Choosing among mortgage lenders in Toronto can feel like walking into a maze: prices are high, the paperwork is endless, and every lender promises something slightly different. It may be useful to get acquainted with those who are standing across from you before starting a comparison of interest rates. Mortgage lenders in Toronto could be divided into several types, which are intended for different sorts of borrowers.
Chartered banks constitute the first type of such lenders. These financial institutions are regulated at the federal level and provide a great number of services. They could be considered the best choice for those people who use their banking services. The second type consists of credit unions. In Ontario, they are regulated at the provincial level, and some borrowers appreciate the flexibility of their approach when the applications do not comply with the common forms.
Monoline lenders form a third category: they focus only on mortgages, and many reach borrowers mainly through brokers instead of branches. Borrowers with an unstable income source, a credit issue from the past, or those without a Canadian credit history may end up with a private lender. Private lenders such as individuals and investors pay less attention to the borrower's income and more to the collateral and the repayment scheme. However, it also means higher interest rates and fees, as well as a shorter term. This loan is considered a good choice when serving as a temporary solution before getting a mortgage. In Ontario, according to FSRA's recommendations, if a person needs a private lender, it is better to deal with a mortgage agent of Level 2 or a mortgage broker, but not with a mortgage agent of Level 1.
The criteria for qualification of a borrower also play an important role. According to OSFI, federally regulated financial institutions are expected to qualify most new uninsured borrowers at the higher of the borrower's contract rate plus 2 percentage points or 5.25 percent. The qualification will differ based on the application of policies and risk appetites by two different institutions. Rejected applications do not mean poor files; they just do not fit.
In comparing mortgages, do not focus only on the headline rate. Enquire about the way the prepayment penalty is calculated, because it is often the higher of three months' worth of interest or the interest rate difference. Find out if there are any additional payment options available, if there are provisions to move the mortgage onto another property, and how much the additional fees for the lender, the appraisals, and the legal work might add up. A small increase in the rate can actually cost you less than a lower one with inflexible conditions.
Finally, make sure who you are dealing with. Banks are exempt, but most other individuals and businesses that arrange mortgages in Ontario must hold an FSRA licence. You can verify this in the regulator’s public registry by searching the name or licence number before you commit. Choosing the best mortgage lender in Toronto depends on your income, your timeline, and your plans for the home. Compare a few options, read the full terms, and confirm the licence before you sign.
Craig Mclean is the author of this article. To know more about mortgage renewal in Toronto, please visit our website: fundingtoronto.com.