Posted: 1 Feb '19

What Questions Should You Be Asking Your Mortgage Broker?

To get the most out of your first meeting with your mortgage broker, it's a good idea to have some questions prepared in advance. Doing so will ensure you get all of the information you need about the home buying process and help your mortgage broker choose the right products for your needs. Here are three things you should discuss with your broker.

How Much Home Can I Afford?

The first thing you'll want to discuss with your mortgage broker is how much home you can afford. A general rule of thumb is that your total housing costs (mortgage payments, heating, property taxes) should not exceed 32% of your pre-tax, or gross, monthly income. Your debt to income ratio (DTI), which is a calculation of how much of your gross monthly income goes toward debts like credit cards, car loans, and personal loans, shouldn't exceed 36%. These are just guidelines, however, and every situation is different. These metrics don't take into account equity or assets that contribute to your net worth. They also don't factor in possible future scenarios like job loss or rising interest rates. Your mortgage broker will take these additional factors into consideration when helping you decide how much to borrow.

How Much Money do I Need for a Down Payment?

In Canada, the minimum down payment for a first-time home buyer is 5% of the purchase price for homes $500,000 and under, and 10% of any amount over $500,000. In some cases, making a larger down payment makes sense. Not only does a larger down payment lower your monthly mortgage payment, but by making a down payment of 20% or more, you won't be required to get mortgage loan insurance. Speak with your mortgage broker about whether making a larger down payment would be more beneficial to you in the long run.

Which is Better: A Fixed Rate Mortgage or a Variable Rate Mortgage?

Another important question to ask your mortgage broker is whether you should obtain a fixed rate mortgage or a variable rate mortgage. A fixed rate mortgage carries a fixed rate for the duration of the term, while a variable rate mortgage carries an interest rate that fluctuates according to market conditions. Your mortgage broker will choose the type of mortgage for you based on a number of factors, including your financial health, current market conditions, and your risk for tolerance.

Have more questions about the home buying process? We can help. Contact a mortgage broker today to discuss your home ownership goals and get the advice you need to purchase the home of your dreams.

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