Frequently Asked Questions
When a lender offers you a mortgage, you have to repay both the original loan amount and interest through monthly payments. The interest is the biggest cost that you have to incur on a mortgage. A good deal on a mortgage is one that offers you a lower interest rate and easy repayment terms.
You can compare the rates and other terms offered by different lenders to get an idea of what the loan will cost you. In doing so, you will find that most lenders offer pretty much the same basic terms. This is because they are all regulated to a certain extent by the government. However, there could be significant differences in several other charges like closing cost, prepayment fee, appraisal cost, legal fee etc.
Hiring a mortgage broker is a good option to increase your familiarity in the process involved in taking a mortgage and if you don’t want to spend a lot of time in understanding the nuances of this industry. The broker can advise you on how to go about getting the loan and they will give you a fair estimate of the charges that will be added by the lender. They can also point out any pitfalls in the fine print that you need to be wary of, which you wouldn’t find in any FAQ section.
An experienced mortgage broker can help you find the right lender for your needs quickly, and with minimum effort from your side. As they would already know many of the lenders, they will be able to negotiate a competitive mortgage rate and terms.
A fixed rate means your mortgage will always have a pre-determined interest rate irrespective of the changes in the economic conditions. On the other hand, an adjustable rate can be changed by the lender to mirror increases/decreases to the Bank of Canada Overnight lending rate.
If you are looking for stable monthly payments and do not want to be dealing with the uncertainty, it is advisable to go for a fixed rate mortgage. But if you have sufficient financial cushion to absorb any increase in your monthly payments, and if you feel that interest rates are likely to go lower in the near future, then an adjustable rate mortgage might be a better option for you.
Although these FAQ would have given you some idea about taking a mortgage, you should try to understand all these concepts in detail to make a sound decision. Take help of a mortgage broker or your financial adviser before you finalize a deal.
A change in the repayment terms of a loan is referred to as loan modification. Such changes are usually sought by home owners to make their loans and monthly repayments more affordable. By revising the terms of the loan, the lenders can create alternatives to resorting to foreclosure when the borrower defaults on monthly installments. Here are some FAQ for people considering modification of their loan terms.
It is often asked whether a mortgagor has the right to conduct an inspection of the property to check its condition. Legally speaking, a mortgagor can carry out any inspection that is required by him to ascertain that the mortgaged property is not in a bad condition. An inspection also allows the lender to assess the real value of the property.
This FAQ is the concern of many borrowers. It is often questioned if the mortgagor will qualify a person for a loan modification when he/she or the spouse is unemployed. The lender will have to conduct a financial review of the total income and expenses of the household of the mortgagee to figure out whether the current household income is enough to make the modified mortgage payments or not. Once the mortgagor has satisfied himself with this condition, he can consult with a legal counsel to determine whether the mortgagee qualifies for the loan modification or not.
Often borrowers also ask, if a new interest rate will be applicable when lenders reassess during a loan modification process. The answer is yes. The mortgagor is supposed to reduce the loan and make it affordable, and the interest being the significant payout has to be brought down. This is done by offering the distressed borrower a low interest rate. The law mandates the lender to make a lower interest rate offer during modification process as per the lending market situation.