FAQs

When you are looking for a mortgage, you may come cross different mortgage products such as fixed rate mortgage, variable rate mortgage and adjustable rate mortgage.   In a nut shell, here're the differences.
Fixed Rate Variable Rate Adjustable Rate
Mortgage Rate Remain the same throughout your mortgage term Fluctuates along with the Canada /Lender’s Prime Rate changes Fluctuates along with the Canada/Lender’s Prime Rate
Availability Usually available in 1, 2, 3, 4, 5 and 10 year mortgage term. Usually available in 3 or 5 year mortgage term. Usually available in 3 or 5 year mortgage term.
Examples of a mortgage rate quote 3 year fixed: 3.35% 5 year fixed: 3.30% Prime Rate + 0.75% Prime Rate – 0.50% Prime Rate + 0.75% Prime Rate – 0.50%
Interest Cost Predictable - Total interest cost during the mortgage term is evaluated based on the mortgage rate you have signed up for. Unpredictable – your mortgage rate will change along with the Bank of Canada/Lender’s Prime Rate change. Unpredictable – your mortgage rate will change along with the Bank of Canada/Lender’s Prime Rate change.
Mortgage Payment Predictable. You will make the same mortgage payment throughout your mortgage term. Predictable. You will make the same mortgage payment throughout your mortgage term. Unpredictable. You expect to make a lower payment in an interest rate drop environment, and vice versa.
Length of Mortgage Life (Amortization) Remain the same until replace your current mortgage with a new one. In an interest rate drop environment,  your mortgage can be paid up faster as more of your mortgage payment will go towards the principal pay-down. It will be opposite if the prime rate keeps going up. Remain the same until replace your current mortgage with a new one.
Right fit for homeowners have low risk tolerence are budget-conscious will take advantage of lower mortgage rates will take advantage of a lower mortgage rate good cash flow.
A refinance is where you take out a new mortgage on your own property - either by replacing your existing mortgage, or by borrowing more money against your property.You can borrow up to 80% of your home’s appraised value, minus the amount you have left to pay on your mortgage. There are 2 types of refinance: (1) Cash Out Refinance (2) Rate and Term Refinance

Cash Out Refinance

If you have equity  in your home—meaning there's a difference between the home value and your mortgage balance —you could refinance to a larger mortgage and put cash in your pocket to use for other goals.

Debt Consolidation

You could use a cash-out refinance to pay off other, higher-interest debts. This is called "Debt Consolidation".  The idea is to get cash out of your house and paying off some high interest debts such as credit cards, car loans, tax arrears, etc. All your debts will now come under one mortgage, which is more manageable and often at lower rate of borrowing.  The benefits of debt consolidation include:
  • Clean up your current credit
  • Lower monthly payment
  • Increase cash flow
  • Savings on costs of interest

Renovations

It's totally worthwhile to consider getting cash out of your home to do some renovations, especially the renovations will increase the value of your home.  You can consider finance your home renovation with your credit card and earns the rewards or points first, then proceed with a cash-out refinance to repay the card balance. The CIBC poll shows that renovation is shifting to the outdoors and Dan Hanson, senior director of secured lending products at CIBC, says that most consumers doing these small-scale renovations will do it from savings, with others choosing to put it on their credit cards. Credit cards can be beneficial if the credit card has a rewards or points program, and many home owners then convert the balance after the renovation is complete, refinancing their mortgage and combining the balances.

Rate and Term Refinance

You can consider replacing your existing mortgage with a different mortgage that better fits your lifestyle. Take advantage of Lower Rates The most common reason for refinancing a mortgage is to take advantage of the dropping interest rates, enjoy some interest savings and lower monthly payments. Since there are costs incurred to arrange a refinance, always work with a mortgage professional so that to make sense of the refinance. Mortgage Free Faster If you have a big career advancement and would like to be mortgage free faster. If you started off with a 30-year mortgage, you may want to refinance into one with a shorter , such as 15 or 20 years.  All things equal, a shorter term means higher payments—but if rates have dropped since you bought your home, you may find there isn't that big a difference.
In most cases, your bank usually sends you a mortgage renewal 60-90 days before your current mortgage term is due. Now, what do you do?

Don't rush to say "yes"

When your bank asks for your mortgage renewal, they won't spend time listening to your needs. You will not be given a chance to get a mortgage that fulfills your current and future needs. Signing your mortgage renewal letter only takes 5 seconds, but this 5-seconds can cost you a lot!

Consider your current situation, plan for the future

There is a lot to think about before you engage into another 'possibly long' mortgage term. We have outlined some of the important questions to think about here.

Don't just compare mortgage rates

You will find your renewal rates in your renewal offer. The next thing you may do is go online and see if you have a good renewal rate. This is certainly the right thing to do. But please bear in mind not every rate you see online represents the mortgage product that fits your needs! There are hundred of mortgage products in the marketplace from hundreds of different lenders. It is always beneficial to talk to an accredited mortgage professional who can show you the product that fits you the best, along with the best rate.  Therefore, do not hesitate to reach out to us! See also: How should I plan for my mortgage renewal?

What could possibly happen in the next few years?

Often people do not realize their mortgage has a lot to do with their current financial situation and their future financial plan. Before you engage yourself into another long mortgage term, HomeHow recommends that you think about these factors:
  • How do you feel about your job situation in the next few years? Are you planning to:
    • change job
    • get a pay raise
    • relocate
    • commit yourself into something entirely different
  • Do you think you will receive a lump sum of cash within the next few years, such as:
    • taking profit from investments
    • inheritances
  • Do you think you will need some big funds in the next few years, such as:
    • planning a home renovation
    • getting more education
    • investing into a business
    • increasing your investment portfolio
  • Do you have plans to change where you live, for example:
    • wanting a bigger house
    • sizing down
    • relocating to another province or country
All of the above has something to do with your next mortgage.  HomeHow will listen to your situation and take time to find a mortgage that works best for you. Do not hesitate to reach out! Already received a mortgage renewal notice from your bank? We can tell you what to do by clicking here!

You can borrow from your RRSP (Registered Retirement Savings Plan) if you are a first time home buyer!

Canadian governments Home Buyers' Plan (HBP) allows first time home buyers to borrow up to $25,000 from your own RRSP. The following are some quick facts about HBP:
  • The government defines a first time home buyer as a person who has not occupied a home that they and/or their spouse/partner have owned in the last 4 years
  • You will start to repay your RRSP withdrawal by instalment after one year. You will have up to 15 years to repay the amount
  • This is interest-free borrowing since the money comes out from your own RRSP borrowing
Visit the Canada Government Home Buyer's Plan website for more information.

What if I am not a first time home buyer?

You can borrow your down payment from other sources such as a line of credit.
  • Lenders will take the monthly payment of this borrowing into consideration while assessing your mortgage application. It may impact your borrowing power
  • Most lenders see borrowed down payment as a sign of financial tightness
  • If the home value declines after you have made the purchase, you are paying extra interest for nothing
  Make sure you talk to HomeHow first before you decide to borrow for your down payment. Our trusted mortgage specialist will review your home ownership strategy for you and come up with a better solution!
If the home value is less than $1 million ($1,000,000), you will need to come up with at least 5% of the home value as the down payment. If you purchase a home that is worth more than $1 million, you will need to come up with 20% down payment. Depending on your income level, job situation and credit profile, you may require to come up more than 5% of the home value as down payment in order to receive a mortgage.
When the lender considers your mortgage application, they will need to know where your down payment is coming from. The lender needs to make sure that:
  1. You do not borrow money to come up with the down payment. Most lenders will not accept borrowed down payment as it implies you are financially unfit to own a house
  2. The money comes from an account that belongs to you. All lenders will require bank statements from your account to prove the money is yours.
  3. You have enough money to close the purchase.  There are a lot of hidden costs that home buyers may not expect when they make the home purchase decision
  4. If your parents, guardians or family members give you money for down payment as a gift, the lender will need to see a letter from them stating that this money is a gift and you have no obligation to return the money
 
In Canada, it is the law to purchase mortgage insurance when you receive a mortgage with less than a 20% downpayment. This insurance covers the lender if you are no longer making your mortgage payments and/or if the sale of property cannot cover the outstanding loan. You can purchase mortgage insurance through the Canada Mortgage and Housing Corporation (CMHC), Genworth Financial and Canada Guaranty. Usually the lender will arrange the purchase of mortgage insurance for you once you have your mortgage approved. Mortgage insurance covers only the lender which is different from Mortgage Protection insurance. Mortgage Protection insurance is an insurance you can purchase on your own to cover mortgage payments when you have lost your income due to illness, change of employment and job loss.

Maximum Coverage 

In order to be covered, the maximum purchase price of the home value must be below $1,000,000. It also means if you are buying a house over a million dollars, you must come up with at least 20% downpayment.

Premium Calculation

The insurance premium is calculated based on the percentage of downpayment you have:
Downpayment Premium Rate
Less than 10% 4%
10%  to less than 15% 3.10%
15% - 20% 2.80%

Example

Home Value: $500,000

10% Downpayment: $50,000

Mortgage Amount Required: $450,000

Mortgage Insurance Premium = $450,000 x 4% = $18,000

Include insurance premium into your loan amount

You can include this premium into your mortgage amount.  Using the example above, your new borrowing amount is $450,000 + $18,000 = $468,000

Bring your current mortgage insurance to your new home

In most cases, you do not have to repurchase a mortgage insurance when you buy a new house.  You can transfer your mortgage insurance from your current dwelling to a new property.
You will need as little as 5% of the home value as downpayment. In Canada, it is mandatory to purchase mortgage insurance if you have less than 20% of the home value as downpayment.  
Most lenders WILL review the following source of income to determine your borrowing power: Taxable Income
  • Income from your occupation including part-time work, seasonal work and contract work
  • Income from your business including income hasn't been reported in your tax filing
  • Income from commissions, bonuses and overtime.
  • Canada Pension Plan (CPP), disability benefits under CPP, and private pension income
  • Old Age Security (OAS)
  • Spousal and child support; alimony
  • Maternity/paternity/adoption leave benefits
  • Rental and investment income
Non-Taxable Income
  • Workers Compensation Payments (WSIB)
  • Non-Taxable Pension Income (e.g. Guaranteed Income Supplement)
  • Disability income provided by private or government; guaranteed for the life of the applicant
  • Indian Act exemption
You will need to provide income proof such as your tax filing record, Notice of Assessment, pay stubs and bank deposit record for lender assessment. Most lenders WILL NOT review the following income:
  • Overseas income that you haven't reported in your tax filing
  • Child Care Benefits
If you have other source of income that would like to apply to your mortgage application, talk to a HomeHow specialist today!
Whether you are retired or still in the workforce, lenders will still look at your property, credit history, debt level and income. Instead of your regular working income, lenders will look at and consider your pension income, Canada Pension Plan (CPP) or Old Age Security (OAS). Lenders will also require documentation such as:
  • Tax filing record (T4)
  • Notice of Assessment from the past 2 years
  • Current pay stub, direct pay deposit or letter from the organization providing the pension
  • T4 slips for CPP and OAS supported by the most recent direct deposit to confirm income stream

Reverse Mortgage

Reverse Mortgage is a mortgage product designed for individuals over the age of 55 to borrow money out from their house. Borrowers do not have to make any regular mortgage payments for as long as you or your spouse lives in your home.

Contact HomeHow now for more details about reverse mortgage.

Getting a Mortgage after Bankruptcy

Most mortgage lenders will be able to provide you with a mortgage if you are two years clear of bankruptcy. At HomeHow, our mortgage specialists will help you build up your credit score to be in a position where prime lenders will consider your file. If you have been turned away from from your bank, you still have the option to work with HomeHow. We will connect you with lenders who will evaluate you on an individual basis and determine if you are a good client to take on.
Credit scores are determined by credit reporting agencies to help lenders predict the likelihood that individuals will pay their bills.

Credit Score Factors

Payment History

Whether your late on your payments or you miss a couple now and then, these actions can greatly impact your credit score. It is so important to keep track of WHEN you pay and HOW much you pay.

Available Credit

How much of the total available credit is being used on your credit cards and lines of credit can tell lenders about your financial situation. For example, if you have a credit card limit of $10,000; but you constantly have an unpaid balance of $9,000, this situation will have a negative impact on your credit score.

Length of your Credit History

The longer credit account history you have (credit card, line of credit etc.) the stronger proof of your ability to handle debts. History of Bankruptcy or Collection Issues Prior history of bankruptcy, collection issues or other derogatory public records may be considered risky and will have a significant negative impact on a credit score.

Frequency of Credit/Loan Application

Your credit report will show how many times and how frequently you have applied for a loan/credit card. Lenders perceive "frequent credit application" as a sign of financial distress.

Calculation of Credit Score

The above factors all contribute to the calculation of your credit score.  Credit score ranges from 300 to 900, with a higher score being better. If you have a credit score higher than 680, you will have a lot of choices with lenders and better bargaining power for better rates and mortgage terms.

Knowing your Credit Score

You can assess your own credit score through the two national credit bureaus in Canada: Equifax Canada and TransUnion Canada. HomeHow can inquire your credit score on your behalf without leaving an inquiry record on your credit report.
  1. whether you are employed or self-employed
  2. the consistency of your income: whether you earn the same or a different amount on every paystub
  3. the duration of your employment

I am self-employed, now what?

Lenders will require more information from you if you are a self-employed.  For example, if your business is making income that does not show on your tax filing, you may need to disclose some of your books as well.  Lenders will then apply some calculations to determine your borrowing power. Mortgage lenders will also require you to prove a steady business income for at least 2 years prior to applying. There could be more complications if you are a self-employed individual.  At HomeHow, our job is to simplify this process for you so that you can still focus on your business, while you are making a big purchase decision.

My income varies from pay cheque to pay cheque

Lenders perceive predictable types of income such as commissions, bonuses, overtime pay, self-employment, or part-time/seasonal employment as less stable. Besides pay stubs and letter of employment, lenders will also need to see your tax return and/or your Notice of Assessment. Lenders will also apply some calculation to determine your borrowing power using an average of your earnings over a period of time.

Recent job changes

So long as you are able to provide the necessary paperwork, most job changes won’t adversely affect your mortgage application. In particular, if you have a pay raise and move up within your industry or if you have a history of employment with a similar pay structure in the same industry, you shouldn’t come across any issues in this respect. Usually, lenders a more conservative approach in assessing your borrowing power if the job change involves:
  • a change to less predictable  income (bonus or commission base)
  • change to a completely different industry or position
  • change jobs too frequently
Lenders assess your borrowing power by looking at your capability to make mortgage payments. In order for lenders to approve your mortgage, they will use one of the following methods:

Method 1: Mortgage Payment & Housing Costs must be less than 35% of your pre-tax income

Monthly mortgage payment + monthly property tax + monthly heat expense should be less than (<) 32% of your before-tax household monthly income (Also see TDS in Mortgage 101)

Example 1: APPROVED

Household Income Before Tax: $10,000 Property Tax: $250 Heat Expenses: $200 Mortgage Payment: $3,000 ($250 + $200  + $3,000) / $10,000 = 34.5%

Example 2: NOT APPROVED

Household Income Before Tax: $9,000 Property Tax: $250 Heat Expenses: $200 Mortgage Payment: $3,000 ($250 + $200 + $3,000) / $9,000 = 38.3%

Method 2: Mortgage Payment, Housing Cost & Debt Obligation must be less than 42% of your pre-tax income

Monthly mortgage payment + monthly property tax + monthly heat expense +  should be less than (<) 42% of your before-tax household monthly income (Also see GDS in Mortgage 101)

Example 1: APPROVED

Household Income Before Tax: $10,000 Property Tax: $250 Heat Expenses: $200 Mortgage Payment: $2,500 Credit Card Payment: $500 Car Loan: $400 ($250 + $200  + $3,000) / $10,000 = 38.5%

Example 2: NOT APPROVED

Household Income Before Tax: $9,000 Property Tax: $250 Heat Expenses: $200 Mortgage Payment: $3,000 Credit Card Payment: $500 Car Loan: $400 ($250 + $200  + $3,000 + $500 + $400) / $9,000 = 48.3%  
You can obtain a mortgage approval by buying a less expensive home or by increasing the downpayment. By doing so, your mortgage payment, property tax and heat expenses will decrease. Chat with us today and we can show you more ways to improve your income situation and get a mortgage approval! TEXT US CALL US ICON
The amount of money you can borrow will be determined based on your current financial circumstance. In general, you can borrow as much as 95% of the property value.  However your income, debt, household spending and credit rating will affect your borrowing power.    

Inquiries

Depending on whatever is easier, we will need one piece of your contact information in order to reach you. This includes:
  • Email address
  • Mobile number for calls and/or text messages

Applying for a Mortgage

Just to make sure we know who we are working with, we will need to verify your identity. We will ask for the following information:
  • Legal First and Last Name
  • Driver's License
  • Proof of Employment
  • Proof of Income
  • Proof of Insurance
  • Bank Statements
  • Proof of Downpayment
  • Property Appraisal
  • Home Buying and Selling Record
  • Statement of your Existing Mortgage
   

How do we keep your information secure?

We use advanced technology and security to hold and protect your information from unauthorized security mechanisms. We allow access to people who legitimately need your information as part of their HomeHow duties and responsibilities including:
  • employees and contractors of HomeHow
  • employees and contractors of our service providers (who are contractually obligated to keep data secure and comply with our privacy policy and relevant laws).
Unless you ask us not to, we may contact you via email to inform you about specials, new products and services or changes to our privacy policy.
We commit to destroy or permanently de-identify your information when it is no longer needed. Under no circumstance will we jeopardize your trust by releasing your confidential information to anyone outside of the HomeHow company. This is our promise to you. 
We collect information through our websites online forms, a secured client portal, web session cookies and the normal course of service when you email, phone, text or come see us in person!    
We collect your information only to:
  • carry out our business and deliver our products and services specifically for you
  • respond to you as best as we can regarding the reason you came to us
  • We save your effort whenever and wherever we can;
  • We maintain a high level of competence by committing to continuous learning and keeping updated of new technologies, approaches and methods;
  • We start your mortgage application with your situation and ensure you make real informed decisions;
  • We aim to use simple language that is easy to understand and stays away from jargons;
  • If we have missed you, we guarantee to return your calls, texts or emails by the next business day;
  • We all take reasonable precautions to protect the information you give us. We do not disclose your information to other parties unless you give us permission to do so;
  • We believe in transparency therefore we are committed to clearly explaining our products and the potential outcomes, including outlining ‘worst-case’ scenarios and associated potential risks;
  • We aim to keep our clients and partners up-to-date through regular communication, documentation and research.
   
HomeHow Inc. is a small team based out of Calgary, Alberta compiled of mortgage experts and tech geeks with a huge goal set in mind. Our mission is to revolutionize how Canadian homeowners finance their homes. By combining advanced technologies with a team of innovative minds, we will transform and reimagine the current (and obviously painful) mortgage process into an experience that is easier and secure for Canadian residents. No matter what your circumstance. We want to hear from you.