgage early?

46. Do I have to pay legal (aka. mortgage registration) fees?

Most lenders cover this cost on switches where the loan amount, loan-to-value and amortization are not increasing.

A few even pay legal fees on refinances, but the rate is often higher than you can get elsewhere.

47. Is the mortgage a “collateral charge” mortgage?

Collateral charges help you avoid paying legal fees to refinance with your lender. But they also make it potentially more expensive to switch institutions at maturity. The reason: most lenders only pay switch fees on “standard charges,” not collateral charges.

Some collateral charge lenders register your mortgage for 100 to 125 per cent of your property value. That lets you borrow more if your property value rises. The tradeoff: It prevents you from securing anything else against your property, like a second mortgage.

48. If I switch my mortgage to you, will you pay my old lender’s discharge fee?

Very few lenders do this, but it can’t hurt to ask.

49. Do I have to pay title insurance if I switch my mortgage to you?

The answer is commonly yes, but some lenders don’t require title insurance, or they will pay it for you. It can be $150 to $300 or more.

50. Will I pay a higher rate if I’m self-employed and cannot prove my income in the traditional manner?

51. Does the mortgage come with free banking or significant discounts on other financial products?

Unlike days gone by, you no longer need to bundle financial products to get the market’s best mortgage rates. Nor do you need a “special relationship” with your banker. Simply shopping around and negotiating will get you the same mortgage discounts 99 per cent of the time.

52. If I switch lenders and have a mortgage and line of credit, will the lender charge me a separate discharge fee on both the mortgage and line of credit?

53. If I need bridge financing to cover the gap between the purchase of my new home and the sale of my old home, what rate and fees will you charge?

Also ask how long the bridge lasts. 30 days is typical.

54. Will I pay an extra fee if I break my open mortgage within 12 months?

The Mortgage Checklist – Other Mortgage Features (Part 6)

November 4th, 2013

If you’re applying for a mortgage, there are some things you will need to know. As a result, we have created a mortgage checklist, so you can ask your lender/broker the right questions. Here is part 6 of 9, featuring questions about other mortgage features.

Other Features

29. Can I split the mortgage into different parts?

“Hybrid mortgages,” as they’re called, let you lock part of your mortgage into a fixed rate, or various fixed rate components, while the other parts may float at a variable rate. The purpose is to diversify your rate risk.

If you pick a mortgage with both long and short terms, remember that the lender may not offer you the best rates on the renewal of your shorter term. It knows you’d have to pay a penalty to get out of your longer term, making you less rate sensitive.

30. Can you offer the amortization I want?

Some lenders have minimum amortizations (like 18 years) while a handful of others still offer amortizations up to 35 years (assuming you have 20 per cent-plus equity).

31. Does the lender let me check my balance and remaining amortization online? Make prepayments online?

Major banks and large non-bank lenders (like First National, Street Capital and the big credit unions) usually have the best online access.

32. Is the lender a bank or credit union with branches?

Nowadays you can fully service your mortgage online or by phone, but some people still like a branch presence.

Almost all lenders link to your chequing account to automatically withdraw mortgage payments and make prepayments. So it’s no longer inconvenient to separate your mortgage and banking.

There are over 300 mortgage lenders in Canada. Don’t fear small lenders that you’ve never heard of.

33. Do you offer early renewals at your best discounted rates with no fees or penalties?

A 120 to 180 day early renewal can potentially reduce your rate risk. But beware of lenders that try to create false urgency and lock you into a “limited time” offer well before your renewal date.

34. Do you offer an all-in-one style mortgage where I can combine chequing, savings and my mortgage into one account?

Doing this can save interest as your spare cash lowers your mortgage balance, thus reducing the amount used to calculate your interest.

35. If I sell my house, can the buyer assume my mortgage?

36. If I get a one-year fixed, can it be converted to any of the lender’s fixed rates, at any time?

Only a handful of lenders offer this option, which gives you variable-rate type features without committing to a long term.

37. Can I skip a payment if needed? If so, how often and under what circumstances?

“Payment vacations” can be handy in emergencies. But some lenders require that you make an equivalent pre-payment first. Remember that skipped payments aren’t free. You still have to make all payments eventually, and interest accrues in the meantime.

38. Do you pay profit sharing on my mortgage?

Available only at credit unions who rebate a small portion of your interest paid. You can access these funds only after a vesting period, which can last 3-7 years or more.

39. What default insurer will insure my mortgage?

Default insurance generally applies if you have less than 20 per cent equity. When you switch lenders with an insured mortgage, you must ensure that the new lender accepts that insurer’s mortgages. CMHC and Genworth allow you the most flexibility when switching lenders.
40. If I purchase creditor life insurance through you, can I port that insurance to a new lender without having to requalify and lose the premium I’m paying on my current mortgage amount?

Insurance premiums go up as you age, so you want insurance that’s not tied to one lender. That way, you can keep your premiums as-is on your original mortgage amount, even if you change lenders.

If you don’t have portable creditor life insurance and get sick, your pre-existing condition may not be covered by the new lender’s insurer.