We promised you it was coming and the it is finally here! We sat down with Jennifer Rossides, a local mortgage broker here in Ottawa, and asked her all of your burning financing questions. And man, did she deliver! So without further ado, let’s get to the interview…
First and foremost, what is a mortgage broker?
A mortgage broker is a licensed professional who provides unbiased advice and compares mortgages from a variety of lenders to find the best option for their clients. A mortgage broker is a kind of middle man between the client and the lender/bank.
Why should I work with one? Is it going to cost me more money than just going to my bank?
Knowledge and experience.
One of the main benefits of using a mortgage broker is their access and knowledge of the entire mortgage market. They can advise which lenders will consider your case and which will not be based on your individual circumstances. No two persons financial picture is the same. A mortgage broker has the ability to work with a multitude of lenders to find the mortgage that will best suit your needs.
Mortgage brokers have access to lenders who specialize in servicing people with adverse credit and can leverage relationships with mainstream banks.
No, it will not cost you more. In fact, a mortgage broker can typically get you better rates and terms for your mortgage than your branch. As a broker, we deal with have the abilty to deal with over 50 different lenders and are able to move laterally for a client. What that means is if we have an approval with lender A and lender B comes out with a great deal we can move the client lender B for the better rate. We deal in volume so lenders are always competing for business.
Why do I need a pre-approval?
Pre-approvals are essential to understanding the home buying process and what you would qualify for. The misconception is that it gives buyers the ability to waive the financing clause when they are making an offer.
A pre-approval is really a rate hold by the lender stating that based on the information you have provided you would qualify for X amount. It is very important to understand that the lender not only has to approve the individual buying but the property as well.
The rules around investment properties are a bit different as lenders will not provide a pre-approval on paper. This is where an experienced broker makes a difference as they are able to access each person’s situation and give recommendations on how to finance properties.
What do I need to get pre-approved and how long does it take to get pre-approved?
First off, you need to do a credit application with your broker. It tyipically takes less than 24 hours. To get pre-approved you will need to:
- have an estimate of what price range you are thinking of
- know the area you are looking at buying in
- decide on the type of property you wish to purchase
- know how much you will have for down payment
- likely provide some income confirmation
- it typically takes less than 24 hours
What is the typical minimum downpayment on an investment property?
20%. Alternatively, you can do a second home purchase with 10% down but you cannot use rental income to qualify.
What is a typical interest rate on an investment property?
It is typically the current rate +.25 (for a rental). Commercial rates are calculated differently.
What should I expect for closing costs?
- legal fees $1500
- appraisal fee $350-400 /door
- land transfer tax 1.25% of purchase price approx
Multi units (5+)
- legal fees $1500 +
- appraisal fee $350/door
- land transfer tax
- lender fee 1% (not always but usually)
I’m going to need more money for renovations on my investment property, can you help me with that?
Yes, it is the best time to do it when you first purchase with the “purchase plus improvement mortgage”
When you do the inspection on the property it is a good time to get contractors in to give you quotes. The quotes are then submitted to the lender during the allowed time for financing and the lender will decide if they will agree to the additional costs.
Commercial units have a similar program but it is individualized by the lender
I’ve heard rumors that interest rates are going to rise, is this true?
Not at this time. All indications are that we are heading into a recession and rates will continue to go down.
What is the “Stress Test”?
The “Stress test” was implemented in January 2018
It is a test to ensure people can afford the properties they are purchasing in case there in an increase in rates. People are forced to qualify at 2% above the contract rate or the rate set by the Bank of Canada.
The stress test is not applicable to the commercial market.
Will getting another mortgage affect my current (primary residence) mortgage (or renewal of it)?
Possibly but a good broker will review all of your options when obtaining a new mortgage.
I’ve owned my home for a while, can I use the equity from it for a downpayment? How?
Absolutely. We would refinance your current mortgage – this is called an equity take out. This money (equity) can be used for a downpayment on a new rental. All costs associated with the equity take out and the interest payable for the investment are tax deductible.
I want to learn more, how can I get in touch with you?
Email works great for an introduction: firstname.lastname@example.org so we can set up a time to talk. Or call me at 613-867-8076. I find it very important to talk to my clients directly rather than emailing, it is more personal and we can accomplish so much.
Learn more about me at my website: www.jenniferrossides.com
Check out My Mortgage Planner. It includes everything you need to estimate your home ownership costs. Includes mortgage payments, rates, Land Transfer fees, stress test, closing costs and much more.