Frequently Asked Questions
How do I apply for a mortgage?
The first steps are to select a lender and complete an application. Generally, here’s what you’ll need to take with you for your meeting with the lender:
- A copy of the offer to purchase or the building contract
- Documents confirming employment, salary and any other income
- A list of your debts and assets
- The name and address of your landlord or mortgage holder
How much can I afford?
Lenders use a formula called the gross debt service ratio (GDS) when they determine the maximum loan they’re prepared to offer you. Your mortgage payments will not be more than 32 per cent of your gross (before-tax) monthly income, and include your mortgage principal and interest, property taxes, heat and, if applicable, secondary financing and 50 per cent of condominium fees.
Only assured income sources are taken into account. (Variable incomes such as tips, bonuses or overtime earnings are considered on an individual basis). Two-income households can use a combined or family income figure.
Your lender will use the lesser of the two amounts to determine the amount of income you have available for housing and may consider contract or self-employed income.
Other debts, such as car payments, personal loans or credit card balances, are taken into account in a formula known as the total debt service ratio (TDS). No more than 40 per cent of your gross (before-tax) income can be allocated to your housing costs and other monthly expenses.
What additional expense can I expect when purchasing a home?
You should be prepared for the many one-time costs associated with the purchase of a home. Some of the more common costs, which vary by province, may include:
- Legal fees
- Mortgage processing fees
- Home inspection costs (if desired)
- Land survey
- Land transfer tax
- Fees for the registration of your deed and mortgage
- High ratio mortgage insurance and application fee and PST where applicable (insurance premium can be added to mortgage)
- Home, fire and other insurance premiums
- GST (on newly constructed homes only)
- Adjustments for property taxes and/or utility costs prepaid by previous owner
- Utility connection fees
- Provincial tax (B.C. only)
- Moving expenses
Should I refinance?
Refinancing refers to renegotiating the terms and conditions of your mortgage. It may be the right choice for you if you want to get a better interest rate or if you need to convert equity in your home to money.
If you’re looking at attractive interest rates, make sure to include the costs of refinancing. These are the same costs you paid when you arranged your initial mortgage, such as application and appraisal fees, legal costs, etc. Compare the costs with the potential savings on the new mortgage.
If you refinance before the end of the term, prepayment penalties may apply. Your lender may also charge a fee to switch or assign your mortgage to another lender.
How can I build equity in my home faster?
One way is to shorten the amortization period. Another way is to take advantage of the prepayment or extra payment options.
Some mortgages, like those offered by London Life, contain generous prepayment privileges that will help you turn your home ownership dreams into reality sooner. You can increase your regular payments by 15 per cent annually.
You can also pay up to 15 per cent of the original principal balance in a lump-sum payment, once annually, provided you remain an ongoing London Life mortgage client. These prepayment privileges can save you interest, so you pay off your mortgage faster and own your home sooner.
How do I renew my mortgage?
When the term of your mortgage comes to an end, you're technically required to pay the balance. However, most lenders will renew your mortgage arrangement for another term. This is also the time when you can pay off the full balance, or make a lump-sum payment to reduce the principal.
Before your term ends, you’ll be informed of the conditions of the renewal and the interest rates available to you. If you agree to the terms, you can sign a renewal agreement before the term’s maturity date.
What happens to my mortgage when I sell my home?
Depending on the terms of your mortgage, you can take your mortgage with you to finance your new home or leave it behind for the new owner. Some conditions may apply. You can also pay off your mortgage, subject to the terms of your agreement with your lender.
How do I transfer my mortgage?
If you decide not to accept the renewal offer from your existing lender, you’ll’ need to settle your mortgage by paying it off and arranging a new one.
Your lender may also charge a fee to switch or assign your mortgage to another lender.
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