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When you buy a home, you may only be able to pay for part of the purchase price. The amount you pay is a down payment. To cover the remaining costs of the home purchase, you may need help from a lender. The loan you get from a lender to help pay for your home is a mortgage.

A mortgage is a legal contract between you and your lender. It specifies the conditions of your loan and secures it on a property.

With a secured loan, the lender has a legal right to take your property. They may do so if you don’t respect the conditions of your mortgage. This includes paying on time and maintaining your home.

Federally regulated entities, like banks require that you pass a stress test to get a mortgage. Lenders that aren’t federally regulated may also ask you to pass a stress test.

FThis means that you need to prove you can afford payments at a qualifying interest rate. This rate is typically higher than the actual rate in your mortgage contract.

If you already have a mortgage, you’ll need to pass this stress test if you:

• refinance your home
• take out a home equity line of credit or
• have an uninsured mortgage and switch to a new lender

If you have an insured mortgage, banks are expected to allow you to switch lenders without passing a stress test

There are 2 questions you might want to ask when negotiating your mortgage:

1. Pre-payment privileges. This might include additional monthly payments or annual payments.
2. What the penalties are for breaking your mortgage. You might do so if you are transferred to another place. Two types of mortgages to avoid penalties are portable mortgage or assumable mortgage.

If you are looking to purchase property, contact us for advice. Calling your bank is not always the best option. We can provide names and contact information for mortgage brokers or mortgage specialists, that work for your bank yet can provide faster service.