Slide Do you need help
getting out of debts?
Find out your options! For free professional and
confidential initial consultation, call:
adam@debtcliniccanada.ca (905) 970-0439
Slide Do you need help
getting out of debts?
Find out your options! For free professional and
confidential initial consultation, call:
(905) 970-0439 adam@debtcliniccanada.ca
Slide Do you need help
getting out of debts?
Find out your options! For free professional and
confidential initial consultation, call:
(905) 970-0439 adam@debtcliniccanada.ca
Slide Do you need help
getting out of debts?
Find out your options! For free professional and
confidential initial consultation, call:
(905) 970-0439 adam@debtcliniccanada.ca

June 2015 – WHAT YOU NEED TO KNOW IN APPLYING FOR A HIGH-RATIO MORTGAGE

By:Adam Aspilla
June 25, 2015

Buying a house is a common dream for almost everyone. Considering house prices are in the hundreds of thousand of dollars, particularly, in Metro Toronto Area, a buyer needs a mortgage financing. There are two common types of mortgage financing.

Conventional Mortgage

One type is called, Conventional Mortgage where a buyer has a down payment of at least twenty percent (20%) of the purchase price. What a buyer would do is simply go to a bank to apply for a mortgage loan. When a buyer has a good credit rating and meets the income requirement the Mortgage Loan Application is usually approved. If for any reason the mortgage application is not approved, a buyer could still go to another bank(s) to secure a mortgage approval.

High-Ratio Mortgage

The other type of mortgage financing is called, High-Ratio Mortgage where the down payment is at least five percent (5%) and less than twenty percent (20%) of the purchase price.

Just like the Conventional Mortgage a buyer could go to a bank and apply for a mortgage loan. Good credit rating and good income are also required for approval.

Since it is a High-Ratio Mortgage (down payment less than twenty percent of the purchase price), the bank approval of the mortgage loan application is dependent on the approval by a Mortgage Insurance Company like CMHC.

A buyer would pay a one-time premium to the Mortgage Insurance Company from 1.75% to 2.75% of the mortgage amount. The lower the down payment the higher is the premium.

The mortgage insurance is a guarantee to a lender-bank, that in the event the buyer defaults on the mortgage payments and the house is taken by the bank and sold with a shortfall (proceed of sale is less than the amount of mortgage owing) through the Power of Sale process, the Mortgage Insurance Company will pay the shortfall to the lender-bank.

What You Need to Know

In a Conventional Mortgage, if disapproved by one bank you can still go to another bank(s) to apply for a mortgage loan, and you still have a chance of getting approval. Whereas, in a High-Ratio Mortgage once disapproved by one bank, your chance of approval by another bank is practically zero.

Therefore, if you are applying for a High-Ratio Mortgage, it is advisable for you to seek assistance from a Mortgage Professional to package your Mortgage Loan Application properly before submitting it to a bank.

Adam Aspilla operates the Debt Clinic of Canada Inc. for more than 30 years.  He was a former financial planner, a former mortgage broker, and the author of the book, You Can Negotiate All Your Debts.  He also writes another column, “Biblical Perspectives” in this paper. For a free initial, expert, professional and confidential financial consultation on your financial issues like: Debt Consolidation, Credit Counseling, Consumer Proposal, Bankruptcy, and securing 1st and 2nd Mortgages, call 905-970-0439 or visit www.debtcliniccanada.ca

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