There are a wide range of financial institutions that are involved in the mortgage industry in Canada. Some of these include:
- Chartered Banks, Loan Corporations
- Trust Companies, Credit Unions
- Finance Companies, Pension
- Life Insurance Companies, Private
Your Neighbourhood Dominion Lending Centres mortgage agent will select the mortgage lender who’s right for you!
A mortgage is a large debt and should be life insured, for your family’s peace of mind. Some lenders include life insurance as part of their cost; others will let you insure the mortgage yourself. But Neighbourhood Dominion Lending Centres always recommends mortgage insurance in some for.
In the Province of Ontario, Mortgage agent is the correct term for a Mortgage Broker.
For most people the Neighbourhood Dominion Lending Centres agent provides a free service. They receive their fee from the lender providing your mortgage.
No because the lender either has to pay its own sales staff to originate mortgages or it can pay a broker, it’s all the same.
Usually the shorter the term the lower the rate. However many people prefer the comfort of a longer-term mortgage and as an example we have provided a historical tracking of the five-year rates. This is another area where your Neighbourhood Dominion Lending Centres mortgage agent can help.
The amortization period has a dramatic effect on the amount of interest paid over the length of the mortgage. Consider the example of a $150,000 mortgage with an interest rate of 6.20%*
With a 25 year amortization the monthly payments are $977.61
With a 20 year amortization the monthly payments are only increased by $107.57 to $1085.18. The savings in interest would be $32,843.40
With a 15 year amortization the monthly payments are increased by only $298.03 to $1,275.64. The savings in interest would be $63,669.38
* The example assumes the interest rate will remain constant through the whole amortization period.
Most mortgages have very flexible payment alternatives. Weekly, bi-weekly, or monthly payments are most common. These choices also have a great effect on the overall interest payments.
Consider the example of a $150,000 mortgage with an interest rate of 6.20% over a 5 year term.
|Payment||Remaining balance at|
Under the 5% Down Payment Program, the minimum down payment of 5% of the purchase price or appraised value, whichever is less.
The down payment must be from customer’s own resources or an outright financial gift from immediate relatives. If the minimum equity requirement is being met by way of a financial gift, the funds must be in the possession of the borrower at the time of application.
Borrowers are also required to demonstrate at time of application the ability to cover a closing cost equal to at least 1.5% of the purchase price.
Maximum purchase price can range from $125,000 to $250,000. Your mortgage agent will confirm the maximum in your market area.
Maximum GDSR ~ 32% (Principal + Interest + Property Taxes + Heating Costs must not exceed 32% of Gross Income).
Maximum TDSR ~ 40% (Principal + Interest + Property Taxes + Heating Costs + Monthly Obligations including Credit Cards & Loans must not exceed 40% of Gross Income).
Minimum loan term for CMHC is 6 months with loan qualification based on the current 5 year rate.
GENCOR (GE Capital) currently has no minimum term requirement.
The mortgage loan insurance premium is 3.75% of the mortgage amount. (Premium can be added to the mortgage or paid separately).
Credit history must be in good standing.
“The stress that I expected never materialized! So many people have expressed how stressful it is to purchase a home. With you in my court, there were no sleepless night!… Anne S.
Each purchaser may borrow up to $20,000 from their RRSP under the Home Buyers’ Plan. (The funds must have been in the RRSP for at least 90 days prior to withdrawal to be eligible under the program)
Provided you buy or build a qualifying home and meet all of the conditions for making a withdrawal under the Home Buyers’ Plan, you can use the particular funds you withdrew under the Home Buyers’ Plan for other purposes. (Not only down payment and closing cost, but for any other purpose you choose.)
This program is available to the first time home buyer only. (You are considered a first time home buyer if, at any time during the period beginning January 1, 1995 and ending 31 days prior to your withdrawal in 1998, you did not own a home while you occupied it as your principal place of residence)
This information is current throughout 1999. And the program has been extended indefinitely.
Repayment of the funds back to your RRSP can be made over 15 years. (The repayment period starts in 2001 and ends in 2015)
If the amount is not repaid in a year, that year’s repayment amount will be added to your income and taxed.
In order for the home to qualify it must be located in Canada and intended to be used as your principal residence.
This program may be used in connection with the 5% down program.
If you have any questions about the HBP program you can call the General Inquiries section of your local tax services office. You can find the address and telephone number listed under “Revenue Canada” in the Government of Canada section of your telephone book. If you use a Telecommunication Device for the deaf (TDD), you can get tax information by calling the toll-free, bilingual TDD inquiry service at: 1-800-665-0354
If you are applying for a preapproved mortgage, have following information ready to give to your Neighbourhood Dominion Lending Centres agent:
Have your employer give you a letter on company letterhead outlining your name, position, gross annual income, and number of years employed with the company.
If you are self-employed, you will need three years financial statements, and tax returns (together with official assessment from Revenue Canada).
Social Insurance Numbers.
At least 3 years history of residences and employers.
Know your banking information (i.e. institutions name, address, type of accounts, account numbers)
Know your assets and their value (i.e. cash amounts, stocks, bonds, RRSPs, car).
Know your liabilities (i.e. car loan, credit card balances).
Also, be sure and advise your Neighbourhood Dominion Lending Centres mortgage agent about any past credit problems you may have had.
Finally, write down a list of questions you would like to have answered.
If there is ‘one’ thing that causes problems which may delay the closing of your house it’s verification of the Down Payment. Here’s why:
To meet the Requirements of Canada Mortgage and Housing Corporation, GENCOR (GE Capital) and the Major Lending Institutions
On or before the issuance of a lending commitment you will be asked to provide “Confirmation of Down Payment” from Non-borrowed funds in one or more of the following forms.
Down Payment from the Sale of an Existing Property You will be required to provide a copy of the unconditional “Purchase and Sale Agreement” on your existing property. This needs to be accompanied by a copy of the statement of “Mortgage Balance” on any mortgages presently held against the property. The difference between the sale price and the mortgages owing will substantiate the funds available for your down payment.
Down Payment from a Gift All or part of the minimum equity requirement may be provided by way of a financial gift, as long as all of the following conditions are met:
(a) the donor is an Immediate relative of the
(b) the Approved Lender has verified that the money is a genuine gift; and
(c) the Approved Lender has verified that the funds are in the borrower’s possession prior to the time of the application to CMHC or GENCOR for mortgage loan insurance.
The Approved Lender will verify the authenticity of the gift by obtaining a written confirmation, signed by the donor and the borrower, which will include the following points:
(a) the money is a genuine gift from the donor and does not ever have to
(b) no part of the financial gift is being provided by any third party having any
interest (direct or indirect in the sale of the subject property)
The Approved Lender is not required to forward this confirmation to CMHC, but is expected to retain the Information in its paper or electronic loan record.
Down Payment from Your Own Resources You must supply verification satisfactory to C.M.H.C. or GENCOR and the lender of accumulated savings from non-borrowed funds. This may be in the form of a copy of your bank book confirming a balance equivalent to your down payment including the amount of deposit confirming the savings of said amount for a period of not less than 3 months.
Should a substantial deposit have been made recently, the source of such funds, i.e. Bonds, Stocks, G.I.C.’s or RRSP receipts will also be required.
To avoid any delay in funding your transaction we suggest that you provide a form of the above noted confirmation at least 14 days prior to your closing date.
LTT only applies for those who made OHOSP Contributions Made Prior to December 31, 1993, Under the plan, persons who have not owned a home are able to contribute up to $2,000 per year to the plan and receive a tax credit based on their total family income. Credits are available for single annual incomes below $40,000 and family incomes below $80,000. Unfortunately the Land Transfer Tax Refund Program has not been extended beyond December 31, 1993. Anyone who has not contributed to OHOSP by that date will not be eligible for a refund when they purchase their first home. Those that did contribute before that date will be eligible for a refund according to the following table.
|Price of the home||% of LTT Refund|
|$ 0 - 150,000||100%|
The forms for claiming the refund for LTT are available at the land registry office, the financial institution where it was opened, or your lawyer’s office, and may be claimed immediately after closing.
If you have any questions about the OHOSP program, please call the Ministry of Finance’s Information Centre toll free:
All areas of Ontario: 1-800-263-7965
French language inquiries: 1-800-668-5821
Teletypewriter (TTY): 1-800-263-7776
To help first time buyers of newly-built homes and promote job creation in the housing industry the Government of Ontario in its 1996 Budget, May 7, 1996, announced a refund of land transfer tax paid on the purchase of the home, up to a maximum of $1,725.
You must be at least 18 years old.
The refund applies to any newly-built home where the sale closes after May 7, 1996. The agreement of purchase and sale have to be completed on or before March 31, 1999, the purchaser must take occupancy on or before December 31, 1999 and the deed must be registered on or before December 31, 2000.
You cannot have previously owned a home, or an interest in a home, anywhere.
If you have a spouse, he or she cannot have owned a home, or an interest in a home, anywhere. You cannot have received an OHOSP-based refund of land transfer tax.
The amount of the refund will be the entire amount of tax paid or payable, up to a maximum of $1,725. If you own less than 100% interest in the new home, the amount will be reduced and calculated according to the amount of your interest in the new home. For example: If you own 100% of your new home and you paid $250,000, the amount of land transfer tax payable is $2,225. You will receive a refund of $1,725 (the maximum). If however, you owned 50% interest in your new home, the amount is 50% of $1,725, or $862.50.
You can receive a same-day refund of the land transfer tax by filing an affidavit for refund at the land registry office at the time of registration. If you do not apply for a refund at the time of registration or require more information on the LTT Rebate program, contact the Ministry of Finance’s toll-free information line:
All areas of Ontario: 1-800-263-7965
French language inquiries: 1-800-668-5821
Teletypewriter (TTY): 1-800-263-7776
Here are some examples of LTT Payable.
|Purchase Price||LTT||Purchase Price||LTT||Purchase Price||LTT||Purchase Price||LTT|
For most people, a mortgage agent acts like a Mortgage Broker. Mortgage agent is the correct title for what most people think of as a Mortgage Broker.
The Purchase Plus Plan lets you add the cost of upgrades to your mortgage before you move in! Eligible upgrades include a new electrical service, a new roof, central air, a new furnace, new siding, eaves, soffits, facia, doors, windows, a new kitchen, carpeting… or any other renovation that would increase the value of the home.
The way it works is like this… Let’s assume that you are a first time buyer and have 5% down payment. Before the mortgage financing is arranged, written quotes are obtained from licensed contractors for the repairs and or the improvements to be done to the home. When the application for mortgage financing is made, the request is made for 95% of the purchase price PLUS 95% of the cost to complete the improvements.
Note: The lender will “hold-back” on closing the “improvement” portion of the mortgage until the work has been completed, normally within 30 to 60 days of closing. Once the work has been completed, the lender will advance the balance of the funds and the contractor can be paid. What does this mean? . . let me give you an example. . .
The purchase price is: $150,000 X 95% = $142,500
The quote for the improvements is: $ 11,000 X 95% = $ 10,450
Total Mortgage is: $161,000 X 95% = $152,950
Therefore, an application is made for a mortgage in the amount of $152,950 which is 95% of the purchase price plus 95% of the improvements.
On closing this is what happens… The mortgage advanced to complete the purchase is $142,500 plus the original 5% from the purchasers down payment ($7,500) sufficient funds to complete the purchase of $150,000.
After closing the contractor completes the improvements (normally within 30 to 60 days after the closing) the lender advances the hold-back of $10,450, the purchaser pays the additional 5% of the cost of the improvements ($550) and the $11,000 owed to the contractor can be paid as per the original quote for the work.
And you will get $11,000 of improvements done to your home with a cash outlay of only $550 (the balance was financed with your mortgage)!
To avoid any surprises on closing, a good rule of thumb is to set aside an amount equal to 2-3% of the purchase price to cover expenses like these:
The Deposit: Part of your down payment, a deposit is due upon acceptance of your offer.
Prior to Closing
Home Inspection: Prepared by a qualified inspector to assess the property for defects and poor maintenance.
Appraisal: Prepared by an appraiser chosen by the lender, by CMHC or GENCOR if the mortgage is insured by either company.
Legal Fee/Disbursements: Your lawyer will quote his fee for closing the purchase and mortgage(s) plus an approximation for his disbursements, which includes registration fees, courier costs, photocopies, etc. Ask for an estimate.
Land Transfer Tax: See the chart enclosed in this package to calculate the Land Transfer Tax which is due on closing and reflected in the “Statement of Adjustments” which your lawyer prepares prior to closing day.
Interest Adjustment: Monthly mortgage payments are due on the first of the month. Unless the closing date is the first of the month, you must prepay the amount of the interest accruing up to the 1st day of the following month, the Interest Adjustment Date.
CMHC or GE & PST: If your mortgage is insured by CMHC or GENCOR the insurance premium will usually be added to the mortgage so it is not a cash requirement on closing. However, the premium is subject to 8% PST, and the tax must be paid on closing.
Prepaid Expenses: If the Vendor has prepaid any other expenses such as utilities, water and sewage taxes, oil in tank or taxes, he must be compensated. This will be reflected in the Statement of Adjustments.
Property Tax Hold-back: If the lender is collecting and paying property taxes you may be required to pay to the lender an amount to ensure sufficient funds are available to pay the next installment of property taxes when due.
Other Fees: Occasionally, a lender or the broker will charge a fee for providing the mortgage. If so, these costs should be disclosed to you at the time the Statement of Mortgage is issued to you.