Following are answers to the most Frequently Asked Questions first time home buyers have
about mortgages. If your question is not here, call 905-795-1637 to talk
to an OECU Mortgage Advisor or email support@oecu.on.ca.
We’ll help you arrange a mortgage that suits your financial situation and minimizes total interest costs. Assistance includes:
The first time Home Buyer's Plan (HBP) enables RRSP withdrawals up to $25,000 ($50,000 for a couple) to help make the
down payment. Withdrawals must be repaid within 15 years. RRSP funds must be on deposit for at least 90 days. Other
conditions apply.
Tip: If you have non-registered down payment savings of, say, $10,000 and have enough RRSP “contribution room”, transfer
the $10,000 into a RRSP at least 90 days before your closing date. Then withdraw the down payment money from your RRSP.
The advantage? Your $10,000 RRSP contribution is tax deductable and you can use any tax refund to repay the RRSP
withdrawal or cover other home expenses. Note that RRSP withdrawals may mean foregoing tax-sheltered investment
growth.
What you pay each month will depend on the amount your borrow, the interest rate, your mortage term and your payment
schedule. Use our simple mortgage payment calculator to determine what’s affordable for you. Check out our posted rates
here. We offer weekly, biweekly and monthly payment options set up through payroll deduction for your convenience.
2) Free, no-obligation information and advice about the home buying process
3) Advice about structuring your mortgage features to minimize interest costs
1) A single point of contact for your mortgage inquiries
How can my OECU Mortgage Advisor help me?
What will my monthly payments be?
Why should I get a pre-approved mortgage before I look for a home?
Mortgage pre-approval will:
1) Calculate how much you can affordably borrow
2) Guarantee a fixed interest rate for 90-days, even if rates rise
3) Enable you to act quickly when it’s time to make an offer
4) Identify up front closing costs in addition to the down payment
Start your pre-approval online - we’ll be in touch within 24 hours.
What is a mortgage down payment?
The down payment is the portion of your purchase price that you pay upfront yourself. There are conventional and high
ratio mortgages - with high ratio requiring default insurance as follows:
Can I use my RRSP as a down payment?
What’s the difference between the mortgage amortization period and the mortgage term?
Amortization Period: Number of years (typically 25) to fully repay the loan assuming a constant interest rate and payment.
Shorter amortization periods reduce total interest costs. Longer amortization periods lower monthly payments but increase
interest costs over time. Amortization is broken out into a series of terms…..
What’s the difference between a fixed rate and variable rate mortgage?
Fixed Rate
Variable Rate
Difference
Interest Rates
Attractive if...
What’s the difference between a closed and open term mortgage?
Is a short or longer term mortgage better for me?
Besides the down payment, what are other up-front costs associated with buying a house?
What type of mortgage is right for my situation?
This largely depends on your current & projected financial situation...
This depends on your credit history and Total Debt Service Ratio (TDS). TDS is the maximum % of gross monthly household
income needed to pay fixed monthly mortgage payments, property taxes, heating costs and other costs (e.g. credit cards,
loans, 50% of condo fees, etc.). Use our “How much home can I afford?” calculator. Check out our posted rates here.
Gross monthly household income $8,000
Monthly mortgage payments/property taxes/heat/
condo fees/other fixed expenses $2,800
TDS Ratio 35%
How much home can I afford?
TDS Example:
What documents will I need to provide for the pre-approval?
You should have the following available:
Social insurance number
Current address
Previous address (if less than 3 years at current address)
Current employer (name, address, telephone no.)
Previous employer (if with current employer less than 3 years)
Sources of verifiable income (e.g. letters of employment)
If self-employed, income tax ‘Notice of Assessment’ for last 2 years
Bank statement confirming payroll deduction
Investment statement
What are the key steps in buying a house?
Calculate how much home you comfortably qualify for. Tip: maximize the down payment to reduce interest
costs (ideally, 20% or more of purchase price).
Step 1
Arrange an OECU loan pre-approval to know what you can afford
Step 2
Choose an appropriate mortgage type (i.e. fixed or variable rate, open or closed, short or long term) based on
your situation.
Step 3
On closing day...
OECU provides the mortgage funds to your lawyer
You provide the down payment less the deposit to your lawyer plus any property tax and prepaid utility adjustments
Lawyer pays the previous owner, registers the home in your name and gives you the deed and keys to your home
.
.
.
Step 4
Your Situation
Mortgage Types
Information
Want fixed rate and monthly
payments over the mortgage
term for budgeting and
peace of mind
Closed, Fixed Rate
(most common)
Open, Fixed Rate
Want to take advantage of a
declining prime rate
scenario to pay down
mortgage faster
Open, Variable Rate
Is the lowest interest rate always the best deal?
The best mortgage involves a competitive interest rate and ‘flexibility’ that saves you the most amount of money long-term.
Statistics show that over half of Canadians with a mortgage renegotiate before their term end due to a change in prime rate
or personal financial conditions. The average five-year borrower changes their mortgage every 3 1/2 years.
If you obtain a cheap rate and want/need to refinance before term end, you may be subject to severe financial penalties
due to mortgage restrictions. That’s why flexibility (e.g. pre-payment privileges, portability, hybrids, refinancing) easily
outweighs small (e.g. 0.10 to 0.25%) differences in interest rates. The lowest rate saves hundreds of dollars up front but
may cost thousands after closing.
Your OECU mortgage advisor will explain your flexibility options and help arrange the best deal to suit your short and
Closing costs are typically in the 2% range of the loan amount. They include property appraisal, home inspection, legal fees
and disbursements, land transfer tax, title insurance and any prepaid property tax and utility adjustments. So, if your new
home is $300,000, closing costs could be $6,000. Besides closing costs, other expenses typically include moving costs,
furniture, appliances, etc. Your OECU mortgage advisor will help you identify these costs.
Mortgage Term: Contracted length of time the loan interest rate is guaranteed. At expiry, the contract is renewed for another
term at the prevailing interest rate until fully amortized. Contract terms are either short or longer as follows...
Short Term Open
Long Term
Term period
Attractive if...
From 6 months to 2 years
Interest rates projected to fall
From 3 to 5 years
Interest rates projected to rise
Fixed interest rate and monthly
payments over term
Fluctuating rates and fixed
monthly payments over term
Higher than variable rate
Lower than fixed rate
Prime rate is rising
Risk adverse - prefer fixed
payments for peace of mind
.
.
Prime rate is stable or falling
Risk tolerant &/or expecting
cash inflow soon to pay down
all or part of the mortgage
.
.
Firstly, any capital prepayment privileges amortize a mortgage faster since all pre-payments are applied directly to capital.
Closed mortgages typically allow annual capital pre-payments up to 20% of the original mortgage or higher monthly
payments without penalty. Interest rates for closed term mortgages are generally lower than for open term mortgages
Open mortgages allow full capital pre-payments or a total discharge anytime without penalty. They may be appealing if
you are planning to pay off your mortgage in the near future via an inheritance, bonus, etc. Interest rates are generally
higher versus closed mortgages because of the pre-payment flexibility.
A shorter term is more viable if selling your home in the near future to pay off your mortgage, or in a declining rate scenario
by the time your term expires.
A longer-term mortgage of 3 to 5 years is more viable in a stable or rising rate scenario. It also provides easier budgeting
and peace of mind benefits.
Fixed interest rate and payments over term. Early
repayment penalities may apply
Fixed interest rate and payment over term. Repayment
anytime in full or part without penalty
Ideal if receiving inflow of funds soon to pay off
mortgage (e.g. receiving an inheritance or selling a house)
Rate fluctuates up or down with prime but monthly
payments are fixed. Repayment anytime in full or part
without penalty
Convert to a fixed rate mortgage anytime
Contact your OECU mortgage advisor for professional advice at 905-795-1637 or email at support@oecu.on.ca.
Contact your OECU mortgage advisor for professional advice at 905-795-1637 or email at support@oecu.on.ca.
Contact your OECU mortgage advisor for professional advice at 905-795-1637 or email at support@oecu.on.ca.