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Getting A Mortgage

Navigate Your Mortgage Options with Confidence

Purchasing a home is a significant milestone, and securing the right mortgage is a key part of that journey. At Sandsland Real Estate, we’re committed to helping you understand and navigate the complexities of getting a mortgage. Here’s everything you need to know to get started on the right foot.

Table of Contents

Understanding the Basics:

What is a Mortgage?

A mortgage is a type of loan specifically used to purchase real estate. In a mortgage agreement, the buyer borrows money from a lender, typically a bank or a financial institution, and pays it back over a set period, usually with interest. The property itself serves as collateral for the loan, which means if the borrower fails to make the agreed-upon payments, the lender has the right to take possession of the property through foreclosure.

Mortgages are essential for buying a home because they make it possible for individuals to purchase real estate without having to pay the full price upfront. This financial tool breaks down the cost of a home into manageable monthly payments, enabling more people to afford homeownership. Mortgages also offer flexibility in terms of payment options and interest rates, allowing buyers to choose terms that best fit their financial situation.

To qualify for a conventional mortgage, you need a down payment of 25% of the purchase price, ensuring the mortgage does not exceed 75% of the property’s appraised value.

If your down payment is under 25%, you will need a high-ratio mortgage, which necessitates loan insurance. The cost of this insurance ranges from 0.5% to 3.75% of the mortgage amount. Additionally, high-ratio mortgages may restrict the maximum price of the house you can purchase.

Types of Mortgages Available:

Fixed-Rate Mortgages:

Lock in your interest rate for the term of the mortgage.

Variable-Rate Mortgages:

Rate varies with the market interest rates.

Adjustable-Rate Mortgages (ARM):

Starts with a fixed rate, then adjusts.

Conventional vs. High Ratio Loans:

Depending on your down payment, learn which applies to you.

Mortgage Qualification Process:

Assessing Your Financial Health:

When evaluating your financial situation in preparation for obtaining a mortgage, it’s crucial to consider several key factors that lenders will review:

Income Stability:

Ensure that your income is reliable and consistent. Lenders prefer borrowers who have a stable job history, typically with at least two years of consistent employment in the same field. If you are self-employed, be prepared to provide additional documentation, such as tax returns and business financial statements, to prove your income.

Debt-to-Income Ratio (DTI):

Calculate your debt-to-income ratio by dividing your total monthly debt payments by your gross monthly income. This ratio helps lenders determine your ability to manage monthly payments and repay debts. A lower DTI ratio makes you a more attractive candidate for a mortgage. Generally, lenders look for a DTI ratio that is no higher than 36%, though this can vary depending on the lender and the type of mortgage.

Credit Score:

Check your credit score, which is a numerical summary of your credit history. A higher score indicates to lenders that you are a low-risk borrower, which can help you secure better mortgage terms such as lower interest rates. Scores typically range from 300 to 850, with a score above 670 considered “good” by most standards. If your score is lower, consider taking steps to improve it, such as paying down debts, making payments on time, and correcting any inaccuracies on your credit report.

Additional Tips:

  • Review Your Credit Reports: Obtain a free copy of your credit report from the major credit bureaus and check for any errors or discrepancies that might affect your score.

  • Reduce Your Debts: Paying down high-interest debts, such as credit card balances, can improve your DTI ratio and credit score, making you more appealing to lenders.

  • Increase Your Down Payment: Saving for a larger down payment not only reduces your loan amount but also may qualify you for better mortgage terms.

  • Maintain a Budget: Understanding your cash flow—what comes in and what goes out—can help you manage your finances effectively and save for a down payment while covering existing debts.

By addressing these areas, you can strengthen your financial profile, making it more likely to get favorable terms on your mortgage.

Mortgage Regulations in Ontario:

Navigating the complexities of mortgage regulations in Ontario is crucial for anyone looking to purchase a home.

These regulations are designed to ensure the stability of the real estate market and protect consumers from assuming loans they cannot afford.

Stress Test:

The stress test regulation is a financial assessment tool used by lenders in Canada, including Ontario, to ensure that homebuyers can afford their mortgage payments even if interest rates rise or their financial situation changes. This test was introduced to curb excessive borrowing and reduce the risk of defaults on mortgages.

When applying for a mortgage, the stress test requires borrowers to qualify at their contracted mortgage interest rate plus 2%, or the Bank of Canada’s five-year benchmark rate, whichever is higher. This means that even if you are offered a lower interest rate by your lender, you must prove that you can handle payments at this higher rate.

The purpose of the stress test is to evaluate a borrower’s ability to manage their mortgage under potentially higher interest rates, thus ensuring that homeownership is sustainable over the long term. By passing the stress test, borrowers demonstrate financial resilience against potential rate increases or declines in income, which helps maintain a stable housing market and protects individual homeowners as well as lenders.

Land Transfer Tax:

In Ontario, the Land Transfer Tax (LTT) is a mandatory fee that buyers must pay when purchasing a property. This tax is calculated based on the purchase price of the property and is due at the time of closing the transaction. The rate of the tax increases progressively with the value of the property, starting at 0.5% and going up to 2.5% for the highest property values.

Here’s a breakdown of the rates:

  • 0.5% on the first $55,000 of the purchase price,
  • 1.0% on the amount between $55,000 and $250,000,
  • 1.5% on the amount between $250,000 and $400,000,
  • 2.0% on the amount between $400,000 and $2,000,000,
  • 2.5% on the amount over $2,000,000 for residential properties.

First-time homebuyers may be eligible for a rebate on the Land Transfer Tax, which can significantly reduce or even eliminate the tax for properties purchased up to a certain value. This rebate is intended to make homeownership more accessible to first-time buyers.

It’s important for prospective buyers in Ontario to factor in the cost of the Land Transfer Tax when budgeting for their home purchase, as it can add a substantial amount to the overall cost of buying a home.

Legal Requirements:

Securing a mortgage and purchasing a home in Ontario involves navigating a series of legal requirements to ensure that the transaction is carried out properly and that both parties’ rights are protected. Here is an overview of the key legal aspects involved in this process:

  1. Mortgage Agreement: The mortgage agreement is a legal contract between the lender and the borrower. It outlines the terms and conditions of the loan, including the interest rate, repayment schedule, and what happens if the borrower fails to make payments. It’s crucial for borrowers to understand all terms before signing.

  2. Title Search and Insurance: A title search is conducted to ensure that the seller has a clear title to the property, free of any liens or other encumbrances that could affect ownership. Title insurance is also recommended to protect against potential title defects.

  3. Legal Representation: It is advisable to hire a lawyer or a licensed paralegal experienced in real estate transactions. They can help review all contracts and legal documents, ensure that all legal requirements are met, and handle the closing process. The lawyer will also facilitate the transfer of funds and ensure that the property is registered under the new owner’s name.

  4. Land Transfer Tax: As mentioned, buyers in Ontario are required to pay a Land Transfer Tax upon the purchase of a property. Legal counsel can help calculate the exact amount and ensure that any eligible rebates, such as those for first-time homebuyers, are applied.

  5. Home Inspection and Appraisal: While not strictly legal requirements, conducting a home inspection and appraisal are important steps in the home buying process. These can be stipulated as conditions in the purchase agreement. A home inspection can reveal any physical issues with the property, while an appraisal determines its market value, which is crucial for securing a mortgage.

  6. Closing Process: The closing process involves several legal steps, including the exchange of documents and funds between the buyer and seller, usually facilitated by the lawyers. The buyer’s lawyer will prepare a statement of adjustments, detailing credits and debits like prepaid taxes and utility bills, and ensuring that the correct amount is paid to the seller.

Tips and Advice:

Choosing the Right Mortgage:

Selecting the right mortgage is a crucial step in the home buying process, as it can impact your financial stability and flexibility for years to come. Here’s a guide to help you make an informed decision when choosing a mortgage that best fits your needs and financial situation.

1. Assess Your Financial Goals:

  • Short-term vs. Long-term: Consider how long you plan to stay in the home. If it’s likely to be short-term, you might prefer a variable or adjustable-rate mortgage to take advantage of lower initial rates. For long-term stays, a fixed-rate mortgage offers stability in payments.
  • Risk Tolerance: Fixed-rate mortgages provide payment certainty, while variable-rate mortgages can offer lower rates initially but carry the risk of increasing rates.

2. Understand Mortgage Types:

  • Fixed-Rate Mortgages: These offer a constant interest rate and predictable monthly payments for the entire term of the mortgage, which can range from 1 to 30 years.
  • Variable-Rate Mortgages (VRM): With VRMs, interest rates can change based on market conditions, which means monthly payments can vary.
  • Adjustable-Rate Mortgages (ARM): Similar to VRMs but often includes a period where the rate is fixed before it begins to adjust.
  • Hybrid and Combo Mortgages: These offer a combination of fixed and variable rates, which can be suitable for homeowners who expect changes in their future financial situation.

3. Consider the Mortgage Features:

  • Amortization Period: The total length of time it takes to pay off the mortgage in full. A longer amortization reduces monthly payments but increases the total interest paid.
  • Payment Flexibility: Some mortgages allow changes to payment schedules, offering the ability to make extra payments or skip payments under certain conditions.
  • Prepayment Privileges: These allow you to pay off your mortgage faster without penalties, which can save significant amounts in interest.

4. Calculate Costs Beyond Interest Rates:

  • Closing Costs: These include various fees and charges involved when finalizing a mortgage agreement, such as appraisal fees, legal fees, and title insurance.
  • Penalties: Understand the costs of breaking your mortgage early. This is particularly important if you anticipate refinancing or moving before the end of your mortgage term.

5. Shop Around and Negotiate:

  • Compare Offers: Look at different lenders and their mortgage products. Don’t hesitate to negotiate the terms and rates. Often, lenders are willing to offer better rates to compete for your business.
  • Use a Mortgage Broker: A broker can help navigate the complex landscape of mortgage products and negotiate on your behalf. They have access to multiple lenders and can often secure terms that might not be directly available to you.

Seek Professional Advice:

  • Given the complexities and long-term implications of choosing a mortgage, consider seeking advice from financial advisors or mortgage professionals. They can provide personalized advice based on your financial situation and goals.

By carefully considering these factors, you can choose a mortgage that not only fits your current financial situation but also aligns with your future goals, ensuring a stable and comfortable home buying experience.

Choosing Your Lending Partner:

When it comes to securing a mortgage, you have the choice between going directly to a bank or using a mortgage broker. Each option has its advantages and disadvantages, and understanding these can help you make the best decision based on your personal circumstances and preferences.

Mortgage Brokers:


  • Access to Multiple Lenders: Mortgage brokers have relationships with a variety of lenders, including major banks, credit unions, and specialty lenders. This wide range allows them to shop around and find the best rates and terms that fit your specific financial situation.
  • Personalized Service: Brokers often provide more personalized service. They work to understand your financial needs and can guide you through the entire mortgage process, from application to closing.
  • Flexibility and Expertise: Brokers are particularly valuable for buyers with unique circumstances such as self-employment or a less-than-perfect credit history. They are skilled at finding lenders who are willing to finance non-traditional borrowers.


  • Fees: Some brokers might charge a fee, especially if you’re a more challenging borrower. It’s important to clarify upfront how they are compensated and who pays their fee—the lender or you.
  • Quality Variance: As with any profession, the quality and expertise of brokers can vary. It’s important to do your homework, check reviews, and get referrals before choosing a broker.



  • Familiarity and Convenience: If you already have a relationship with a bank (e.g., checking, savings accounts, or other loans), it can be convenient to use them for your mortgage. This existing relationship can sometimes lead to better rates or offers.
  • Direct Lender: Dealing directly with the lender can simplify the process. You don’t need to go through a third party, which can be preferable for people who want a more straightforward communication channel.
  • Full Service: Banks often offer a range of financial services and products. Having all your financial dealings in one place can be convenient for managing your finances.


  • Limited Options: A bank will only offer you its own mortgage products, which may not always have the most competitive terms or rates compared to the wider market.
  • Stricter Qualifications: Banks may have more rigid qualifying criteria compared to the broader array of options available through a broker. This can be a hurdle if you have unique circumstances or less than ideal credit.

Making the Choice: When choosing between a mortgage broker and a bank, consider your personal priorities. If you value having a wide range of options and getting the best possible deal, a broker might be the way to go. However, if you prefer a direct relationship with a lender and the convenience of keeping all your financial products in one place, a bank could be a better fit.

Regardless of the route you choose, it’s important to ask questions, understand the terms and conditions of your mortgage offer, and ensure you are comfortable with the professionals helping you navigate this significant financial decision.

Got Questions? Get Answers!

Curious about any aspect of the home buying process? Don’t hesitate to reach out! Our expert team is here to provide clear, concise answers to all your questions. Whether it’s about financing, neighborhoods, or the closing process, we’re here to ensure you have all the information you need to make confident decisions. Get in touch today and let us guide you through your real estate journey.