The real estate market in Toronto has been strong in recent years, and many Canadians are attracted to the prospect of buying and owning property in the GTA.
If you’re looking to buy property, you’re probably going to need a mortgage. In Toronto, mortgages function the same as they do anywhere else in Canada. A-lenders like federally regulated banks can provide prime mortgages as well as other types of home equity loans to those with strong credit scores and good financial standing. If your credit rating is less than ideal, you may need to approach a private or alternative lender.
As long as you have a steady source of income and at least 20 percent equity in your current property, you should be able to be approved for a mortgage in Toronto. A strong credit score and a history of financial responsibility will improve your chances of getting approved for a lower interest rate.
What is a Mortgage Brokerage?
A brokerage is a group of mortgage brokers who have connections to individuals, banks, and other types of lenders. Brokers who work for a brokerage are experts on many types of loans and mortgage structures and can help you find a loan structure that works for both your budget and your needs. A reputable mortgage brokerage is a great first stop if you are looking for a mortgage but aren’t quite sure what the best option is, or how to go about applying for a mortgage.
What is a Mortgage Agent?
A mortgage agent is, like a mortgage broker, a person that acts as a middleman between the mortgage lender and the mortgage borrower. Agents can work out of banks and credit unions, and they can also work under private mortgage brokers who specialize in connecting borrowers with private and alternative lenders. A mortgage broker does essentially the same thing, however, brokers usually have a slightly higher degree of training, and are qualified to oversee the work of multiple agents.
You may have also heard the term mortgage advisor used synonymously with broker or agent, however, these are not the same thing. An advisor is someone who works in-house at a lender (usually a bank, credit union, or trust) and, as their title would suggest, provides advice to lenders on what mortgage options are available to them and how they can prepare to apply for a loan.
Toronto Mortgage Rates
As of 2020, interest rates for prime mortgages from Canadian A-lenders are around 2.5 to 3 percent. As always, mortgage interest rates vary depending on the loan duration, whether the mortgage carries a fixed or variable interest rate, and the financial status of the borrower. Interest rates also fluctuate annually with the economy and the real estate market. For subprime mortgages, as well as alternative loans like second mortgages, the interest rates can be much higher — second mortgages, for example, often carry interest rates of 7 to 12 percent.
Toronto Mortgage Approval Process
The approval process for a mortgage in Toronto is the same as it is anywhere else in Canada. If you’re applying for a prime mortgage from a bank, be prepared to provide documentation including but not limited to:
- Up-to-date identification
- Prior tax returns
- Proof of employment
- Credit card statements
- Records of investments and other debts
Before you get approved for a mortgage you’ll need to go through a pre-approval process. During pre-approval, a bank will look at your financial assets as well as your total debt load.
The bank or mortgage advisor will look through your financial records and determine the maximum amount you can qualify for, your monthly mortgage payment amount, and an initial locked-in interest rate. Though you may be pre-approved for a maximum mortgage amount, your actual mortgage may not be as large. Pre-approval usually occurs before the property actually changes hands, so the amount of your mortgage will depend on the amount of your down payment and the final appraised value of the home.
During this process, you’ll need to stay on top of your budget so you can accurately determine how much money you’ll be able to put down for an initial down payment while still having cash left over for moving and any ongoing maintenance.
Most banks require a credit score of at least 600 if you want to borrow a mortgage. In some cases — such as in the case of a smaller or shorter-term home equity loan — trust companies and credit unions can accept applicants with a credit score as low as 550.
Pre-approval usually lasts for a set period of time, like 60 or 120 days. If you choose to go ahead with the process during that time, in order to secure formal mortgage approval you’ll need to then prove that you can afford your mortgage at the current interest rate. One way to prove this is to undergo what is referred to by banks as a “stress test”. While federally regulated lenders are required by law to make mortgage applicants undergo a stress test, any lender can choose to stress test your finances.
Mortgage brokers in Toronto are intermediaries between lenders and mortgage consumers. A mortgage broker’s main goal is to link clients with lenders offering the best loan product for their needs. Banks are the biggest lenders of first mortgages, but mortgage brokers gained popularity as an alternative for those who were turned down by banks. In Canada, most mortgage agents and brokers connect customers with non-bank or private lenders. Our mortgage brokers concentrate on private lending services for people who cannot qualify for bank loans.
Our Mortgage Brokerage’s Focus and Services Provided by Mortgage Brokers
The ordinary mortgage brokerage in Toronto offers standard mortgage set up related services. They can discuss your options and request different quotes before making a choice. They have deep knowledge of the industry, which is particularly beneficial in getting consumers the best rates and terms for a mortgage.
Our Mortgage Broker Store is a licensed mortgage brokerage to operate in Toronto, ON. We also engage in some niche areas including:
- Private Lender Mortgages
- Bad Credit Mortgages
- Stopping Power of Sale and Foreclosure
- Home Equity Loans
- Second Mortgages
- Debt Consolidation Loans
The professionals at Mortgage Broker Store have over half a decade of experience providing alternative funding solutions. The broker of record, Ron Alphonso is a renowned expert in the mortgage industry who constantly features in the media. Ron is an important professional in the Toronto market but his name resonates with the entire province of Ontario and beyond. He has been on Toronto Life, Toronto Star, and Global News as is evident in our media link.
Comparing Mortgage Brokers with Mortgage Agents
Mortgage brokers and agents in Toronto are both licensed to sell mortgages but only one is allowed to run a brokerage. The person who runs a mortgage brokerage is the principal broker, also known as a broker of record. A principal broker may hire others to work at the mortgage brokerage but it is his job to ensure full compliance with regulations and that all documents are in place. In simple terms, the broker of records is responsible for everything that happens at the brokerage, as he is indeed the heart of that company.
Mortgage Brokers vs. Banks
Banks have historically been the main mortgage providers in Canada but mortgage brokers have recently become very popular. This is probably because they are able to offer more options than banks can. Most specialise in the provision of non-bank mortgages by negotiating competitive rates with their pool of lenders. Most clients of mortgage brokers are people who have been turned away by banks. Banks might be the major source of mortgages but that doesn’t deter the use of mortgage brokers. Mortgage brokerages are today responsible for arranging 45% of mortgages for people buying a home and 40% of initial mortgages.
Fees Charged by Mortgage Brokers
The fees a mortgage broker charges depend on each client’s needs. Those who meet banks’ criteria will not have to pay any upfront fees. This is because the bank pays a lender directly the moment a mortgage close. People who fail the bank assessment have to pay upfront fees to the lender, broker, or both. If you seek a loan with a private lender, you must pay $2000 as fees to set up the mortgage as they need to mitigate the risk of loaning people with bad credit. This figure will increase if there is a legal issue such as inheritance, divorce, and power of sales to resolve. Fees for a private lender mortgage are meant to pay lender and broker’s staff, lawyers and property appraisal experts among other professionals involved in the mortgage process.
Mortgage Broker Licensing Toronto
All mortgage brokers in Toronto must have a license from the (FSCO) Financial Services Commission of Ontario. This allows one to do business as a broker and to get it an individual must have an Ontario address and work at a licensed mortgage brokerage. Mortgage brokers start as mortgage agents and maintain a relevant mortgage agent license for 2 years. Only then, can they apply as a mortgage broker and pass the Master Broker Education Program approved by the FSCO.