1- Overnight rate: The central bank of Canada determines according to the economic policies of the country. 2- Prime rate: Banks themselves determine this rate as a criterion for lending. Usually, this interest rate goes up or down according to the overnight rate. 3- loan rate: the prime interest rate plus or minus one number that is determined and agreed upon at the time of closing the loan agreement, depending on the conditions of the loan and the applicant.
The second loan is based on the property in the house (difference between the value of the house and the first mortgage). The second mortgage has a higher risk for the lender, because legally the first lender has priority. Although the interest rate of the second mortgage is higher than the interest rate of the first mortgage, in many cases it is more cost-effective than unsecured loans.
– Emergency situations such as unemployment or illness – For temporary capital such as buying a second house or business – Clearing debts with high interest rates – Home renovation – Buying a car – Paying for education, wedding, travel, etc.
A loan with an advance payment below 20% is more expensive, harder, and less: – The loan must be insured for the benefit of the bank and at the expense of the borrower, and the insurance cost is paid by the borrower. – The person must be recognized as eligible both by the bank and by the insurance company. The insurance company has stricter criteria to qualify than the bank. – The applicant qualifies for a much smaller loan amount than when buying with 20%.
1- Reducing the monthly installments by increasing the repayment period 2- Taking money out of the property for investment or debt settlement 3- Reducing the loan interest rate
Usually, the interest rate of the loan for the house where the applicant lives is lower than the interest rate of the property for rent. Also, a residential house can be bought with a down payment of less than 20%, but to buy an investment property, a down payment of at least 20% is required. On the other hand, less income is needed to buy an investment property, because the rent of this property is added to the applicant’s income.
If the mortgage is open, you can pay off all or part of the loan without penalty whenever you want. If the mortgage is closed, you will have to pay an exit penalty, which is usually a significant amount, to exit the loan earlier than the end of the contract. On the other hand, the interest rate of an open loan is higher than the interest rate of a closed loan.
A repayment period of 30 years, for example, includes shorter term contracts with agreed terms and interest rates. For example, 6 periods of 5 years. The terms and interest of each of these contracts govern only that particular period, and at the end of each period, new terms and interest rates must be negotiated and agreed upon. At the end of the contract period, neither party is required to renew the contract. The borrower can transfer his loan to another bank with more favorable conditions or the lender can demand his money for any reason.
There is a period of time in which the borrower must repay the entire amount of the loan. The longer this period is, the greater the lender’s risk and the higher the interest rate will be. If buyers have less than 20% down payment, the maximum loan repayment period is 25 years. For applicants with advance payments of 20% or more, this time is up to 30 years.
There is a credit account backed by your property. This type of credit account has a much lower interest rate than unsecured credit accounts. This account has no cost to the account owner until it is used. The account holder can withdraw or repay money from this account at any time and at his discretion, and only pay interest on the money during the period of use.
The minimum advance payment required for newcomers is 35% of the purchase price. Also, the applicant must have an amount equivalent to one year of loan installments saved in his account.
1- Paying installments on time 2- Not using more than 35% of credit 3- Long life of each credit account 4- Not having a history of bankruptcy or credit repair 5- Not taking repeated actions to get credit or loans
Because mortgages usually have a lower interest rate or a longer repayment period than other debts. For example, if the bank is told that you intend to pay off your $30,000 car with monthly payments of about $710 from your mortgage money. You can borrow about $130,000 more, which increases the purchasing power of your property by about $100,000.
1- Mortgage Life and Disability Insurance 2- Mortgage Default Insurance 3- Home Insurance
This insurance guarantees the principal of the lender’s money so that the lender does not lose if the value of the property decreases or the borrower fails to pay the installments. If the advance amount is less than 20% of the property value, the purchase of this insurance by the borrower is mandatory for the benefit of the lender. The cost of this insurance is between 2.8% and 4% depending on the ratio of advance payment to the value of the property.
It is an insurance that protects your house or building against possible risks such as fire. Because the house is the basis of the mortgage, the lender wants the building to be insured.
Yes, if you are buying a house that needs repairs, you can ask the bank to add the cost of repairs to the mortgage at the time of getting the loan. After buying the house, the borrower must complete the repairs within a certain period of time, and the bank will pay the money for the repairs to the borrower after checking and re-inspecting.
No, the bank does not check the documents to give pre-approval. The bank will review and fully approve the loan only after submitting the purchase agreement along with the complete documents of the applicant. So, even with pre-approval, it is better to include the condition of obtaining a mortgage in the purchase offer.
A father or mother who recently had a child can take up to 18 months of maternity leave and use EI during this period. A person can apply for a home loan by presenting a letter from the employer stating the exact date of return to work, along with several salary slips before taking leave.
Whether to have a credit account (line of credit) depends entirely on how much a person owes to this account at the time of taking a mortgage. If you have a debt and do not settle it at the time of taking a loan, this debt has a negative effect on the amount of the loan that a person can get. But the existence of this account has a positive effect if you are not indebted to it at the time of taking a loan. Does it have a positive or negative effect on taking a mortgage?
There are 2 types of variable rate mortgages (Variable Rate Mortgage) and (Adjustable Rate Mortgage) ARM. In short, if your mortgage is VRM, your payments will remain the same. But if your mortgage is an ARM, your payments will go up or down as interest rates change.
No, if the value of the property is determined by the appraiser to be lower than the purchase price, the bank will use the appraised amount as the criterion for the loan and the buyer must provide the rest of the money.
1- Business owners who do not have enough net income for a bank loan for 2 years can take a loan with 6 months of their gross business income.
No, when interest rates are rising, the difference between fixed and variable rates is usually very large. For example, this difference is about 2% today, which is a very high number. That is, by fixing the interest rate, you will pay 2% higher from today, for fear of gradually increasing the rate and payments. It should be remembered that after each increase, the rates will decrease again and people with fixed loans will lose the benefit of this decrease. Also, if someone with a fixed loan decides to sell or refinance their loan for any reason before the end of their loan period, they will have to pay a much, much higher penalty than the variable rate. Studies have shown that in the long run, having and keeping a variable rate is much cheaper than a fixed rate loan.
