In the past, homebuyers more or less had limited mortgage loan options. These days, there are more options than you can shake a stick at, but here’s a primer on the basics.
With the real estate market explosion over the last 10 years, a call has gone out for unique mortgage loan programs. Bankers have been more than happy to answer the call. For many borrowers, traditional mortgage loans still fit the bill. Here’s an introduction.
The loans comply with requirements set down by CMHC, the national insurance company for high-ratio mortgages. CMHC sets guidelines for debt-servicing, the types of down payment sources allowable, job type, etc. etc. This is what the banks (and many other lenders) use in addition to their own guidelines to obtain mortgage insurance and help you complete on your refinance or purchase.
For one reason or another (income, employment type/duration, credit) you may not qualify for CMHC insurance, but that doesn’t mean you are unable to qualify for a mortgage. There are several lenders in Canada that lend based solely on their own criteria which is a little more flexible than the rigid guidelines CMHC has.
In the mortgage industry, mortgage brokers often refer to a borrower’s “paper.” This paper refers to people with less than stellar credit. “B” paper refers to relatively small problems, while “D” paper refers to bigger issues such as bankruptcy filings. The worse your paper, the more you can expect to pay in interest, points and down payment amounts. You need to carefully determine whether paying these extra penalties makes financial sense.
With each of the above loans, you’ll have an option of going with a fixed interest rate or an adjustable rate. Fixed interest rates simply set a definitive interest rate that will be charged over the length of the term, typically a one to five year commitment. Adjustable rates usually start at a figure lower than fixed rates, but can be moved up to reflect changes in the cost of borrowing money. In many ways, you are betting whether interest rates will increase in the future. As with any bet, there is some risk involved. If interest rates rise, your rate could end up higher than what you might have ‘locked it in’ for with a fixed rate term. Many borrowers prefer the stability and predictability of fixed rate terms, even though variable rate mortgages have historically saved borrowers money in the long run.
For a great majority of people, basic mortgage loan options still suffice when it comes to borrowing money. Don’t fret if you have problems qualifying for these loans. There are many other options on the market these days.
Under our ‘shared knowledge’ concept intellectual property is shared within our organization for all and recognition is given for the one making the contribution.’
Rebecca joins the team with over 20 years of business, investment and real estate experience. A true advocate for the consumer, Rebecca brings you unparalleled integrity with unbiased advice. Phone anytime and discover for yourself just how easy and enjoyable the mortgage process can be.
Serving Metro Vancouver Area
& Tri-Cities BC
Direct 604.614.2382
Fax 604.463.7886
rebeccaawram@homenwork.com
www.communitylendingcentre.com
Head Office:
#200 - 5050 Kingsway
Burnaby, B.C.
V5H 4C2
