Frequently Asked Questions
What Are Ways of Paying Property Tax?
Property Tax may be paid in three different ways.
The first way is through the lender, which I don’t recommend if you don’t have to. Some banks make this mandatory so you may not have the option.
Recommended: The second option is to pay through the city once per month. The program is typically called TIPP (Google TIPP and your city and the link will come up).
The last way is to pay it once per year. Your property tax bill is received at the beginning of June each year and is due by June 30. The June payment covers the year from January 1 – December 31.
What is Mortgage Insurance?
In most cases, mortgage insurance is when you put less than 20% down on a home (there are exceptions to this!). The insurance protects the lender in the event that you default. The insurance premium is added to your mortgage and paid over the amortization (typically 25 years). Here is the cost of mortgage insurance:
5% - 9.99% Down: 4.00% Insurance Fee
10% - 14.99% Down: 3.10% Insurance Fee
15% - 19.99% Down: 2.80% Insurance Fee
There are three different insurance providers: CMHC, Genworth, and Canada Guarantee. They all cost the same, and the lender choses which insurer they insure you under. It makes no difference to the borrower (you).
What is an Adjustment (Property Tax and Mortgage Payment)?
Typically, a legal bill will cost $1200 - $1600 depending on the amount of work and the cost of the lawyer. The adjustments are additional costs added to your legal bill that are pre-payments or “adjustments” to what the seller has paid.
Here is an example:
The Seller pays their property tax once per year in June. The property tax on the property is $3600 per year, or $300 per month. The Buyer (you) take possession of the home July 15. If you read above on FAQ #1, the property tax payment in June pays for the property tax from January 1 – December 31. This means that the Seller has paid for the property tax from July 15 – December 31 (your part of the year) already. You must “adjust” or repay the Seller for his pre-payment. In this example, July 15 – December 31 is 183 days.
Calculation: $3600 /365 days (1 year) x 183 days = $1804.93
This means that your bill at the lawyer’s office will be at least $1800 more than expected! On a positive note, you will not owe any more property tax for the year (unless you must pay through the lender). You may start the TIPP program January 1 of the following year or pay the bill in full the following June.
What is the Difference Between a Pre-approval and Locking in a Rate?
A pre-approval is an assessment of your financial situation and an estimate of what purchase price you would be approved for. A pre-approval is not guaranteed and subject to the property being accepted by the lender as well as the Borrower and property accepted by the insurer (if applicable). Any changes in your financial situation may change your pre-approval amount. Before you switch jobs or add additional debts, it is best to speak to your Mortgage Broker. A pre-approval is valid for as long as your financial status stays the same (unless government rules change).
A rate hold is typically a pre-approval with a rate attached to it. The rate is valid for 120 days (4 months) and guarantees that rate, pending the full approval with that lender. The benefit of a rate hold is that if rates begin to rise, your rate is locked in while you search for your new home! No need to worry about losing your rate. Rate holds are typically held at a premium to market.
What’s the Difference Between Bi-weekly and Bi-weekly Accelerated?
Typically, clients have the option to choose different payments. These options may include monthly, semi-monthly, bi-weekly and weekly. The bi-weekly and weekly payments typically have the option to be accelerated or non-accelerated.
Assume your payments were $1200 per month. If you wanted to pay accelerated bi-weekly, your payments would be exactly half of your monthly payment ($600) every 2 weeks. You must be wondering, how does that pay off my mortgage faster? Well, if you take $600 and multiply by the number of bi-weekly periods in a year ( 26), you would pay a total of $600 x 26 = $15,600 in a year. However, if you took the $1200 a month (original payment) and multiplied that by 12 months, you would only pay $14,400 in a year. This means that you are paying 2 extra $600 payments with the accelerated option. Bi-weekly non-accelerated is when you take the same amount you would pay in a year and divide it by 26 bi-weekly periods. For example, using the scenario above, $14,400 (regular monthly payments) / 26 bi-weekly periods = $553.85 instead of $600. Because of those 2 extra payments with the accelerated option, your mortgage is typically paid down 4 years faster.
What Are the Different Options Within Mortgages?
It is imperative that you receive the best advice from your mortgage broker. This is why I go through options in details with my clients. Things to watch for in a mortgage:
Collateral or Standard Charge
There may be more options as well! Speak to me today to learn more.
Why Use a Mortgage Broker?
There are many reasons as to why you should hire me, your Mortgage Broker and #1 advocate.
My services are FREE (some exceptions apply - I will forewarn you prior to moving forward with your application).
I will be your advocate! I will offer you the best product and rates available on the market. When you go into a bank, they can only sell you their product so they will not tell you any negatives about their mortgage. I will tell you the good, the bad and the ugly!
Save time! Who has time to fill out 5 applications? I am a one stop shop. One application and one credit pull! Let me save you time and shop the market for you!