Questions
Mortgage questions, answered
The questions Ontario borrowers ask us most, each answered in the first two sentences — then the detail.
Offers & negotiating
- Can I shop around instead of renewing with my bank? (Canada)Yes. In Canada you can compare lenders at renewal and switch at maturity with no prepayment penalty. The new lender still has to approve you.
- Do mortgage brokers get better rates than banks in Canada?In Canada, often but not always. A broker compares many lenders, including broker-only lenders and credit unions; banks can match, and some are branch-only.
- Does switching from my bank at renewal hurt my credit score? (Canada)In Canada, switching lenders means a credit check, which can affect your score. Mortgage quotes within a 2-week window count as one inquiry (FCAC).
- How do I negotiate my mortgage renewal with my bank in Ontario?In Ontario, get a written competing offer for the same mortgage, then ask your bank about four things: rate, switching costs, prepayment room and cash-back.
- How much below my bank's posted rate should my mortgage rate be? (Canada)In Canada there is no official 'normal' discount from posted rates. Compare your rate with written offers for the same mortgage, and check the penalty method.
- Is it worth switching from my bank's mortgage for 0.2%? (Canada)In Canada, 0.2 points on a $500,000 balance is about $1,000 of interest in year one and about $4,700 over five years, before switching costs. Illustrative only.
- Is my bank's pre-approval rate good? (Ontario)In Ontario a pre-approval rate is a rate hold, still subject to lender approval. Check the hold length, conditions and terms, and compare it with other offers.
- Is my bank's renewal offer good? (Ontario)In Ontario a renewal letter is an opening offer: FCAC says you may qualify for a lower rate than the letter. Compare a written offer; staying can be right.
- Is this a good mortgage offer from my bank? (Canada)A mortgage offer from your bank in Canada is good when its full terms fit your plans and hold up against another written offer. The rate is one of about a dozen inputs.
- Mortgage broker in Toronto for a second opinion on my bank's renewal (Ontario)Renewal second opinion in Toronto, Ontario: Stonefield Mortgage (FSRA #13722) checks your bank's offer against the lenders we work with. Stay is a real answer.
- Should I negotiate my mortgage renewal with my bank? (Ontario)Yes, in Ontario it is generally worth asking your lender to improve a renewal offer. FCAC says you may qualify for a lower rate than the letter. Start early.
- Should I sign my bank's renewal letter as is? (Ontario)In Ontario, signing your renewal letter as is can be right, but only after you have read it, compared it with other lenders and asked your bank for more.
- What does my bank's mortgage retention desk do? (Canada)In Canada, a bank's retention desk is the team that tries to keep your mortgage at renewal. It can often improve on the renewal letter, within bank limits.
- Will my bank match a mortgage broker's offer? (Canada)In Canada a bank will often consider matching a broker's written renewal offer, but never for certain. Bring a like-for-like offer; if it won't, you can move.
Buying
- 25 or 30-year amortization: is the lower payment worth it?A 30-year amortization lowers your monthly payment but adds years of interest, and an insured 30-year mortgage carries a higher premium. Here is the trade-off.
- Am I still a first-time home buyer?It depends on the program. Ontario's land transfer tax refund, Toronto's rebate, the FHSA and the Home Buyers' Plan each use their own test.
- Can I buy a home with a 600 credit score?Possibly. A CMHC-insured mortgage needs one borrower with a score of 600 or more; lenders also weigh your credit history, income and down payment.
- Can I buy a new home before I sell my current one?Yes. If your sale is firm, many lenders offer bridge financing to cover the down payment between closings. If it is not firm, you may need to carry both homes.
- Can I get a mortgage if I am new to Canada?Often, yes. Many lenders and mortgage insurers have newcomer programs that allow for a short Canadian credit history, with requirements that vary by lender.
- Can my down payment be a gift?Usually, yes. Lenders generally accept a gift from close family with a signed gift letter and proof the money is in your account before closing.
- Condo vs freehold: does mortgage financing differ?The down payment rules are the same, but for a condo, lenders generally count half the condo fees in your GDS ratio and review the building itself.
- Fixed or variable mortgage: how do I decide?Start with how long you want your payment to be certain. Fixed locks it for the term; variable can move but is commonly cheaper to break.
- How long does mortgage approval take?It depends on how complete your file is and what the lender needs. Here are the stages from application to funding, and what most often slows them down.
- How much of a down payment do I need in Ontario?5% of the first $500,000, 10% of the part from $500,000 to $1.5 million, and 20% at $1.5 million or more. Under 20% down, you pay for mortgage insurance.
- Insured, insurable, uninsurable: why do mortgage rates differ?Lenders price a mortgage partly on whether it is insured, could be insured, or cannot be. That is why one lender can quote different rates to different people.
- What are closing costs in Ontario?Land transfer tax is usually the largest closing cost in Ontario, plus legal fees, title insurance, adjustments and sales tax on any mortgage insurance premium.
- What documents do I need for a mortgage?Lenders ask for proof of identity, income, down payment and the property. Salaried buyers need less paperwork than self-employed buyers, who need tax returns.
- What first-time home buyer programs are there in Ontario?The FHSA, the RRSP Home Buyers' Plan, land transfer tax refunds and a 30-year insured amortization all help first-time buyers in Ontario. Here is how.
- What is the difference between a mortgage pre-approval and a pre-qualification?A pre-qualification is a quick estimate from what you tell a lender; a pre-approval means a lender has checked your credit and documents. Neither is final.
- What is the mortgage stress test?Banks qualify you at the greater of your contract rate plus 2% or 5.25%, to check you could afford higher rates. It limits how much you can borrow.
Refinancing
- Does consolidating debt into my mortgage save money?It lowers your interest rate and monthly payments, but stretching debt over 25 years can cost more in total unless you pay it off faster. The details decide.
- How much equity can I take out of my home?With a federally regulated lender, a refinance can go up to 80% of your home's appraised value, minus what you owe, if you qualify for the payment.
- Posted vs discounted rate: why does it change my penalty?Many lenders work out a fixed-rate IRD penalty from posted rates and the discount you got at signing, which can make it larger. Your contract governs.
- Refinance, HELOC or second mortgage: which should I choose?A refinance replaces your mortgage, a HELOC is a revolving line on your home, and a second mortgage sits behind your first. Cost and flexibility differ.
- Should I break my mortgage for a lower rate or ride it out?Breaking pays only if the interest saved over the rest of the term clearly beats the penalty and costs. With an IRD penalty, or near renewal, it often does not.
- Should I refinance to renovate or invest?It can make sense when you can carry the larger payment and the benefit clearly outweighs the cost of borrowing. Timing, penalties and risk decide.
- What does it cost to break my mortgage?Usually the higher of three months' interest or the interest rate differential (IRD) on a fixed mortgage, and commonly three months' interest on a variable one.
- When does refinancing not make sense?When the penalty and costs outweigh the savings, when renewal is close, when it only stretches debt over decades, or when the larger payment would strain you.
HELOC & lines of credit
- HELOC or second mortgage: what is the difference?A HELOC is a revolving line, usually from a bank. A second mortgage is a lump sum behind your first, usually from an alternative lender, and costs more.
- How does a HELOC work?A HELOC is a revolving line of credit secured on your home. You borrow, repay and borrow again up to a limit, and pay interest only on what you use.
- How much can I borrow on a HELOC?With a federally regulated lender, a HELOC's revolving limit is up to 65% of your home's value, and your mortgage plus HELOC together can reach 80%.
- What are the risks of interest-only HELOC payments?Paying only interest keeps payments low but never reduces the balance, so the debt can last for decades, and the payment rises whenever prime rises.
- What is a readvanceable mortgage?A mortgage combined with a HELOC under one registration: as you pay the mortgage down, the line of credit can grow, up to the lender's limit.
Renewal
- Can I renew my mortgage early?Often, yes. Many lenders let you renew in the months before maturity without a penalty. Earlier than that, a penalty or blended rate may apply.
- Does the stress test apply when I renew my mortgage?Not if you renew the same amount, with your lender or as a straight switch. Borrowing more or extending the amortization is a refinance, and it is tested.
- Renewal vs refinance: what is the difference?A renewal keeps your balance and starts a new term. A refinance changes the loan, usually borrowing more, and means re-qualifying under the stress test.
- What does switching mortgage lenders cost?At maturity there is no prepayment penalty, but there may be a discharge fee, legal costs and an appraisal. Some lenders cover part, so the full offer matters.
- What is a trigger rate on a variable mortgage?On a fixed-payment variable mortgage, the trigger rate is the rate at which your payment no longer covers the interest. Above it, your balance can grow.
- When can I switch lenders at renewal?At the end of your term you can move to another lender without a prepayment penalty. Many borrowers start comparing months before the renewal letter.
- Why will my mortgage payment jump at renewal?At renewal your rate resets to today's and the payment is recalculated on the time left. If rates rose since you signed, the payment can rise a lot.
Self-employed & alternative lenders
- Can a business owner use a readvanceable mortgage? (Canada)In Canada a business owner can generally use a readvanceable mortgage within the 65% and 80% limits. Structure and discipline here; tax is for your accountant.
- Do salary or dividends affect my mortgage approval? (Canada)In Canada, how you pay yourself changes the income lenders see on your return. The pay mix is your accountant's decision; here is how lenders generally read it.
- How do lenders count self-employed income?Most lenders average the income on your last two years of tax returns, confirmed by Notices of Assessment. Some look more broadly at the business, at a cost.
- My business income dropped. Can I still renew or refinance? (Ontario)In Ontario, renewing with your current lender generally doesn't mean qualifying again; switching or refinancing does. If banks can't help, there is a ladder.
- Should I use my home equity to fund my business? (Ontario)In Ontario you can often borrow against your home for a business, but the home secures the debt. Limits, payments and risks here; tax goes to your accountant.
- What are add-backs on a self-employed mortgage application? (Canada)In Canada, an add-back is an expense some lenders add back to the income on your return. Practice varies by lender; what you claim is your accountant's call.
- What fees do alternative lenders and mortgage brokers charge?Bank and monoline mortgages are usually free to you, as the lender pays the broker. Alternative and private loans may carry fees, disclosed in writing first.
- What is a B lender, and when does it make sense?A B lender, or alternative lender, accepts borrowers a bank may decline, at a higher cost. It suits a short-term step with a plan to return to a bank.
- Why do lenders want two years of Notices of Assessment?Two years of NOAs show income the Canada Revenue Agency has processed, whether it is stable, and that no tax is owing, so a lender can rely on it.
- Will incorporating my business affect my mortgage? (Canada)In Canada, incorporating changes the income on your return, and lenders generally want some history of it. Whether to incorporate is your accountant's call.
Investors
- Besides 20% down, what do lenders ask for on a rental property? (Ontario)In Ontario, beyond 20% down, lenders generally ask for proof of the rent, the property's costs, details of your other properties and, often, reserves.
- Can I use a HELOC for the down payment on a rental property?Often, yes, but it is borrowed money. Lenders count the HELOC payment in your debts, so it can reduce what you qualify for. Tax questions go to your accountant.
- Does a rental that doesn't cover its costs hurt my borrowing? (Ontario)In Ontario, generally yes. Under CMHC's net approach, a rental whose rent doesn't cover its costs counts against you; lenders generally treat it similarly.
- Does rental income count when I qualify for a mortgage? (Ontario)Yes. For a CMHC-insured 2-unit home you live in, up to 100% of the rent can count; 3–4 units, up to 50%. Other lenders set their own methods.
- How many mortgaged rental properties will a bank finance? (Canada)In Canada, there's no single number. Some banks limit how many financed properties they'll lend on; past that, other lenders generally take over.
- How much can I borrow against rental income in Ontario?In Ontario, it depends on the mortgage. CMHC lets part or all of the rent count on insured 2–4 unit homes; other lenders generally set their own methods.
- How much of a down payment do I need for a rental property?A property you will not live in generally needs at least 20% down, because default insurance is for owner-occupied homes. Some lenders ask for more.
- Should a rental investor choose a shorter mortgage term? (Canada)In Canada, a shorter term can suit an investor who may sell or refinance soon: breaking a term early usually costs a penalty; letting one end doesn't.
- Which mortgage suits a rental property: shorter term, longer amortization or a HELOC? (Canada)In Canada, it depends on whether the rent must cover the costs now and how long you'll hold. Each choice trades payment, interest and flexibility.
Private bridge
- How do I get back to a bank lender after a private mortgage?Fix the issue that sent you to a private lender, rebuild credit, document your income, protect your equity and give it time. Then refinance, often in steps.
- When is a private mortgage the right bridge?When you need funds briefly, bank and alternative lenders cannot help in time, and you have a clear way out, such as a sale or refinance. It costs more.
Planning ahead
- Does the lower mortgage rate always cost less? (Canada)Not always. In Canada a slightly lower rate can cost more if you sell or refinance mid-term: the penalty method, prepayment room and portability count too.
- How long should my mortgage term be if I might move? (Ontario)If you might move, many Ontario borrowers match the term to the move, or pick a mortgage they can port or break for less. The trade-off is renewing sooner.
- Should I prepay my mortgage or invest? (Canada)In Canada, prepay or invest is a question for your financial advisor and accountant. The mortgage side: interest saved, privileges, penalties, liquidity.
- Should I take a 30-year amortization and keep the payment difference? (Canada)In Canada a 30-year amortization lowers the payment and adds interest. Investing the difference is for your financial advisor; here is the mortgage side.
- What does a mortgage cost over the years I'll own the home, not just the term? (Canada)In Canada a mortgage costs the interest over every term you hold it, any penalty if you sell mid-term, and property tax and insurance. How to add it up.
- What should I ask a mortgage broker besides the rate? (Ontario)In Ontario, ask a mortgage broker about term, amortization, prepayment, portability, the penalty method, the charge type, and what the home is for.
Life events
- Can I get a mortgage after a consumer proposal in Ontario?Often, in steps. In Ontario a proposal leaves your credit report 3 years after it is paid or 6 years after signing; alternative lenders generally come first.
- Can I keep the house after a separation in Ontario?Often, if you can buy out your spouse and qualify alone. In Ontario, your family lawyer settles the legal side; the lender decides the mortgage.
- Can I take my mortgage with me when I move? (Canada)Often. In Canada many lenders let you port a mortgage to a new home within time limits, and CMHC insurance can move too; if you can't, a penalty may apply.
- Pre-construction closing in Ontario: what if the appraisal comes in low?In Ontario, lenders generally appraise a pre-construction home at closing; if the value comes in below the price, the buyer generally covers the gap in cash.
- What does it cost to carry two homes while I wait for my sale to close? (Ontario)In Ontario, two homes means two sets of mortgage, tax, insurance and utility costs for every day of overlap, plus any bridge interest and fees.
- What happens to the mortgage on an inherited house in Ontario?In Ontario, a mortgage does not end when the owner dies. The estate generally deals with it; an heir who keeps the home generally must qualify with the lender.
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Ask a mortgage broker to call you back
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