Portable or Transferable Mortgages

Portable mortgage allows you to transfer your existing mortgage on your current home to the new property and retain the same terms of the original mortgage

Standard Vs. Collateral Mortgages

The main difference between a standard mortgage and a collateral mortgage is how the loan is secured.

A standard mortgage


• A type of loan where the property being purchased is used as collateral to secure the loan. The loan is registered with the government, and the lender has a claim on the property if the borrower defaults on the loan.
  
  

A collateral mortgage


• A type of loan where the lender uses the property being purchased, plus any additional property owned by the borrower, as collateral to secure the loan. The loan is registered with the government, and the lender has a claim on all of the properties used as collateral if the borrower defaults on the loan.

• The main advantage of a collateral mortgage is that it allows the borrower to access additional funds using their existing properties as collateral, without having to go through the mortgage application process again. However, collateral mortgages can be more difficult to transfer to a new lender, and they may have higher penalties if the borrower wants to break the mortgage early.

Steps in a Mortgage Closing

• Pre-Qualification - initial assessment of a borrower's financial situation and creditworthiness to determine how much money they may be eligible to borrow.


• Approval - If the borrower meets the lender's lending criteria and the property is eligible for financing, the lender will provide a mortgage offer that outlines the terms of the loan.


• Conditions & Appraisals- completing conditions and the lender orders an appraisal of the property to determine its value and ensure it is worth the purchase price/property value.


• Solicitor Instructions - solicitor will receive instructions from the lender
• Signing - The buyer reviews and signs the loan documents, which include the mortgage agreement and other legal documents related to the loan.


• Funding - Once all the documents are signed and all conditions are complete, the mortgage loan is funded and the purchase of the property is complete.

Qualification Criteria

Qualification criteria for mortgages can vary depending on the lender and the type of mortgage being applied for.

• Income

  
  

  Income is an important qualification criterion when applying for a mortgage, as it is an indicator of your ability to repay the loan. lenders typically require borrowers to have a stable and sufficient income to support their mortgage payments over the long term.

  
  

  When evaluating your income, lenders will consider various factors, such as the amount and stability of your income, your employment history, and the debt-to-income ratio. In Canada we call this the gross and total debt service ratio. What monthly payment you are permitted to manage compared to your monthly household income, along with your heating costs called GDS and other then along with other debt expenses called TDS capped to 39% and 44% respectively.

  
  

  Each lender has a different acceptance to the kind of income. Salary and Hourly wages paid regularly are more preferred by the big lenders, and that can mean little flexibility to self employed or commissioned and contract employees. Banks look at income as either documented or self declared. Those with a documented proven income can qualify for better mortgage rates. Working with a mortgage broker can help identify lenders that are flexible towards the self declared, all while getting best mortgage rates for the documented income applicants.




• Credit

  
  

  A borrower's credit score is a reflection of their credit history, including their repayment history on previous loans, the amount of debt they currently have, and how long they've had credit. A higher credit score generally indicates that a borrower has a good credit history and is more likely to be able to repay their mortgage on time and in full. The credit score rating is offered by Equifax and Transunion in Canada as Credit Reporting Bureaus. Though similarities exist in their independent Scoring Algorithm, the actual scores tend to vary between the two. The credit report in Canada compiles your credit accounts like credit cards, line of credits, vehicle loans, mortgages and some phone or utility payments history, reported to your personal credit file that eventually creates a score of financial worthiness when being lent to.

  
  

  A credit report will also contain any Fraud & Identity Alerts, collection accounts and late or missed payments also known as derogs. So keep on top of your credit report for free, and track your credit score regularly.

  
  

  When applying for a mortgage, lenders will typically check a borrower's credit score and credit report to assess their creditworthiness. If a borrower has a high credit score and a clean credit history, they will be offered more favorable mortgage terms, such as a lower interest rate or a higher loan amount.




• Stress Test

  
  

  The Canadian mortgage stress test first introduced on January 1, 2018, is a financial assessment that lenders use to evaluate whether a borrower can afford to make mortgage payments should the interest rates rise or if their financial situation changes.

  
  

  In Canada, the mortgage stress test is a requirement for all borrowers applying for a mortgage, and it applies to both insured and uninsured mortgages. The stress test requires borrowers to qualify for a mortgage at a higher interest rate than the one they will actually be paying, usually two percentage points higher than the contract rate or the Bank of Canada's five-year benchmark rate, whichever is higher.

  
  

  The idea behind the stress test is to ensure that borrowers can handle a potential rise in interest rates and maintain their mortgage payments over the long term, without becoming financially stressed or defaulting on their loan.




• Pitfalls of a bad mortgage

  
  
  • Hidden Fees
  • High Interest Mortgage
  • Failure to get the discounted rate and special features
  • Pre-Termination Penalties / Prepayment Penalties
  
  

  It's important to carefully research and compare different mortgage options before making a decision. Be sure to read the fine print and ask questions about any fees or penalties associated with the mortgage. With this, Rateshop.ca Mortgage Advisors are here to help you secure the best mortgage product and rates.




• Hefty Penalties

  
  

  In Canada, mortgage lenders often include penalties to discourage borrowers from breaking their mortgage contract before the end of the term. These penalties can be significant and can add up to thousands of dollars. Here are penalties you might encounter when you have a mortgage:

  
  
  • Prepayment Penalty
  • Discharge Fee



• Refinance Restrictions

  
  

  In Canada, there are some restrictions on refinancing your mortgage, which are designed to protect lenders and borrowers. Rateshop.ca Mortgage Advisors can help you evaluate your options and determine if refinancing is right for you. Here are some of the main restrictions you should be aware of:

  
  
  • Maximum LTV (Loan-to-Value) is 80%, which means you cannot borrow more than 80% of your home's appraised value.
  • Minimum Credit score for refinancing is 620.
  • Lender will ask for income verification again if you can afford the new repayment
  • If you're refinancing before the end of your current mortgage term, you may be subject to penalties, such as prepayment penalties or mortgage discharge fees. These fees can be significant and may offset any potential savings from refinancing.
  • Appraisal is required and clients have to pay for it
  • Limited customer service options