Mortgage FAQ

Mortgage faq

Before you apply for mortgage, here are a few important things that you need to know.

What is required to obtain a mortgage in Ontario?

  • Full time/part time employment/proof of income
  • Good credit rating
  • Verifiable down payment
  • Mortgage Approval Application

If I’m unable to confirm my income, can I still qualify?

Unfortunately, you usually can’t. However, there are some exceptions. For instance, if you are self-employed or have been a commissioned employee for at least 2 years, you can generally qualify for a mortgage loan. You’ll have to provide certain documentation, including articles of incorporation, a business license, and the most recent two years Notices of Assessment from CRA.

How much should I consider spending on a home?

Most mortgage lenders allow you to spend no more than 32% of your monthly income on your mortgage, and newer guidelines allow up to 44% of your monthly income for mortgage payments and other debt payments.

What is the minimum down payment required for a mortgage in Ontario?

The amount of money you pay up front to obtain a mortgage. The minimum down payment in Canada is 5%. For down payments of less than 20%, home buyers are required to purchase mortgage default insurance, commonly referred to as CMHC insurance.

What are closing costs?

Closing costs are the fees associated with the purchase of your home that are in addition to the actual purchase price, such as legal fees and disbursements, land transfer taxes and moving expenses.

 Please note that for CMHC (Canada Mortgage and Housing Corporation) and Genworth Financial Canada insured mortgages, you must provide evidence of available cash for closing costs equal to 1.5% of the purchase price.

What is a First Time Home Buyers' plan withdrawal?

The Home Buyers' Plan (HBP) is a program that allows Canadians to withdraw up to $25,000 from their personal or spousal Registered Savings Plans (RSPs) to buy or build a “qualifying” home for themselves or for a related person with a disability. RSP contributions must remain in the RSP for at least 90 days before they can be withdrawn under the HBP, or they may not be deductible for any year. Generally, funds cannot be withdrawn from a locked-in RSP or group RSP. The withdrawals can be made as a single amount or a series of withdrawals in the same calendar year, provided that the total amount withdrawn is not more than $25,000. Withdrawals under the Home Buyers' Plan must be repaid, starting the second year following the withdrawal, over a period of no longer than 15 years. Repayments are made by contributing into any RSP plan and by filing a Schedule 7 in your income tax return to the Canada Revenue Agency (CRA) to designate the contribution as an HBP repayment. Since the Home Buyers Plan is a federal government program, please verify your eligibility and conditions for participating under the HBP by contacting CRA or viewing information posted on the Canada Revenue Agency website. To request a Home Buyers Plan withdrawal, you'll need to complete the appropriate CRA forms.

Can I use money gifted to me for a down payment?

Yes, most lenders will accept down payment that is gifted from a family member. A gift letter is usually required to be signed by the donor to confirm it is not a loan.

What benefits do I receive for mortgage pre-payments?

Pre-payment typically allows you the following privileges:

  • Ability to increase your monthly payment (usually by 15-20%). Keep in mind that you cannot decrease your payments.
  • You are allowed to pay a percentage (usually 15-20%) of your principal per year.
  • You may be able to double your mortgage payment for a month or a number of months. Remember that you are not allowed to exceed the percentage that you’re permitted to pay down annually.

What’s better; a short-term or long-term mortgage?

While a short-term mortgage will usually have a lower interest rate, your rate might go up when you renew at the end of your term. A long-term mortgage will typically have a higher rate, but you won’t have to renew for a longer period of time. The option you choose depends on your situation. If interest rates are low, it may be wise to choose a longer term, where a shorter term might be a better choice if interest rates are currently high, so you might be able to renew at a lower rate.

Does paying bi-weekly actually save me money or shorten my amortization time?

It does! With a monthly mortgage, you’ll make 12 regular mortgage payments annually. When you pay bi-weekly, you’ll make 26 half-payments, amounting to 13 regular mortgage payments annually. That might not sound like much, but it adds up. A bi-weekly payment schedule could make you mortgage-free years sooner, saving you thousands in interest payments to boot!

What is required for my down payment to be confirmed?

This will depend on the source of your down payment.

  • From sale of your current home: You’ll need a final Contract of Sale and a current mortgage statement.
  • From a savings account: You’ll need 90 days (3 months) of bank statements, including your name and account number.
  • From gifted funds from a family member: You’ll need a copy of the gift letter and proof of its deposit in your account (you’ll need a bank statement including your name and account number which states your balance).
  • From Investments: You’ll need 90 days (3 months) of investment statements, including your name and account number.

Can I transfer my mortgage if I buy another home?

Depending on your mortgage lender, yes. Most lenders are now offering options that allow you to take your mortgage with you. Typically, you will not be assessed additional fees if the possession period between your old and new home is 60 days or less.

What is mortgage assumption?

Mortgage Assumption is usually when the buyer “assumes” the mortgage from the seller. In other words, you are taking responsibility for the mortgage payments. Because of the potential risk, we do not recommend this method. Additionally, lenders are recognizing the additional risk in mortgage assumptions and are working to make it more difficult for people to assume mortgages for which they do not qualify.