Buying a house is exciting but it also brings a lot of anxiety. One of the most common issues that homeowners face during a home purchase is financing.

Most Canadians pay a minimum down-payment and obtain a mortgage to pay for a house.  But you don’t just get the first available mortgage offer that comes along. You will be paying for your mortgage for many years and its cost will have a huge impact on your finances.

With that said, it is important for you to get the best mortgage terms and conditions, particularly the interest rate.

Meet with a good mortgage broker and ask these 8 questions to help you make the best mortgage decision.

Can I get a mortgage pre-approval?

A mortgage pre-approval is a great idea before you start viewing properties for sale. A mortgage broker can help you with a pre-approval so you can know

1) If you qualify for a mortgage

2) How much you can borrow

3) How much you can afford to pay for a house

By knowing how much lenders can provide you for your home purchase, you will be able to target properties in the right price range. A pre-approval will also give you the confidence to submit an offer to buy a house once you find your ideal property.

During a pre-approval, you will also know what interest rate you can obtain and lock-in the rate while you search for a property.

Take note, however, that a mortgage pre-approval is not a guarantee that your lender will give you the funds. This is why it is a good idea to include in your offer to purchase the condition that your offer is subject to lender approval for financing.

Your mortgage broker will submit your mortgage application to the lender of your choice. When applying for a pre-approval, check with the broker how long the rate is guaranteed and how long the pre-approval is valid.

How much should I put towards my down payment?

A mortgage broker can advise you on how much to pay for your down payment. If you are a first time buyer, you may not know all of the mortgage regulations. A good mortgage broker will be very knowledgeable about minimum down payment requirements and will explain to you the pros and cons of your options.

A bigger down payment will help you save on interest payments but it does not necessarily give you a lower interest rate. A broker can recommend the appropriate down payment for you based on your financial situation and your goals.

Should I choose a fixed or variable rate?

A mortgage broker will give you advice based on your financial needs.  With a fixed-mortgage, your payment stays level at the same interest rate throughout the mortgage term. This allows you to budget your finances more easily and is convenient for salaried workers. Of course, this guarantee of stability comes at a price because your interest rate will stay the same even if the market rates decrease in the future.

Fixed-rates are recommended for first-time buyers and people who are uncomfortable with taking risks.

A variable rate means your interest rate changes at any time during the mortgage term based on the prime rate. They depend on the Bank of Canada’s rates. When rates fall, your interest payment goes down but when rates increase, your payment also goes up. Before you get a variable rate mortgage, make sure you understand how interest rate changes will impact your finances.

What is the penalty if I pre-terminate my mortgage?

When you first apply for a mortgage, you may not have plans to break your contract. However, life comes with many unexpected changes such as a new job, family, etc. This is why it is better to know what penalties you have to pay just in case you need to pre-terminate your mortgage.

Pre-terminating a mortgage can mean paying it off earlier such as when you sell your house or even when you switch lenders or refinance.

Variable rate mortgages have lower penalties compared to fixed-rate mortgages.  If you think chances are high that you need to break your mortgage, you might want to opt for a variable rate.

What are included in the closing costs?

You must prepare a budget for closing costs which include the transfer tax, legal fees, home inspection fees, appraisal and Provincial Sales Tax on mortgage insurance, among others.

A mortgage broker can give you a good idea of how much you need to prepare for your closing costs.

Is this mortgage offer a collateral or standard mortgage?

Do you plan on looking around when the time to renew your mortgage is up? This is a really smart choice. You can save a lot of money when you compare mortgage rates before you renew.

If you have a standard mortgage, you can switch lenders at the end of the mortgage term without any cost. A collateral mortgage is good if you wish to have a home equity line of credit against your home equity. However, this makes it harder and more expensive for you to switch to another lender.

It is best to make sure what type of mortgage you are getting so ask your broker right away. Many lenders offer both collateral charge and standard mortgages.

What are the restrictions for pre-payment for this mortgage?

If you are financially savvy, your goal would be to pay off your mortgage as fast as possible. Your goal would be to reduce the amount of money you pay towards the interest. A good way to do this is to increase your regular payment or make lump sum payments whenever you have extra cash.

Thus, it is good to look for a lender that offers prepayment at any time or once a year.  Your mortgage broker will try to help you find a mortgage with the best terms.

Is there a fee for your broker services?

When you work with a mortgage professional, it is best to clarify how he will be compensated.

Generally, mortgage broker services are free. You may have to pay for legal fees (notary) and appraisal fees.

So how does your broker get compensated? Brokers earn compensation from mortgage lenders. But even when lenders pay for brokers’ services, they are independent as they get paid regardless of the lender you select. This ensures you get unbiased mortgage advice, free of charge.

These are questions you should ask a mortgage broker before you take out a mortgage. Why do it on your own when you can have a mortgage expert by your side?

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