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Frequently Asked Questions

Find clear answers to common mortgage questions—from pre-approval to renewal and everything in between.

A mortgage broker is a licensed professional who submits your application to multiple lenders and presents the options that fit your situation. Brokers work with banks, credit unions, monoline lenders, and alternative lenders, so a single decline does not end the search. One lender’s no is not the final answer.

Yes. Karla Badillo is a licensed mortgage broker with Sherwood Mortgage Group, FSRA Brokerage Licence #12176, based at 2275 Lake Shore Blvd W, Suite 413, Toronto. Licensing status for any Ontario brokerage or agent can be confirmed through the Financial Services Regulatory Authority of Ontario. You can also read more about Karla Badillo and her background in the financial industry.

On most standard residential mortgages the lender pays the broker, so there is usually no direct fee to you. Some alternative and private arrangements do involve a broker fee, and any fee is disclosed in writing before you commit to anything. You will not be asked to agree to a cost you have not seen in advance.

A bank can only offer its own products, while a broker compares products across a wide lender panel. That difference matters most when a file is not a straightforward salaried application, since lender guidelines on income, credit, and property type vary considerably. The goal is to match your file to the lender most likely to approve it on favourable terms.

Yes. Service is available in both English and Spanish, including document review and lender communication. Visit the Spanish language page for details and client reviews in Spanish.

Many complete applications receive a pre-approval decision within about 24 hours, although timelines vary by lender, document completeness, and the complexity of the application. Funding timelines after that depend on the product, the lender, and how quickly documents and property details come together. Straightforward files often move quickly once the paperwork is in hand.

Pre-qualification is an estimate based on the figures you provide, while pre-approval involves a credit check and a lender review of your documents. Pre-approval carries more weight with sellers and gives you a realistic budget before you start shopping. Neither is a final commitment, since full approval also depends on the property and updated verification at the time of purchase.

Most pre-approvals hold for roughly 90 to 120 days, depending on the lender. If your search runs longer than that, the pre-approval can usually be refreshed with updated documents. Any rate hold attached to the pre-approval follows the same window.

Lenders generally ask for proof of identity, income, down payment, and property details. A typical file includes:

 

  1. Government-issued photo identification
  2. Recent pay stubs and a letter of employment, or two years of T1 Generals and Notices of Assessment if you are self-employed
  3. Ninety days of bank or investment statements showing the source of your down payment
  4. The purchase agreement and listing, for a purchase
  5. Your current mortgage statement and property tax bill, for a refinance or renewal

 

Additional documents may be requested depending on the lender and the details of the file.

A mortgage application involves a credit check, which may cause a small and temporary dip in your score. Working with one mortgage broker may reduce the number of separate hard inquiries because many lenders can review the same application. Repeated hard inquiries over a short period tend to have a larger effect than one.

Yes, self-employed borrowers can qualify, though the documentation looks different from a salaried file. Some lenders work from declared income on your Notices of Assessment, while others review business bank statements and financial statements. The right lender depends on how your income is reported and how long you have been operating.

A past decline does not mean you are out of options. Alternative and private lenders weigh home equity, property type, and the overall picture differently than a major bank does, and many clients use that route as a short-term step while they rebuild. One lender’s no is not the final answer.

The stress test is a federal qualifying rule that requires borrowers to show they could still afford payments at a rate higher than the one on their contract. It applies to mortgages from federally regulated lenders and directly affects how much you may qualify to borrow. Qualifying rules are set by regulators and can change, so current figures are worth confirming through the Financial Consumer Agency of Canada.

Minimum down payments are based on the home’s purchase price: 5% on the first $500,000, 10% on the portion between $500,000 and $1.5 million, and 20% for homes purchased for $1.5 million or more. Mortgage default insurance is generally not available for homes at or above $1.5 million, so these purchases require a minimum 20% down payment. Program requirements are published by Canada Mortgage and Housing Corporation.

Mortgage default insurance protects the lender when a buyer puts down less than 20%, and the premium is usually added to the mortgage balance rather than paid up front. It is provided by CMHC, Sagen, or Canada Guaranty, and the premium rate rises as the down payment gets smaller. Ontario buyers also pay provincial sales tax on the premium at closing.

Insured mortgages are generally capped at 25 years, though first time buyers and buyers of newly built homes may qualify for 30 years. A longer amortization lowers the monthly payment and raises the total interest paid over the life of the loan. Eligibility is subject to lender qualification and approval.

Several federal and provincial measures may apply, and some can be used together. The most commonly used include:

 

  • The First Home Savings Account, which combines a tax deduction on contributions with tax free withdrawals for a qualifying purchase
  • The Home Buyers’ Plan, which allows an RRSP withdrawal of up to $60,000 per eligible buyer, repayable over time
  • The Ontario land transfer tax refund for eligible first time buyers
  • The additional City of Toronto municipal land transfer tax rebate for eligible first time buyers

 

Eligibility rules and dollar limits differ for each program and are updated periodically, so current figures should be confirmed before you budget around them.

Closing costs commonly fall between 1.5% and 4% of the purchase price, on top of the down payment. Typical items include:

 

  • Ontario land transfer tax, plus the additional municipal land transfer tax within the City of Toronto
  • Legal fees and disbursements
  • Title insurance
  • Home appraisal, if the lender requires one
  • Home inspection
  • Provincial sales tax on mortgage default insurance, if the mortgage is insured

A fixed rate holds your interest rate and payment steady for the full term, while a variable rate moves with the lender’s prime rate. Fixed suits people who want budget certainty, and variables may appeal to those comfortable with movement in exchange for potential savings. The rate types available to you also depend on your circumstances, the product, and the length of the loan.

Rates are priced to the file, not to the applicant alone. The main factors include:

 

  • Credit history and score
  • Income type, stability, and debt service ratios
  • Down payment size or available home equity
  • Property type, use, and location
  • Term length and the fixed or variable choice
  • Insured or uninsured status

 

Advertised rates reflect the strongest possible files, so the rate a specific application qualifies for may differ. The Bank of Canada policy rate influences prime and, in turn, variable rate pricing.

The term is the length of your current mortgage contract, commonly one to five years, while amortization is the total time it takes to pay the mortgage off in full. At the end of each term you renew, renegotiate, or move the mortgage to another lender. The amortization keeps running down across those successive terms.

Funding amounts are determined individually rather than by a single formula. Home equity, credit profile, income, property type, and the product being considered all factor into the number. Running your figures through the mortgage calculator gives you a starting estimate, and a full review gives you a figure you can plan around.

Refinancing replaces your existing mortgage with a new one, often to access equity, change the rate or term, or consolidate debt. It may suit homeowners funding renovations, education costs, a business, or the purchase of another property. The mortgage refinancing page walks through how the process works from application to funding.

Yes. Because mortgage rates are typically lower than credit card and unsecured loan rates, folding higher interest balances into a mortgage may reduce your total monthly payments. The trade off is that the balance becomes secured against your home and may be repaid over a longer period. Contact us to find out which rates and structures you may be eligible for.

Most homeowners need an appraisal so the lender can confirm current market value before advancing funds. Some files qualify for an automated valuation instead, depending on the property, the loan to value ratio, and the lender. We can tell you early on which path your file is likely to take.

Common uses include home renovations and repairs, education costs, debt consolidation, investment, and business needs. Lenders generally want to see a purpose connected to your broader financial position rather than discretionary spending. The acceptable list varies by product, so it is worth confirming before you apply.

A second mortgage is a separate loan registered behind your existing first mortgage, giving you access to equity without breaking your current mortgage. It can be useful when the first mortgage carries a favourable rate or a large prepayment penalty. See the home equity loans page for how borrowing limits are calculated.

Your existing lender’s renewal letter is a starting point rather than the whole market. Shopping the renewal may produce a better rate or terms that fit your plans more closely, and switching lenders at renewal is often simpler than people expect. You can sign up for a free mortgage renewal reminder so the date does not slip past you.

A prepayment penalty is the charge a lender applies when you pay out or break a mortgage before the end of the term. Fixed rate mortgages commonly use the greater of three months of interest or an interest rate differential calculation, while variable rate mortgages typically use three months of interest. Ask your current lender for the exact figure in writing before making a decision, since the amount can vary widely.

Bridge financing is short term funding that covers the gap when your new home closes before the sale of your current home completes. It lets you move forward on the purchase and repay once the sale proceeds arrive. Lenders generally require a firm sale agreement on the outgoing property, and the term is short by design.

A private mortgage is funded by an individual lender or investment group rather than a bank, with approval weighted heavily toward the property and available equity. It often suits self-employed borrowers, people rebuilding credit, or those who need funding on a short timeline. Rates and fees are higher than bank products, so it works best as a temporary step with a clear exit plan in place.

Yes. Several lenders offer programs designed for newcomers with limited Canadian credit history, and requirements differ from standard applications. Documentation such as proof of status, employment, and international credit references may be requested. Options depend on your status, income, and down payment.

The mortgage blog covers buying, renewing, refinancing, and market conditions across Toronto and the GTA in plain language. It is a good place to get oriented before a first conversation.

Yes. Getting pre-approved before you start house hunting is often the best first step. A mortgage pre-approval gives you an estimate of how much you may qualify to borrow based on your income, debts, credit history, and down payment. It can also allow you to lock in an interest rate for a limited period with many lenders, although final approval still depends on the property you choose and a full review of your application.

Yes, but timing matters. You can usually switch lenders when your mortgage comes up for renewal without paying a prepayment penalty, provided the new mortgage takes effect when your current term ends. Switching before your renewal date is also possible, but it may trigger penalties or other costs. Reviewing your options well before renewal helps you decide whether switching makes financial sense.

Many mortgages allow you to make extra payments or pay off part of your balance before the end of your term, but the amount you can repay without penalty depends on your lender and mortgage agreement. Paying off the entire mortgage before your term ends may result in a prepayment penalty. Your mortgage documents outline the specific rules and limits.

Possibly. While a higher credit score generally provides access to more lenders and better rates, a lower score does not automatically mean your application will be declined. Your income, employment, debt levels, down payment, and overall financial situation are also considered. Depending on your circumstances, alternative lenders may be an option.

Yes. Many Canadian lenders allow gifted funds to be used for a down payment, provided the money is a genuine gift and does not need to be repaid. Most lenders require a signed gift letter, and they may also ask for proof that the funds have been transferred into your account.

Yes. If you have enough equity in your current home and your finances qualify, you may be able to buy your next home before your existing property sells. In some situations, bridge financing can help cover the gap between your purchase and sale closing dates. The right option depends on your finances, timelines, and lender requirements.

There is no single income requirement for a mortgage. The amount you need depends on the home’s purchase price, your down payment, existing debts, interest rates, and lender qualification rules. Lenders look at your overall ability to comfortably manage the mortgage payments, not just your annual salary.

There is no universal minimum credit score because different lenders have different requirements. In general, borrowers with stronger credit have access to more mortgage options and lower interest rates. If your credit score is lower, you may still qualify through alternative lending solutions, depending on your overall financial profile.

Yes. You can refinance before your mortgage term expires, but doing so often results in a prepayment penalty. Many homeowners refinance early to consolidate debt, access home equity, or secure a better mortgage solution when the benefits outweigh the costs. Reviewing the numbers first helps determine whether refinancing early is worthwhile.

After you submit your application, your mortgage broker reviews your information and supporting documents before presenting your file to lenders that best fit your situation. The lender assesses your income, credit, debts, down payment, and other qualifying factors. If approved, you’ll receive a mortgage commitment outlining the terms and any conditions that must be met before your mortgage is finalized.

Approval times vary depending on your application, the lender, and how quickly required documents are provided. Some applications receive a decision within one or two business days, while more complex files may take longer. Responding promptly to document requests can help keep the process moving.

No. Reaching out for information or asking questions does not obligate you to move forward with a mortgage application. Whether you’re comparing options, renewing your mortgage, refinancing, or buying your first home, you can explore your choices before making any decisions.

Working with Karla gives you access to mortgage solutions from a wide range of Canadian lenders rather than just one financial institution. Instead of comparing lenders on your own, Karla helps identify options that fit your financial situation, explains the differences, and guides you through the application process from start to finish.

Possibly. A recent job change does not automatically prevent you from qualifying for a mortgage. Lenders consider factors such as whether your employment is full-time, your income stability, your industry, and your overall financial profile. Even if you’re in a probation period, there may still be options available depending on the lender.

Yes, many borrowers qualify for a mortgage while carrying existing debt. Lenders look at the amount of debt you have, your monthly payments, your income, and your overall debt service ratios. Having debt does not automatically disqualify you, but it can affect how much you qualify to borrow.

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