Mortgage Renewal – Let Me Shop Your Mortgage Around For You!

General Victor Anasimiv 4 Aug

While most Canadians spend a lot of time and expend a lot of effort in shopping for an initial mortgage, the same is generally not the case when looking at mortgage term renewals. Omitting proper consideration at the time of renewal costs Canadians thousands of extra dollars every year.

It’s important to never accept the first rate offer that your existing lender sends to you in the mail around renewal time. Without any negotiation, simply signing up for the market rate on a renewal will unnecessarily cost you a lot of extra money on your mortgage.

It would be my pleasure to have the lenders compete for your mortgage business at renewal time to ensure you receive the best mortgage options and rate catered to your specific needs. After all, just because a lender had the best available product or rate for you when you obtained a mortgage one, three or five years ago does not mean the same holds true in today’s market.

 

With products and rates changing on an ongoing basis, you can’t possibly know what the best offering is for your unique situation without having me – a mortgage professional – do some investigating on your behalf.

It’s my job to look at every rate and product change from each lender – including banks, trust companies and credit unions – every morning to ensure I find the best deals for my clients. I also have the inside scoop on specials available through dozens of lenders thanks to the large volume of business I fund through these lenders each year.

Often times, your existing lender will send a highball renewal rate to their existing clients in the hopes that you will simply sign the renewal form and send it back. Your best bet is to come to me prior to your renewal date or forward the lender’s renewal offer to me before signing anything. That way, you can rest assure you’re getting the best possible mortgage product and rate that suits both your current and future mortgage needs.

Down Payment Options

General Victor Anasimiv 4 Aug

The main reason many renters feel they can’t afford to purchase a home has to do with saving for a down payment. But there are many solutions available today that can help first-time buyers with their down payments.

Down payment
The main reason many renters feel they can’t afford to purchase a home has to do with saving for a down payment. But there are many solutions available today that can help first-time buyers with their down payments.

Many lenders will allow for a gifted or borrowed down payment. And of those lenders that will not provide this alternative, many offer cash-back options that can be used as a down payment.

Better yet, there are programs available from some financial institutions where they will offer a “free down payment” or a “flex down”. Of course, you will end up paying about 1% more in your interest rate, but the program will help you get in the homeownership door and start accumulating equity earlier. The only catch, however, is that you must remain with the original lender for the full initial five-year term or else you’ll have to pay the down payment back.

And last year, a $5,000 increase was made to the RRSP Home Buyers’ Plan, meaning first-time homebuyers can now withdraw up to $25,000 from their RRSPs for a down payment – tax- and interest-free.

And if there’s a couple making a home purchase together, they can each withdraw up to $25,000 from their RRSPs.

 

Making an informed decision
There’s an endless amount of information available to prospective homeowners – through the Internet, friends, family members and anyone willing to voice their opinion on a given subject. What you need, therefore, is education and coaching as opposed to being bombarded with more information.

That’s why it’s important to speak to me – a mortgage professional – in order to get a pre-approval prior to setting out home shopping. This will help set your mind at ease, because many first-time buyers are overwhelmed by the financing and buying processes, and often don’t know what it truly costs to purchase a home. I can provide you with real examples that can go a long way in showing you what it really costs to buy a home in your area versus what you’re currently paying in rent.

If you’re currently paying $800 per month, for example, with that same payment (including taxes) you could afford to buy a $120,000 home. And assuming real estate values increase 2% per year over the next five years, as a new homeowner, you would have accumulated $27,000 in equity in your home. If you continue renting, however, this $27,000 has generated equity in someone else’s home.

As always, if you have any questions about down payment options or your mortgage in general, give me a call – I am here to help!

Debt Consolidation – Refinance and Save Money

General Victor Anasimiv 4 Aug

We are benefiting from one of the best mortgage environments in history. Take a look at the interest rates on mortgages these days. Now look at what you’re paying on your credit cards and other debts. You can actually power down your debt load faster by pulling together your credit cards, car loans or any other high-interest debt and rolling everything into a new or existing mortgage. This can be a great money-saving strategy.

The benefits of pooling your debt are immediate and long-lasting: improved cash flow; fewer

 

payments; a brighter credit picture; and big savings on your overall interest costs. If you have equity in your home, there is no reason to be holding large amounts of high-interest debt. The right refinancing package can help put an end to the monthly squeeze of too much credit card debt or too many loans.

I can assess your situation if you are worried about penalties associated with breaking your current mortgage. The savings each month often far outweigh any penalties:

 

  Debt Amount Monthly
Payment
Interest Rate
         
  Mortgage $203,000 $1,239.09 5.5%
Current Car Loan $20,000 $396 7.0%
situation: Credit Cards $20,000 $524 19.5%
  Total $243,000 $2,159.09  
         
  New mortgage* $250,000 $1,328.64 4.10%
After Car Loan Paid Off Zero N/A
review: Credit Cards Paid Off Zero N/A
  Total $250,000 $1,328.64  
That’s a savings of $830.45 every month!

The above chart is for illustrative purposes only. It assumes the amortization period for both mortgages is 25 years, with five-year amortizations for the car loan and credit cards. All rates are hypothetical and subject to change.

*The $250,000 mortgage includes a $7,000 fee to break the old mortgage; appraisal and legal fees are an additional cost. OAC.

 

You can either use these savings to ease your monthly cash flow or apply some of it to hammer down your debts faster than you thought possible. For instance, if you put $450 of that cash flow into your mortgage payment, you’ll reduce your amortization from 25 to 15 years!

 

As always, I’m just an e-mail or phone call away if you want to discuss debt management or anything else!

Mortgage Prepayments – Pay Your Mortgage Off Quicker

General Victor Anasimiv 4 Aug

Canadians seeking a sure-fire investment return should look no further than their mortgage. Paying it down as quickly as you can will, in most cases, result in a stellar return on your investment.

Prepayment options are worth exploring because paying down even a small amount of principal (the true cost of the mortgage loan minus the interest) has huge benefits over the life of a mortgage.

Mortgages are front-loaded when it comes to interest meaning, in the early years, most of the money you pay goes toward paying the interest on the amount you borrow as opposed to the principal.

For instance, if you borrow 95% of your home’s value, you’re paying $3 of interest for every $1 of principal you pay. So, by paying an extra $1 of principal, that’s $3 less you’ll have to pay in interest, at least in the early stages of a mortgage.

Range of Prepayment Options
There are a variety of ways to make prepayments work to pay down your mortgage faster. We can discuss your specific needs, but following are some general rules.

Most lenders allow you to make a lump-sum payment of anywhere between 10% and 25% of the value of your mortgage per year. The lump-sum payment is based on either the original amount you borrowed or the amount currently outstanding. Since mortgages decrease with each payment, it’s best to negotiate a lump-sum payment option based on the original amount you borrow. That way, if you come into an inheritance, a big bonus or save a large sum of money, you can pay down the largest amount possible.

 

Another factor to consider is when you can make a lump-sum payment. Some mortgages allow prepayments during the year, while others permit it only on the anniversary date. Still others allow you to make prepayments on the day you make your regular payment.

If you can’t pay the maximum prepayment amount, it’s still worth your while to at least make some extra payment, even if it’s a few thousand dollars each year. That will still save you thousands of dollars in interest payments.

Another prepayment option involves taking advantage of flexible payments. Most lenders allow you to increase your regular payment up to a set maximum, such as 15%, while others allow you to double up your payments.

If, for instance, you have a $1,000 per month mortgage payment and increase it by 15% to $1,150, you could shave off as much as five-and-a-half years on a $200,000 mortgage.

You can also pay off your mortgage faster by moving to a different payment schedule. Instead of making monthly payments, make them biweekly or even weekly. Using an accelerated mortgage – where you make payments every two weeks as opposed to twice a month – you actually make one extra payment in the calendar year. By paying more and paying faster, you reduce your principal earlier, which lowers the amount of interest you pay.

Another option is to round up your mortgage payment from, say, $766 to an even figure such as $800, because any extra little bit goes toward the principal.

As always, if you have any questions about prepayment options or your mortgage in general, I’m here to help!

Porting Your Mortgage

General Victor Anasimiv 4 Aug

Selling your current home and moving into a new one can be stressful enough, let alone worrying about your current mortgage and whether you’re able to carry it over to your new home.

Porting enables you to move to another property without having to lose your existing interest rate, mortgage balance and term. And, better yet, the ability to port also saves you money by avoiding early discharge penalties.

It’s important to note, however, that not all mortgages are portable. When it comes to fixed-rate mortgage products, you usually have a portability option. Lenders often use a “blended” system where your current mortgage rate stays the same on the mortgage amount ported over to the new property and the new balance is calculated using the current interest rate.

With variable-rate mortgages, on the other hand, porting is usually not available. As such, upon breaking your existing mortgage, a three-month interest penalty will be charged. This charge may or may not be reimbursed with your new mortgage.

Porting Conditions
While porting typically ensures no penalty will be charged when you sell your existing property and buy a new one, some conditions that may apply include:

 
  • Some lenders allow you to port your mortgage, but your sale and purchase have to happen on the same day. Other lenders offer a week to do this, some a month, and others up to three months.
  • Some lenders don’t allow a changed term or force you into a longer term as part of agreeing to port your mortgage.
  • Some lenders will, in fact, reimburse your entire penalty whether you are a fixed or variable borrower if you simply get a new mortgage with the same lender – replacing the one being discharged. Additionally, some lenders will even allow you to move into a brand new term of your choice and start fresh.
  • There are instances where it’s better to pay a penalty at the time of selling and get into a new term at a brand new rate that could save back your penalty over the course of the new term.

While this may sound like a complicated subject, I can explain all of your options and help you select the right mortgage based on your own specific needs.

As always, if you have any questions about porting options or your mortgage in general, I’m here to help!

Choosing The Best Mortgage Term

General Victor Anasimiv 4 Aug

Selecting the mortgage term that is right for you can be a challenging proposition for even the savviest of homebuyers, as terms typically range from six months up to 10 years.

By understanding mortgage terms and what they mean in dollars and sense, you can save the most money and choose the term that is best suited to your specific needs.

The first consideration when comparing various mortgage terms is to understand that a longer term generally means a higher corresponding interest rate. And, a shorter term generally means a lower corresponding interest rate. While this generalization may lead you to believe that a shorter term is always the preferred option, this is not always the case. Sometimes there are other factors – either in the financial markets or in your own life – that you will also have to take into consideration when selecting the length of your mortgage term.

If paying your mortgage each month places you close to the financial edge of your comfort zone, you may want to opt for a longer mortgage term, such as five or 10 years, so that you can ensure that you will be able to afford your mortgage payments should interest rates increase.

 

By the end of a five- or 10-year mortgage term, most buyers are in a better financial situation, have a lower outstanding principal balance and, should interest rates have risen throughout the course of their term, will be able to afford higher mortgage payments.

If you are shopping for a mortgage for an investment property, you will likely want to consider choosing a longer mortgage term – depending, of course, on your overall plan. This will allow you to know that the mortgage payments on the property will be steady for a long time and enable you to more accurately project your future income from the property.

As well, if you know you will not be staying in the same home for the next five or 10 years, opting for a shorter term can save you significant fees when it comes to early payout penalties.

Choosing the right mortgage term is a unique decision for each individual. By understanding your personal financial situation and your tolerance for risk, I can assist you in choosing the mortgage term that will work best for your situation.

As always, if you have any questions about mortgage terms or your mortgage in general, I’m here to help!

4 Good Reasons To Be Pre-Approved For A Mortgage

General Victor Anasimiv 22 Mar

A mortgage loan pre-qualification is the process of being pre-approved for a home mortgage loan BEFORE you make an offer to purchase.

Here are four good reasons why you should pre-qualify BEFORE you start looking:

1.  Getting pre-qualified lets you know what your top price is.  You won’t waste your time looking outside of your range.

2. You won’t go through the terrible disappointment of being rejected on a mortgage application … or having your “dream home”  pulled out from under you.

3.   Pre-qualification shows you are a serious shopper. Both your agent and the sellers will take you more seriously.  By knowing what your financial limitations are, your agent can spend more time looking for homes that “fit” instead of wasting time time showing you homes you will never qualify for.

4. You’ll save time running around after you have put in an offer.

The bottom line?  Pre-qualification makes the whole process of shopping for a new home easier!

Pre-qualifying is easy … just give me a call @ 250-338-3740.  My mission is to get you the BEST mortgage possible.

New CMHC Insured Mortgage Rules

General Victor Anasimiv 16 Feb

New CMHC Insured Mortgage Rules  

Recently, the Government of Canada announced new rules regarding CMHC mortgage insurance.

CMHC has changed its 1 to 4 unit investment (rental) product offering to reflect the new Government Guarantee Parameters.  CMHC also made changes to its policy on its Self Employed & Second Home Products

These changes are effective April 19, 2010:

Qualifying Interest Rates

• For loans with a fixed rate term of less than 5 years and for all variable rate mortgages, regardless of the term, the qualifying interest rate is the greater of the benchmark rate and the contract interest rate.

• CMHC defines the benchmark rate as the Chartered Bank – Conventional Mortgage 5-year rate that is the most recent interest rate published by the Bank of Canada.

• For loans with a fixed rate term of 5 years or more, the qualifying interest rate is the contract interest rate.

• For mortgages with Multiple Interest Rates (e.g. Multi-Component Mortgages) each component must be qualified using the applicable criteria defined above.

CMHC Refinance

• The maximum amount Canadians can withdraw in refinancing their mortgages is reduced to 90 per cent from 95 per cent of the value of their homes.

CMHC Income Property

• A 20 per cent downpayment is required for small (i.e. 1- to 4-unit) non-owner occupied residential rental properties. 

TDS Total Debt Service Ratio Formula

• CMHC will also be implementing changes to the calculation of a borrower’s Total Debt Service Ratio where rental income is included in the calculation of household gross annual income.

• Effective April 19, 2010, under the revised calculation, fifty percent (50%) of the gross rental income from the subject property may be included into the borrower’s gross annual income for the purposes of calculating the borrower’s Total Debt Service Ratio.

• Previously 80% of the gross rental income was deducted from the total household debt service cost to calculate the Total Debt Service Ratio.

• Rental income from all other rental properties will be treated the same as other non-salaried income.

CMHC Second Home

• CMHC Second Home product will only be available for 1 unit owner occupied properties.

CMHC Self Employed

• CMHC is reducing the maximum Loan to Value (LTV) for the Self-Employed Product Without Traditional Third Party Validation of Income.

• For purchase and portability transactions, the maximum LTV is being reduced from 95% to 90%; and for refinance transactions, the maximum LTV is being reduced from 90% to 85%.

• Effective April 9, 2010, self-employed borrowers who have been self-employed in the same business for more than 3 years will not be eligible under CMHC’s Self-Employed Product Without Traditional Third Party Validation of Income.

• Since commissioned income can be relatively easily substantiated, borrowers who earn income through commission will no longer be eligible for the CMHC Self-Employed Product Without Traditional Third Party Validation of Income.