What a mortgage broker does that a bank cannot
A bank employee can offer you the products of one lender. A licensed mortgage broker takes a single application and shops it across banks, credit unions, monoline lenders, alternative B lenders, mortgage investment corporations, and private investors. You get competing offers rather than one answer, and on standard residential files the lender pays the brokerage, so the advice costs you nothing.
- One credit inquiry, many lenders reviewing the same file
- Access to monoline lenders who deal only through brokers
- Alternative and private options if bank guidelines do not fit
How much you can borrow
Lenders measure two ratios: how much of your gross income goes to housing costs, and how much goes to total debt including cards, car payments, and lines of credit. On top of that, the stress test requires you to qualify at a rate higher than the one you will pay. Two applicants with identical salaries can be approved for very different amounts depending on how income is documented and what other debt they carry.
Down payments and default insurance
Five percent is required on the first $500,000 of the purchase price and ten percent on the portion above that, up to the insured price ceiling. Above the ceiling, and on rental properties, twenty percent is the floor. Under twenty percent means default insurance, which is added to the mortgage balance rather than paid in cash - though in Ontario the provincial sales tax on the premium is payable at closing.
- Insured mortgages often carry lower rates than uninsured ones
- Gifted down payments from immediate family are widely accepted
- Lenders want ninety days of history on the funds
Closing costs Toronto buyers forget
Toronto is the only city in Ontario where land transfer tax is charged twice, once provincially and once municipally. Add legal fees, title insurance, a home inspection, adjustments for prepaid property tax, and the PST on default insurance. Budgeting roughly one and a half to four percent of the purchase price for closing, on top of the down payment, keeps closing day calm.
Fixed, variable, and the terms behind the rate
Fixed buys certainty. Variable follows prime and normally carries a penalty of three months' interest if you break early, where a fixed penalty can run into five figures. Prepayment privileges, portability, and whether the mortgage is registered as a collateral charge all matter. A rate that looks a tenth of a point better can cost far more over the term once those terms are read.
Self-employed, commission, and new to Canada
Roughly one in six Canadian workers is self-employed, and bank guidelines were not built for them. Bank statement programs, stated income with a larger down payment, and lenders that average business income over two years all exist. Newcomer programs accept limited Canadian credit history with the right documentation. The file is not the problem; placing it with the wrong lender is.
Renewals: the most expensive letter you will ever sign
Lenders price renewals knowing most people sign the first offer. Start four months before maturity, when rate holds begin and competing lenders will still quote you. A straight switch at maturity, with no new money and no change to the amortization, usually costs little or nothing and can be materially cheaper than staying.
- Switch: same balance, new lender, small or covered fees
- Refinance: new money added, full legal costs, appraisal likely
- Stay: fastest, and usually the priciest
When the answer is a private mortgage
Arrears, a power of sale notice, a builder closing that has to fund this month, income a bank will not verify - these are equity deals. Private and second mortgages in Toronto are underwritten on the property and the exit plan rather than the credit score, price above bank rates, and are meant to be short-term bridges rather than permanent financing.
Frequently asked questions
- Is a mortgage broker free in Toronto?
- On a standard residential purchase, refinance, or renewal the lender pays the brokerage fee, so there is no cost to the borrower. Fees on private or specialty files are disclosed in writing before anything is signed.
- How long does a Toronto mortgage approval take?
- A pre-approval can usually be issued the same day. A full approval with conditions typically takes a few business days once documents are in, and private files can move faster when there is a deadline.
- How much do I need for a down payment in Toronto?
- Five percent on the first $500,000 and ten percent above that, up to the insured price ceiling. Above the ceiling, or on a rental, expect twenty percent minimum.
- Can I get a mortgage in Toronto with bad credit?
- Yes. Alternative and private lenders weigh the equity in the property and the exit plan far more heavily than the credit score. Pricing is higher, and the plan should be to move back to a bank within a term or two.
- Should I get pre-approved before house hunting?
- Yes. A pre-approval holds a rate, sets a realistic price range, and makes an offer far more credible in a competitive Toronto bidding situation.