Mortgage Information
Whether you are buying your first home,
trading up to a larger home, building
your dream home, or even trading down once the
kids are out on their
own, a house is probably the single biggest
investment you will ever make.
As almost everyone who is buying a home will
need financing, they are also
interested and often need guidance on what to
look for in a mortgage and
how they can pay the least amount of interest
over the term of the
mortgage.
This site is designed to help answer
some of your questions.
To let you know how much you can afford to
spend and what your payments
will be, suggest ways to save thousands in
interest over the life of the
mortgage, and present the special programs
that some borrowers could
participate in and save from.
Mortgage Basics
What is a mortgage?
A mortgage is a loan that uses a property as security to ensure that the
debt is repaid. The borrower is referred to as the mortgagor, the
lender as the mortgagee. The actual loan amount is referred to as the
principal, and the mortgagor is expected to repay that principal,
along with interest, over the repayment period (amortization) of the
mortgage.
A mortgage can be used for financing many different things, including:
- Purchasing or constructing a new home
- Purchasing an existing home
- Refinancing to consolidate debts
- Financing a renovation
- Financing the purchase of other investments
- Financing the purchase of investment property
Since a mortgage is a fully secured form of financing, the interest you pay
is usually less than with most other types of financing. Many people
use the equity in their homes to finance the purchase of investments.
Using a Secured Line of Credit, or a fixed-rate mortgage, the interest
costs are lower, and they can even write off those interest costs
against their taxable incomes.
Mortgage Closing Costs
Now that you know what you can afford, the next step is to determine the
additional costs of the home-buying process. According to CMHC and GE
Capital, one should have, in addition to the down payment, at least
1.5% of the purchase price for closing costs (we say 2-2.5%, just to
be on the safe side). The costs vary across provinces, and for that
matter, cities.
Below you will find a brief explanation of these
costs, yet it may not include all items required specific to your
property, or the area in which you have purchased. This is a
guideline, but your lawyer can provide a fairly close estimate, and is
the best resource.
Appraisal Fee:
The appraisal provides
the lenders with a professional opinion of the market value of the
property. This cost is normally the borrower's
responsibility and it ranges as low as $200 for a drive-by appraisal
to as much as $350 for a full appraisal, and the average being $200,
plus H.S.T./G.S.T. Occasionally, the costs could be slightly higher for
larger, custom-built homes, or homes in remote parts.
Home Inspection Fee:
A professional inspection of the home, top to bottom, is for the benefit of the
buyer, therefore, that's who absorbs the cost. A typical home
inspection can cost anywhere from $250-$350, but our opinion is that
they are well worth the investment. New home buyers may not worry
about it, but a definite must for buyers purchasing properties older
than 5 years. When hiring a home inspector, make sure the inspector
has liability insurance, just in case a mistake is made.
Fire Insurance:
All mortgage lenders will require a certificate of fire insurance to be in place from the
time you take possession of the home. The amount required is generally
at least the amount of the mortgage or the replacement cost of the
home. This cost can vary on the property size and extras being
insured, as well as the insurance company and the municipality. The
cost can vary anywhere from $250-$600 for most properties.
Land Survey Fee Or Title Insurance Fee:
A recent Survey of the property is usually required by the lender, and if one is not
available, it normally costs anywhere from $600-$900 for a new survey.
In lieu of the Survey, most lenders today will accept Title Insurance,
at a much lower price of approximately $225.
Legal Costs and Disbursements:
A lawyer or notary will
charge a fee for their professional services involved in drafting the
title deed, preparing the mortgage, and conducting the various
searches. The disbursements, on the other hand, are out-of-pocket
expenses incurred, such as registrations, searches, supplies, etc.,
plus G.S.T/H.S.T.
Land Transfer Tax:
Most provinces charge a land transfer tax, payable by the purchaser,
and the amount varies from province to province. This tax is based on
the purchase price (refer to mortgage ABC's for exact calculation).
New Home Warranty:
In many provinces, new homes are covered by a new home warranty program.
The cost to the purchaser for this warranty is approximately $600 and
should the builder default or fail to build to an agreed-upon standard,
the fund will finish or repair the deficiencies.
Mortgage Application and Processing Fee:
On a high-ratio insured mortgage (mortgages above 75% of the purchase
price), the mortgage insurer (CMHC or GE Capital) charges a fee of
$165-$185 for applying and processing the file, as well as appraising
the property. On new homes, this fee drops to $75.
Closing Adjustments:
An estimate should be made for closing adjustments for bills that
the seller has prepaid such as property taxes, utility bills, and other
charges. Any bills after the closing date are the purchaser's
responsibility. Your lawyer/notary will let you know what they are
exactly once the various searches have been completed.
G.S.T./H.S.T.:
On the purchase of a newly constructed home, G.S.T/H.S.T. is payable, but make
sure you know who pays this, you or the builder. Therefore, on the offer,
the purchase price will say "Plus G.S.T/H.S.T." or "G.S.T/H.S.T. Included",
and who gets the G.S.T/H.S.T. new home rebate. A lot of builders have included this
cost into the purchase price so that the buyer does not have to come up with
that at closing. (As well, this tax is also charged on all professional fees).
Mortgage Credit Rating
Your credit rating is a measure of your credit-worthiness or in other
words, your record of borrowing and repayment. Without a credit
rating, few institutions will lend you money.
Governed by provincial laws, the credit bureau - the clearing-house of
information on consumers' use of credit - provides a credit history,
which is a list of facts about how you handle debt. This information
is gathered from financial institutions, retailers and other lenders.
Most of your credit information remains on your file for seven years.
In addition to negative information, positive information is also
reported on your file.
Here is how to build a good credit rating:
- Pay your bills promptly, especially credit cards.
- Borrow only what you need and what you can afford.
- Try to pay off loans on time and as quickly as possible.
Not only does it help your credit rating, you also save valuable interest costs.
Checking Your Credit Rating
As a consumer, it's
your right to know your credit rating. Credit can be denied based on
inaccurate or insufficient information. You may want to check your
file if you aren't sure of your credit rating, if you are refused
credit or if you plan to apply for a large amount of credit such as a
mortgage. You can get a copy of your credit report through one of the
many credit bureaus across Canada for free or for a nominal charge.
Here are some guidelines:
- Contact your local credit bureau, which you can find in the yellow pages.
- Call to find out how you can review your file. You'll be asked to provide identification to ensure the confidentiality of your file. A written report may take two to three weeks.
- If you notice any errors and can offer written proof, your file will be changed immediately. If you can't supply written proof, give the facts to the credit bureau, which will then investigate. If your facts are confirmed, your file will be updated.
- If you see an error but proof cannot be found, what happens next depends on where you live. Each province has its own legislation relating to credit bureaus. The information you are challenging may be taken off your file or a note may be added, saying the information is "in dispute".
- If an error has been corrected, the credit bureau must notify members who have inquired about you during previous months (as required by provincial law).
Dealing with a Credit Crisis?
Chances are you have a credit problem if you:
- Can't make your minimum monthly payments on your credit cards,
- Take cash advances for living expenses,
- Aren't sure how much you owe and
- Never seem to be out of debt.
Here are some tips to help you recover:
- Put away all of your credit cards.
- If you have several debts, consider consolidating them into one consumer loan. You'll save on the interest rate alone, especially if your debt is from credit cards.
- If slow payments are affecting your credit rating, consider contacting your creditors to see if you can make alternative arrangements. Be honest with your creditors. Let them know you're in difficulty and work with them to find the best way to meet your financial obligations.
- Try and figure out how you got into debt and stick to a plan to prevent it from happening again.
- Re-evaluate your spending habits and lifestyle.
- Seek the advice of a credit counselor if you can't sort things out yourself. There are several not-for-profit credit counseling agencies across Canada . An experienced counselor will sit down with you to look at your situation, discuss your options and help you develop a course of action.
- When you begin to recover financially, consider keeping only one credit card. It will be easier to track your spending and you won't have the collective credit limit to tempt you.
Mortgage Features
Choosing A Term You Can Live With
What term should you take? That's a good question. Before you look at the
issue of term specifically, there are things you should consider:
When you're looking at term and interest rates, look also at what you can
live with in terms of payment amounts, because trying to predict where
interest rates are going is a tough job. There are many forces that
affect Canadian interest rates - economic, political, domestic, and
international.
Predicting interest rates is very much a gamble and one should be prepared to
keep a close eye on the market.
Here's a suggestion: If you feel that rates are at a point you can
live with and you want to guarantee that rate as long as possible, go
with a long term (5 years, 7 years, and 10 years). If interest rates
appear to be rising, take advantage of the lower rate for as long as
possible, and remember, if you sell your property, you can take the
mortgage with you to the new property or have someone assume the
mortgage. It could prove to be a great selling feature if you have an
assumable mortgage at very low rate.
If rates appear to be falling, you can choose a shorter term (6-month
convertible or variable-rate mortgage) that offers the flexibility to
lock-in to longer term at any time, just in case the rates start going
the other way.
Fixed vs. Variable Rate Mortgages
With a fixed-rate mortgage, the interest rate is set for the term of the
mortgage so that the monthly payment of principal and interest remains
the same throughout the term. Regardless of whether rates move up or
down, you know exactly how much your payments will be and this
simplifies your personal budgeting. In a low rate climate, it is a
good idea to take a longer term, fixed-rate mortgage for protection
from upward fluctuations in interest rates.
A variable-rate mortgage (also called adjustable-rate) provides a lot of
flexibility, especially when interest rates are on their way down. The
rate is based on prime and can be adjusted monthly to reflect current
rates. Typically, the mortgage payment remains constant, but the ratio
between principal and interest fluctuates. When interest rates are
falling, you pay less interest and more principal. If rates are
rising, you pay more interest and less principal, and if they rise
substantially, the original payment may not cover both the interest
and principal. Any portion not paid is still owed, or you may be asked
to increase your monthly payment. Make sure that your variable-rate
mortgage is open or convertible to a fixed-rate mortgage at any time,
so that when rates begin to rise, you can lock-in your rate for a
specific term.
Closed and Open Mortgages - What's the Difference
An
open mortgage allows you the flexibility to repay the mortgage at any
time without penalty. Open mortgages are available in shorter terms, 6
months or 1 year only, and the interest rate is higher than closed
mortgages by as much as 1%, or more. They are normally chosen if you are
thinking of selling your home, or if expecting to pay off the whole
mortgage from the sale of another property, or an inheritance (that
would be nice).
A closed mortgage offers the security of fixed payment for terms from 6
months to 10 years. The interest rates are considerably lower than
open, and if you are not planning on any one of the above reasons,
then choose a closed mortgage. Nowadays, they offer as much as 20%
prepayment of the original principal, and that is more than most of us
can hope to prepay on a yearly basis. If one wanted to pay off the
full mortgage prior to the maturity, a penalty would be charged to
break that mortgage. The penalty is usually 3 months interest, or
interest rate differential (I.R.D. - please refer to glossary for
detailed explanation).
Buy first or sell first?
Which comes first--the purchase or the sale--is the greatest dilemma facing
homeowners planning to move-up.
If you choose to buy first, make sure the offer to purchase is
conditional on selling your current house. That way, if you sell your
house, both deals proceed; if not, the deal is off, and you won't be
stuck with two homes. Selling first though will give you considerable
peace of mind.
Knowing
how much money you'll get on the sale will help you establish a price
range for the new house. Selling first allows you to negotiate the
purchase more vigorously, too, since unconditional offers carry a lot
more weight with sellers.
Market conditions are another important consideration in deciding which route
to follow. In a seller's market, you'll probably do better selling
after you've bought, but in a buyer's market, it makes more sense to sell.
If you obtained an insured mortgage after April 1'st, 1997, the
premium you paid on the mortgage is now portable to another property
(if you closed before this date, it is not portable, meaning that if
you bought another home and your mortgage needed to be insured, you
must pay the applicable premium again.
Amortization
The Amortization Period is the number of years it would take to repay the
entire mortgage amount based on a set of fixed payments. The longer
the amortization, the more interest is paid over the life of the
mortgage. Therefore, when choosing the amortization period, careful
planning should be done to meet your cash flows. Remember, the
amortization can be easily shortened after the closing, by simply
making arrangements to increase your payments.
MORTGAGE FEATURES - To Help You Become Mortgage-Free Faster
Monthly, bi-weekly, or weekly payments?
Once you have the mortgage amount, rate and amortization period, your
monthly payment can be calculated. Now is the time to decide how often
you want to make your payments, because by selecting the right payment
frequency could literally mean thousands of dollars in savings. For
example, on a $100,000 mortgage at 8% interest, amortized over 25
years, the monthly payments would be $763.21. However, by simply
switching to bi-weekly payments (every two weeks) with payments of
$381.61 (half of the monthly payment), there would be a saving of
$30,484 in interest! Weekly payments of $190.80 will save $30,839 in
interest, and you will be mortgage free in the 19'th year.
You notice that there is very little difference between weekly and
bi-weekly payments, however. If you have other payments throughout the
month, bi-weekly may be less stressful and easier to budget. If you
are self-employed or commissioned, and your income varies greatly from
week to week, it may be easier to pay monthly and use your prepayment
privileges to knock the amortization period. Also, not all weekly and
bi-weekly payments work the same as above. Let us show you how to manage
your mortgage to your best advantage.
Prepayments - Extra Payments against Principal
This is one of the most important features to look for when you are getting
a mortgage. Having the prepayment privilege that works to your
specific needs could mean a difference of thousands of dollars over
the life of your mortgage. Although all financial institutions offer
some form of prepayment privilege, the amount and how it can be
applied varies from one to another. Some offer only up to 10%, once
per year, and on the anniversary date. Then there are others that
offer as high as 20% per year, and prepayments can be done throughout
the whole year as long as the total does not exceed 20%. Ideally, you
should work your prepayment privilege as often as possible throughout
the year. Saving aside to make that big prepayment is not the best
strategy. We have found that the small, regular prepayments will get
you quicker to that mortgage burning party (I hope we're invited).
(TIP:
Put your tax refund to good use. The average tax refund for Canadians
in 1995 was $1,000. Even this amount will pay large dividends over the
life of the mortgage)
Often times most mortgage shoppers are only looking at rates and overlooking
this interest saving feature. That is why it is important to have a mortgage
specialist make some recommendations for your specific needs. Not only can we
find you the lowest rates, we can also get you the features that will work to
your advantage.
Increase Your Regular Payment
The
secret to borrowing is borrow early in your life. The reason is that
the future value of the dollar decreases. Why we are bringing up this
fact is that when you borrow early, your payments are set. As time
goes, our incomes increase (hopefully), but our mortgage payments stay
the same, provided you locked-in to a long term, fixed mortgage.
Therefore, in the future we may be in a position to increase our
payment on the mortgage, regardless if you are paying weekly,
bi-weekly, or monthly. Any increase in payment is directly going to
pay down the mortgage, thus saving you thousands down the road due to
the effect of interest not compounding on that amount for the life of
the mortgage. Neat little feature.
Again,
this feature varies from bank to bank. Some allow increasing payment
up to 10%, and others as high as 25% per year, some up to 15% only
once in the term of the mortgage. If you increased your payments,
should the need arise, you can go back to the original payments as
well. A mortgage specialist will run a "Mortgage
Reduction" model for you and make some recommendations.
Double-Up on Payments
A few lenders will allow you to double-up on your payments, and the
extra payment goes directly in the principal. If you double-up once in
the year, you have just achieved the benefits of the weekly or
bi-weekly mortgage. This is a neat little feature for someone who
prefers the monthly payments but wants the results of the weekly and
bi-weekly payments. And some lenders allow you the flexibility to skip
a payment if you have made a double payment previously. This defeats
the purpose, but when times are tough, a neat little feature to have.
Early Renewal Option
This is a great feature to have when interest rates are on a rise. If you
are locked-in to a term and the mortgage will be maturing in months or
years down the road, and the mortgage rates are on a rise, you can
renew your mortgage before the maturity and lock-in the low rates for
a new term. You may not even have to pay anything out of pocket and
still save over the term, especially if rates move up considerably.
Portable Mortgage
If
you want to take your mortgage with you when you move, you can if your
mortgage has a clause that allows you to do that. This option allows
you to continue your savings on your lower rate if the going rates are
higher, as well as avoid any penalties if you were to break that
mortgage. If you need a larger mortgage for the new property, your
existing mortgage amount can be increased. As for the associated
costs, since a new mortgage document must be registered on title,
legal fees and normal appraisal fees would be applicable.
Assumable Mortgage
If you are moving and don't want to take your mortgage with you, or you
are selling and not buying, an assumable feature will allow the
buyer(s) of your property to take over the mortgage, providing they
meet the lender's qualifying criteria. By doing so, you will not pay
any penalties as you are not breaking the mortgage contract. In fact,
if your interest rate is lower than those available at the time, your
assumable mortgage suddenly became a great selling feature for your
property.
A word of caution here: Just because someone assumes your mortgage does
not necessarily mean you are off the hook for the responsibility. You
must get a release from the Mortgage Company to ensure that you are no
longer liable for it. Some mortgage companies automatically offer a
release, but with others, you must make the request, and do it through
your lawyer.
Mortgage
Life Insurance (optional)
Since your home is likely your single largest investment, you may want to
protect that investment. Many financial institutions offer mortgage
life insurance at an affordable and competitive price, and the
requirements for eligibility are usually quite simple to meet. If you
or your co-borrower (if you choose joint coverage) die, the insurance
company will pay off your mortgage. Also, some institutions now offer
job-loss and/or disability insurance to borrowers. The best thing to
do in making a decision about how to insure your mortgage is to have
an insurance agent work out the figures for a private term insurance
and mortgage life insurance.
Types of Mortgages
- Pre-Approved Mortgage
- Conventional Mortgage
- High-Ratio Mortgage - CMHC / GE Capital Insured
- First Mortgages
- Open Mortgages
- Closed Mortgages
- Fixed-Term Mortgages
- The Adjustable Rate (A.R.M.) Mortgage
- Secured Lines of Credit
- Equity Mortgages
- Multiple Term Mortgages
- The 6 Month Convertible Mortgage
- All-Inclusive-Mortgage (A.I.M.)
- Bridge Financing
Pre-Approved Mortgage
A Pre-Approved mortgage is a Free and
No-Obligation deal that lets you know before you go looking for your
home or signing an offer to purchase, how much you can afford to
borrow based on your qualification and personal credit rating. We'll
arrange for you the most competitive rates with longest rate guarantee
period that goes up to 120 days - if rates go higher, your rate will
not be affected, and if rates go lower, you get the lower rate. This
protection is solely responsible for savings thousands of dollars for
many people who obtained a pre-approval and the rates increased
afterwards.
Too often in the past, the mortgage was
left to the very end, but with our Online Pre-Approval or by simply
e-mailing us, we can take
care of this important process within hours. Once you are
Pre-Approved, you can confidently negotiate an offer on a home. A
seller also prefers to negotiate an offer of a purchaser who has been
pre-approved. With more lenders, lower rates, and no-cost,
no-obligation, make us your choice for your pre-approval.
Conventional Mortgage
A conventional mortgage is a loan that
does not exceed 80% of the purchase price or appraised value of the
home, whichever is less. This type of mortgage does not have to be
insured against default.
High-Ratio Mortgage - CMHC Insured / GE
Capital Insured
A high-ratio mortgage is a loan that is
above 80% and up to 95% of the purchase price or appraised value of
the home, whichever is less. These mortgages must me insured against
loss by either Canada Mortgage and Housing Corporation (CMHC), a
Federal Government Corporation, or GE Capital, a private insurer. The
premiums can be added to the mortgage amount or paid at closing, and
are as follows:
For Mortgages Up To: | 80% | No Insurance Required |
For Mortgages From: | 75.1-80% | Premium is 1.00% |
80.1-85% | Premium is 1.75% | |
85.1-90% | Premium is 2.00% | |
90.1-95% | Premium is 3.25% |
If you obtained an insured mortgage after April 1'st, 1996, the premium you paid on the mortgage is now portable to another property (if you closed before this date, it is not portable, meaning that if you bought another home and your mortgage needed to be insured, you must pay the applicable premium again.) NOTE: This insurance is for the benefit of the lender against default. It is very costly and there is another way we can arrange a mortgage for you with a low down payment. That is with a 1'st mortgage and a 2'nd mortgage. For your unique situation, it may be less costly to consider this option. Banks, on the other hand, cannot offer you this option as they cannot provide secondary financing over 75% of the purchase price or value of the property.
First Mortgages:
A First mortgage is the first debt registered against a property that is secured by a first "charge" on the property. If a default on the mortgage occurs, the first lender has first right on the property to recover the outstanding principal and interest costs, and any other costs incurred during the process. Second Mortgages: A second mortgage is a debt registered after a first mortgage has been registered. In most cases, the interest charged on the second is higher than the first, reflecting the higher risk to the lender, but over a short term, still more cost effective than paying the high cost of the CMHC/GE Capital insurance premium. They can be used to finance up to 90% of the purchase price or value of the home.
Open Mortgages
An open mortgage allows you the flexibility to repay the mortgage at any time without penalty. Open mortgages are available in shorter terms, 6 months or 1 year only, and the interest rate is higher than closed mortgages as much as 1%, or more. They are normally chosen if you are thinking of selling your home, or if you are expecting to pay off the whole mortgage from the sale of a another property, or an inheritance (that would be nice).
Closed Mortgages
A closed mortgage offers the security of fixed payments for terms from 6 months to 10 years. The interest rates are considerably lower than open, and if you are not planning on any one of the above reasons, then choose a closed mortgage. Nowadays, they offer as much as 20% prepayment of the original principal, and that is more than most of us can hope to prepay on a yearly basis. If one wanted to pay off the full mortgage prior to the maturity, a penalty would be charged to break that mortgage. The penalty is usually 3 months interest, or interest rate differential (I.R.D. - please refer to glossary for detailed explanation).
Fixed-Term Mortgages
With a fixed-rate mortgage, the interest rate is set for the term of the mortgage so that the monthly payment of principal and interest remains the same throughout the term. Regardless of whether rates move up or down, you know exactly how much your payments will be and this simplifies your personal budgeting. In a low rate climate, it is a good idea to take a longer term, fixed-rate mortgage for protection from upward fluctuations in interest rates.
The Adjustable Rate Mortgage (A.R.M.)
The Adjustable Rate Mortgage (A.R.M.) provides a lot of flexibility, especially when interest rates are on their way down. The rate is based on prime minus 0.375% and can be adjusted monthly to reflect current rates, and for the first 3 months of the mortgage, a large discount on the rate is given as a welcoming offer. Typically, the mortgage payments remain constant, but the ratio between principal and interest fluctuates. When interest rates are falling, you pay less interest and more principal. If rates are rising, you pay more interest and less principal, and if they rise substantially, the original payment may not cover both the interest and principal. Any portion not paid is still owed, or you may be asked to increase your monthly payment. This mortgage is fully convertible at any time without any cost to you, if you choose a 3 year term or greater, and offers a 20% prepayment privilege at any times throughout the year. While traditionally, banks offer variable mortgages up to 75% of the purchase price or the value of the home, we can go up to 90% with this product.
Secured Lines of Credit
Use the equity in your home that you have built up to purchase investments (where interest costs would be deductible against the earned income), finance home renovations, buy a car, or any other reasonable needs, with rates as low as prime. They can be arranged up to 75% of the purchase price or value of the home, and should you need more, we can arrange another secured line of credit as a Second mortgage up to 90%. Accessing the available credit is as simple as writing a cheque, or using the issued credit and/or debit card. You do not have to draw the money until you need it, and once you make a withdrawal, you can pay of your balance at any time or make monthly payments as low as interest only. As you pay down the balance, you have that much more available credit (revolving credit).
Being a secured product, there are the normal legal and appraisal fees that are applicable. From time to time, there are promotions where a lender will cover for part or all of these costs.
A word of caution:
Although these lines are very flexible and versatile products, great caution and care should be taken. It is very easy and very tempting to use it for everything whereas normal restraint would have been exercised, and suddenly, there are thousands of dollars more that have to be repaid.
Equity Mortgages
These are mortgages that are assessed on the equity of the home (market value minus the mortgage amount). They can be as high as 75% of the purchase price or value of the property and if more is required, we can look at a small Second mortgage. These are generally offered to applicants that do not meet the normal income and/or credit qualifying guidelines. You may have little or no income verification, self-employed, and/or your credit may be less-than-perfect.
Multiple Term Mortgages
If you wanted the lower rates of a short term mortgage but wanted the security of a long term, why not choose both. Yes, "build your own mortgage" product. You can split your mortgage in to as many as 5 parts, all having different terms, rates, and amortizations, but one total monthly payment. This way, you are spreading the risk. But, be prepared to be "hands-on" and watch the market very carefully here. This is not for everyone, as the time and stress levels are quite high.
The 6 Month Convertible Mortgage
When rates are on their way down, or you may feel that they will in the near future, a 6 month convertible mortgage offers you the short term commitment at fixed payments, with an added advantage that while within the term, the mortgage is fully convertible to a longer term from 1 year to 10 years. At the end of the 6 month period, the mortgage becomes fully open, where one can renew with the existing lender or transfer to another lender. Even though it is offered at many financial institutions, there are differences from one to the next.
All-Inclusive-Mortgage (A.I.M.)
The AIM mortgage takes care of everything automatically. For Purchases, it includes: Solicitor's legal fees and standard disbursements to close the purchase and mortgage; Title transfer; Title Insurance from LandCanada for the clients; CMHC application fee or Appraisal fee; 1% Cash-Back to cover Land Transfer Tax; Registration of Deed and Mortgage. For Refinances, it includes: Legal fees and standard disbursements to prepare and close the mortgage; Title Insurance from LandCanada; CMHC application fee or appraisal fee; 1% Cash-Back; Registration of new first mortgage; Registration of discharge of existing first and second mortgage. The minimum term available is a 5 year term.
Bridge Financing
Bridge financing refers to a special, short-term loan needed to cover the time gap when two properties, both firm sales, are involved and the closing dates don't match. The property being purchased closes before the one that was sold. There is a small set-up fee charged by the lender to have the bridge loan arranged, plus the cost of the interest as now you are carrying both properties for a short time. The rate charged on the bridge loan is about 2-3% above the bank's prime.
Mortgage Refinancing / Renewing
Refinancing
is the process that pays the existing mortgage and/or any other legal
claims against the property and sets-up a completely new mortgage(s).
There are many reasons as to why you should consider refinancing your
mortgage:
Consolidate debts:
If
your monthly bills have gotten out of control, you might be able to
refinance your home and pay them off. The advantage of doing this is
to lower your total monthly payments. You should have a mortgage
specialist review your situation and make a recommendation.
Refinance a First & Second Mortgage into a new First:
If you have two mortgages on the same property, you can combine them into
a new first mortgage, as long as the total amount does not exceed 90%
of the value of the property. If the new mortgage is over 75% of the
value of the property, normal CMHC/GE Capital premiums and guidelines
apply, and one thing to remember here is that only outstanding amounts
can be combined - any discharge penalties and costs must be paid
separately at closing (please note that we have cash-back programs to
help with these penalties).
Financing a Renovation:
If you are doing major renovations (spending over $15,000), it could be
less painful monthly with a mortgage as opposed to a loan or line of
credit.
Financing the purchase of other investments:
You can use the equity in your home to finance the purchase of
investments, and also benefit from the lower carrying costs of a
secured line of credit or mortgage and also write-off the interest
costs against the taxable incomes.
Financing the purchase of investment property:
If you have the equity and have a desire to be a landlord, you could take
equity out of your property by refinancing the mortgage to use towards
the purchase of an investment property. This is also called leveraging
of your assets.
Financing children's education:
The
best thing we can do for our children is be good role models to them,
teach them to be responsible citizens, and give them a good base with
a good education. With the high cost of many things nowadays, as well
as education, it is sometimes difficult to have that kind of money in
the bank, but you many have it in the form of equity in your home.
Education is something they will never lose on.
To refinance your mortgage today to your advantage, simply APPLY ONLINE
NOW with no obligation whatsoever.
Closing Costs related to Refinancing:
The regular costs related to the refinancing process are: appraisal
($150-$214), legal fees & disbursements ($700-$1000), title
insurance if survey not available ($225), CMHC/GE Capital Premium if
mortgage is high-ratio (this cost can be added to mortgage), PST when
CMHC/GE Capital premium is required, and any discharge penalties.
You should review your
mortgage on a regular basis and keep up with new products and offers
that are available - they may save you a bundle. When you break your
mortgage contract to renew your mortgage at a new rate and a new term,
you are faced with a prepayment charge to reimburse your financial
institution for the lost interest income. Typically, this prepayment
charge is based on the greater amount of either 3 months interest or
the interest rate differential (IRD).
Early Renewal
Whether or not you
should early-renew your mortgage depends on several factors. If the
current rates are lower than the rate you have, compare the prepayment
charge against the savings by having the lower rate, and this will
point the way. Or, if you believe that interest rates will be higher
at your existing renewal date, you can renew early to protect yourself
from higher rates.
One thing to remember
if you decide to early renew, is the prepayment charge will have to be
paid up front. If there is room, you can add it to your mortgage, but
you will have to go through a lawyer to redo the mortgage, and this
cost will have to be taken into consideration when deciding which way
to go. Some financial institutions will blend both rates for the new
term.
Remember that we have
the CASH-BACK programs that could pay for your prepayment charge. The
savings in some situations run into the thousands of dollars.
Re-examine your
mortgage from time to time, and at least once a year. There are
thousands of dollars that could be saved in many situations, but they
go unnoticed.
Switching / Renewing
When the mortgage is about to mature, most lenders will mail out their
renewal agreements around 30 days before the mortgage matures. Often,
this causes a lot of grief for many people, especially if rates start
to climb just before the mortgage comes due.
We can guarantee your rates up to 120 days (4 months) before your
mortgage comes due, and this service is free and with no obligations.
Just this protection could and has saved thousands of dollars for our
clients. Let's get it working for you, too.
When your mortgage is due for renewal, it's a great opportunity to
make sure that you've got the right mortgage for your present needs.
Since the mortgage is fully open at this time, this is the perfect
opportunity to pay down your mortgage. Whatever you can afford, even a
small amount, will have a significant impact in terms of interest you
will save over the life of the mortgage. It is also a great
opportunity at this time to consider a more frequent payment method,
such as bi-weekly or weekly, if you are not already doing it. And of
course, choosing the new term is important.
Another step you can take to save thousands of dollars in interest is
if at renewal the rates are lower than the rate you just had, and you
are comfortable with making those payments, keep the payments the same
at the lower rate and start planning for the mortgage-burning party.
Mortgage Rates
Term | 1 Year | 2 Years | 3 Years | 4 Years | 5 Years | 10 Years |
Best Rates* | 2.75% | 2.99% | 3.19% | 3.19% | 2.79% | 4.19% |
Mortgage Payment Calculator
* Rates may change at any time, are subject to client qualification and not guaranteed.
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