When it comes to choosing the right Vancouver mortgage broker for you, it’s important to feel trusting and comfortable. In order to find you the best mortgage plan, a broker needs to learn as much about you and your finances as possible. Don’t hesitate to give your broker access to your financial statements and credit reports; the more they know about you, the more assistance they can be.
Here are five questions that YOU can ask your broker to learn more about your options in selecting a mortgage.
1. What’s the right type of loan for me?
Depending on a broker’s assessment of your finances, different loan types may be more appropriate than others for your income. Some of the most common loan types are:
- Fixed-Rate Mortgage Loans
Although a fixed-rate loan carries the cost of higher interest charges, the benefit comes in the form of a stable rate for the entirety of the loan. A fixed-rate loan allows for more accurate financial planning for the entire time of your mortgage repayment.
- Adjustable-Rate Mortgage Loans
An adjustable-rate mortgage (ARM) loan starts with a fixed initial rate, after which the rate will ‘adjust,’ usually annually. ARM loans have the benefit of a lower initial rate, ideal for homebuyers with less up-front cash. However, the uncertainty of future adjustments after the initial period can make financial planning more challenging.
- Interest-Only Loans
An interest only loan does not contain principal, meaning that the mortgage holder only pays the interest rate for a certain period of time. After this point (sixty months into a thirty year mortgage, for instance), the loan will be amortized to a higher monthly payment, without changing the total balance. This loan type is suited for first-time homebuyers, who may struggle with the initial months of mortgage payments compared to rental costs.
2. What can I expect my interest and annual percentage rates to look like?
An annual percentage rate, or APR, is calculated with an algorithm that factors in your interest rate with other lender fees, divided by the length of your loan’s term. Although an APR can provide valuable insight into some loan types, note that there’s no accurate way to calculate APR for an adjustable rate mortgage. In the case of an adjustable interest rate, ask your broker about:
- Maximum rate (cap)
- Maximum yearly adjustment
- Adjustment frequency
3. What is my loan estimate?
Your broker must provide you with a loan estimate, which is an accurate outline of the costs associated with securing a loan. These estimates are typically delivered upon completion of your application, so ensure that you provide your broker or lender with:
- Name of the lender
- Social Insurance Number (SIN)
- Property information (location, estimated value)
- Loan amount
- Income and financial information
4. What other costs can I expect to pay?
There are some costs and fees with getting a mortgage than can be difficult to predict without experience in mortgage application. Some of these ‘hidden fees’ include:
- Lawyer and notary fees
- Title registration
- Property tax
- Home inspection
- Appraisal fees
- Credit pull fees
Make sure to ask your broker about these costs ahead of time, so that you aren’t met with any financial surprises down the line.
5. How much should I put on a down-payment?
Among many first-time homebuyers, there is an assumption that the larger the down-payment, the lower the mortgage rate. However, it is sometimes possible for a 5% down payment to receive the same monthly repayment rate as a 20% down payment. A mortgage broker can help you find the right amount to balance your current savings with your anticipated income down the line.
There are many things to consider when choosing a mortgage broker. You deserve the peace of mind that comes with being in good hands when making the largest financial decision of your life.
If you have any questions about loan types, down-payments, or anything else to do with securing a mortgage, get in touch with your local Port Coquitlam mortgage broker, Milka Lukacevic.