5 Common Questions Clients Ask Mortgage Brokers
Like most home buyers, your goal is to find the best mortgage rate.
June 18, 2021
We’re going to discuss 5 questions you should ask mortgage broker to ensure you secure the best mortgage that suits your needs.
Should I go with a variable or fixed rate mortgage?
One of the most commonly asked questions, and rightfully so!
A fixed rate product is the most used mortgage by clients in Canada, however, variable rates are trending as the favourable option for 2021. With a fixed rate mortgage, your mortgage interest rate and principal payment will remain the same for the entire term of your mortgage.
With a variable rate, your total payment stays the same, however the interest portion of your mortgage can fluctuate based on the increase or decrease of the prime rate.
3 reasons why clients are choosing variable rate mortgages are:
- historically variable rates have outperformed fixed rates, allowing clients to save more throughout their mortgage term;
- the penalty to exit your variable rate mortgage is capped at three months of interest vs. fixed rate penalties can be substantially higher; and,
- you can switch your variable rate mortgage into a fixed rate mortgage at any time, however, not the other way around.
What are the benefits of working with a mortgage broker?
There are a variety of benefits of working with a mortgage broker, including:
- There is no cost to using a mortgage broker as they get paid by the lender;
- mortgage brokers have access to over 30 lenders;
- brokers can sometimes cover certain fees for you such as appraisal fees and title searches;
- brokers also have access to lower rates that wouldn't necessarily be available to access at a bank; and,
- mortgage brokers work for you, not the bank, which allows your broker to provide you options, unbiased advice, and a licensed mortgage expert to walk you through the process.
What happens if I break my mortgage early?
Unfortunately, you will have to pay a penalty. How much will this penalty cost will depend on whether or not your mortgage is on a variable or fixed rate, as well as who your lender is and how much time you have left in your current mortgage contract term.
With both variable rate mortgages and fixed rate mortgages, the penalty can be 3 months' worth of interest.
On top of the prepayment penalty, you may also incur associated fees such as administration, legal, appraisal, and discharge fees.
What closing costs should I budget for?
Some expenses are one-time costs, while others are on-going commitments. It is important to take the time to factor the following costs into your budget:
- proof of down payment / closing costs
- lawyer (solicitor) fees
- title insurance and/or real property reports (RPR)
- realtor fees
- home inspection
- property taxes
For more information regarding closing costs, read our blog Understanding the Costs of Homeownership.
How much should my down payment be?
According to the Government of Canada, your minimum down payment corresponds to the purchase price of your home, as follows:
Let's get started
At KV Capital, our experts will take the time to explore suitable financing options that meet your needs and our team will assess your unique circumstances and preferences to identify the most suitable financing structure available.
We encourage you to reach out today to speak with one of our experienced team members and learn more about how KV Capital can support you in your real estate financing journey.