You can use your RRSP up to $20,000 as a down payment, and pay it back over 15 years. You can get 95 per cent or higher financing as a first time homebuyer and get the mortgage high-ratio insured in the event of default. You can get a pay-back period (amortization) of up to 40 years, or get a 5 or 10 year mortgage with a fixed rated for interest payments only. You can get a variable interest rate mortgage that can change when rates go up or down. Or you can get a traditional fixed-rate mortgage that combines principal and interest pay-down, and lock it into a term of three, five, seven or ten year. You have many options to consider, and possibly little time to research the competitive marketplace to get the best deal. So, what do you do? Using a mortgage broker is a popular choice.

Mortgage lending has become very complex, with constantly changing rates, terms, conditions and plans.  Each lending institution has its own criteria that apply to potential borrowers. Some insist on a particular type of property as security, while others require a certain type of applicant. In this latter case, factors such as type of employment, job stability, self-employment, income, and credit background are weighed. There is a broad range of philosophies and policies held by the various lending institutions on the issue of security and applicant qualifications in order for a lender to advance mortgage funds. These are subject to change from time to time of course.

Other factors such as the availability or shortage of funds, past experience in a specific area and perceived resale market for a particular property could also affect mortgage approval.

Mortgage brokers make it their business to know all the various plans and lending policies, as well as the lender’s attitude on various aspects of mortgage security and covenants. For this reason, a mortgage broker performs an invaluable service inthe real estate financing process, whether you are buying your condo as a principal residence or for investment.  A broker’s role is that of money matchmaker; attempting to introduce the appropriate lender to the purchaser, so you end up getting the best package at the most competitive rate.  Mortgage brokers are governed by provincial legislation.

Mortgage Brokers Have Numerous Funding Sources
Mortgage brokers have access to numerous sources of funds, including the following:
• Conventional lenders such as banks, trust companies and credit unions
• Canada Mortgage and Housing Corporation (CMHC)
• Genworth Financial Canada
• Private pension funds
• Union pension funds
• Real estate syndication funds
• Insurance companies
• Private lenders.
Knowing all the lender’s objectives, the broker is capable of matching the applicant and his or her property with the appropriate plan and lender to get the best rate and terms. Alternatively, the broker can provide a series of mortgage plans from which the borrower may select the one that best suits his or her needs.

How to Process Works
Here is how the process works. The normal procedure is for you to complete an application form supplied by the mortgage broker, provide a copy of the agreement of purchase and sale, as well as provide proof of employment, the length of time employed and your annual salary. A letter from your employer is often also required. If you are self-employed, you are normally required to provide the last three years of financial statements of your business and/or copies of the last three income tax returns for your business.

In addition, you normally pay the mortgage broker the cost of obtaining an appraisal of your property, although the prospective lender could cover that cost. The broker also does a credit bureau search and pre-screens you for the lender. The broker attempts to get you a good deal, by matching you up with a lender who will loan you money based on your financial needs, the terms you require and the information that you have supplied. Since brokers operate exclusively in the money market, they know at any point in time who is giving the best rates and most favorable terms and why.

For example, after RRSP season, all lenders are flush with cash, and want to get the money out the door as loans or mortgages, in order to generate revenue to cover the term deposit interest, and provide a profit spread. Some lenders are more aggressive than others to provide incentives and good deals to get their deposit money working for them. Tentative approvals are generally given the same day, or within one to two business days from application, depending on the circumstances. You can also apply for mortgages online. The lender pays a referral commission to the broker. For normal primary residence or investment property financing purposes, you would not pay the broker any commission.

Where to Find a Mortgage Broker
To find a mortgage broker, look in the Yellow Pages of your telephone directory, or online directory, ask your real estate lawyer or your realtor for a reference, or do a Google search in your geographic area under “mortgage brokers”. You can also go the national association for mortgage brokers in Canada to get the name of a mortgage broker in your area. The association is called, the Canadian Institute of Mortgage Brokers and Lenders. Their website is: http://www.cimbl.ca.

Remember to “comparison shop” before deciding which broker to deal with. The classic advice of having a minimum of three comparisons is a good rule of thumb. Most mortgage brokers are available by phone, cell phone, or pager seven days a week and will arrange to meet you at your home or office in the day or evening, depending on your needs. It is all about customer convenience and making a deal.   CL