Mortgage Intelligence

Oshawa's Mortgage News Desk!


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Are you ready to buy a home?

There’s lots of perks for owning your own home – monthly payments you make will be towards paying off your mortgage instead of paying a landlord, build home equity, become a part of a community and you can decorate the way you want!

Here’s what you need to know, to get started..

To find out more about how much you can qualify for, get in touch with the team at MiMortgage.ca. Call us at 1 866 452-1100 to speak to an expert or apply online now!

 


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What is an interest-saving mortgage?

One of the problems in the mortgage industry is the way mortgages are advertised: usually by rate. If an online rate says 1.9%, chances are homebuyers are going to check it out.

What many don’t realize is that saving interest is what saves money over the long term, and that rate is only part of the story. On a $500,000 mortgage, a rate of 0.1% lower does not even equate to a savings of $500 a year. The right mortgage however can save you MUCH more than that.

Saving interest is the key to pounding down your debt and building your wealth. That means that – yes, we look at rate – but the real savings result from the little things you don’t see with an advertised rate: like finding the right combination of options, privileges and payment schedules to maximize your savings.

For example, drop a few hundred dollars against your mortgage principal once in a while and you could save thousands in interest and shave years off your mortgage. That’s because if you knock down the principal even a little, every dollar you pay after that will go further.

Mortgage contracts are full of devilish details that make winners and losers of Canadian homebuyers. Rates are just the lure. Generally, the lower the rate, the bigger the catch.

With more than 50 lenders – including most of the major banks – we can build you an interest-saving mortgage. Together we’ll look at:

  • Prepayment privileges: those options that can help you slam down your debt by increasing your payments and/or putting down lump sums.
  • Unless you’ll be there for good, you’ll want favourable rates and terms should you want to port your mortgage from one property to another.
  • Fees for breaking the mortgage. This is a big one: there can be substantial differences between lenders. Remember life happens. If there’s even a chance you’ll need to break your mortgage, going with a lender that has reasonable fees can save you thousands.
  • Minimizing all restrictions and fees as much as possible.

These key mortgage features don’t fit in a rate ad. And… this is where the rubber hits the road in building the right mortgage.

Catch yourself looking at low online rates? It’s time to come in for a chat with an expert at MiMortgage.ca; let’s have a conversation about building your custom interest-saving mortgage!


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Less mortgage. Higher rate. What gives?

 

Think that mortgage rates are suddenly very confusing? It’s not your imagination. New Canadian mortgage rules have changed the way lenders operate in Canada. The good news is that you’re in good hands; the team at MiMortage.ca will help you understand what’s changed, and can get you a mortgage under those rules that is right for you.

Here’s a quick explanation of what’s going on with Canadian mortgages right now.

Firstly, understand that there are different kinds of lenders: big banks, small banks, and a wide range of non-bank lenders. As a mortgage broker, of course, we work with them all. But their business models are different, and that’s a clue to what’s going on in the market.

Think about where the money comes from when your lender gives you a mortgage.  The banks – both big and small – get money from deposits. They have the ability to loan from their deposits, and hold the mortgage for the full term if they choose.  They’ve got money coming in, so they can invest in money going out: like a mortgage. It’s called “balance sheet lending”. And it comprises some – but not all – of their mortgage business.

Non-bank lenders don’t take deposits so they get their money from investors in the financial marketplace. When they fund a mortgage, they will “securitize” it, and sell it off to an investor. That process gives them their supply of funds. It’s smart business. It’s so smart, that the banks do it too for some of their mortgages.

The new mortgage rules are designed to protect the housing market and the financial well being of Canadian homeowners. But they reflect a different approach to risk, which has resulted in pricing changes, even for the best clients.

Homebuyers who are looking to borrow less than 80% of the value of their home are dream clients for a lender. But an LTV of less than 80% is a magic threshold for clients because they no longer need to pay for “default insurance”.  So lenders would purchase bulk insurance on these mortgages, which was inexpensive and kept investors happy. Last October, however, new rules made insuring these low LTV mortgages much more costly. And refinances and certain other mortgages are not even eligible for insurance anymore. Suddenly, mortgage lenders have more risk and/or higher costs.

For the mortgages that banks hold on their own balance sheets, the new rules had another wrinkle: the requirement to set aside more capital to use in case there are losses in the mortgage market. That’s money safely tucked away – and not available to invest. For a bank, that’s a lost opportunity that affects the bottom line.

You can guess the rest – any extra cost, risk or lost opportunity for the lender… are passed along to you through a higher rate.

That doesn’t mean that you are a less worthy borrower than you were a year ago. The lenders are still incredibly sound, and your perfect mortgage is still out there. Mortgage pricing is just more confusing and getting an expert from MiMortgage.ca working with you is now more important than ever!


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What is the Qualifying Rate?

In 2010 the Department of Finance introduced the Qualifying Rate to assess borrower eligibility and ensure that potential borrowers can maintain their payments should rates begin to rise. The qualifying rate is a 5-year rate published every week by the Bank of Canada, and will be higher than your actual contract rate. The Bank of Canada surveys the six major banks’ posted 5-year fixed rates every Wednesday and uses a mode average of those rates to set the official benchmark.

As a result, your lender is required to use this rate to calculate debt service ratios when reviewing mortgage applications for all insured mortgages. Prior to October, 2016, this financial “stress test” was applicable for fixed-rate mortgages with terms of 1 to 4 years and all variable-rate mortgages. Now, it also applies to fixed-rate insured mortgages of 5 years or longer, and some conventional mortgages.

Although we can find you a much better mortgage rate – you’ll still need to show you can maintain your mortgage using the higher qualifying rate. While you must “qualify” at this higher rate, your actual payments will be based on your lower mortgage contract rate.

Our goal is to provide expert advice, education and resources that homebuyers need. It’s important that you understand the terms you agree to when making what is likely your biggest purchase decision. Want to learn more about the qualifying rate and how it applies to you? Contact the team at MiMortgage.ca now. We’re here to help you!


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Mortgage rates and qualifying are so complicated now. Here’s why.

Image by courtsey of credit.com

Image by courtsey of credit.com

If you’ve been shopping for a mortgage lately, you’ll have figured out that rates seem to be all over the map and qualifying has changed. That’s because of new mortgage rules introduced October 17, 2016. Here’s what has changed:

The High-Ratio Rule (less than 20% downpayment)

  • What’s changed?If you require an insured mortgage, you must qualify for your mortgage using the Bank of Canada qualifying rate (currently 4.64%) regardless of what your actual mortgage rate will be. Although I can find you a much better mortgage rate – you’ll still need to show you can handle your mortgage using the qualifying rate. This financial “stress test” was already applicable for fixed mortgages with terms of 1 to 4 years and all variable mortgages. Now, it also applies to fixed-rate mortgages of 5 years or longer.
  • Why the new rule?The government wants to be sure borrowers can withstand any increases in mortgage rates when their mortgages come up for renewal.
  • Will your payments be higher? Payments will still be based on your much lower actual mortgage contract rate. Keep in mind that mortgage rates are expected to stay at record lows into 2020.  So this new rule isn’t costing you more. The change is in how much mortgage homebuyers can qualify for: up to 20% less. You may need to plan on purchasing a less expensive home, save up a larger downpayment, or eliminate all or most of your other debts.

The Conventional Mortgage Rule (more than 20% down/equity)

  • What’s changed? Any mortgage loans that lenders insure using portfolio insurance must now meet eligibility criteria applicable to “high ratio” mortgages, including the new qualifying stress test. This means that many types of mortgages will no longer be eligible for portfolio insurance and are now “uninsurable”, impacting rates and choice.

What’s the impact on rates?

  • Rates are now all over the map. When you compare rates, you are no longer comparing apples to apples. The mortgage pricing matrix is suddenly much more complicated.
  • Mortgages that are “uninsurable” can include rental properties and second homes, switch mortgages that move to another lender, 30-year amortizations, refinance mortgages, mortgages over $1 million, and even some conventional 5-year mortgages. These mortgages are charged a rate premium or some lenders no longer offer them. Additionally, rate premiums are often charged if it’s difficult to prove your income or you have bad credit, the property is in a rural location, you want a long rate hold, you want the best pre-payment privileges and porting flexibility, and you don’t want refinance restrictions.
  • Be wary of rates you see online, you might not qualify for them.

Without a doubt, the mortgage landscape is significantly more confusing. And Mortgage Brokers have never been more important in the home buying process.  We have access to all the lenders we need and have the experience and knowledge to get you your mortgage.  Contact the team at MiMortgage.ca at 1 866 452-1100 to speak to an expert. We’re here to help you!


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What’s up with zero downpayment? For some, it can make all the difference.

no-down-payment

Image by courtsey of erastarr.com

Many Canadians are not aware that zero down is alive and well and offered by a handful of excellent lenders to qualified borrowers. Of course, you have to wonder if zero-down can possibly make good financial sense. The answer is both yes and no.

A zero-down mortgage is not for everyone – but for well qualified homebuyers, a zero-down plan can get them into their homes faster, saving potentially thousands in rent, and providing a jump start on building wealth.

If you have excellent income and credit, and the ability to manage your mortgage payment and ongoing housing expenses comfortably within your budget, then you could be a candidate for a zero-down mortgage.  Consider that the money currently going to rent could be helping you build home equity right now, and that we continue to be in a period of historically low interest rates.

So how can you get around saving that critical minimum downpayment required to qualify for an insured mortgage? You can borrow the downpayment from a line of credit, personal loan or family member. With excellent credit and stable income, your interest rate will be fully discounted. The loan payment of course will be used in your qualifying calculation, and your mortgage insurance premium will be higher. You’ll also need to have funds set aside to cover your closing costs.

Want to learn if you qualify to purchase now without waiting, how to build your downpayment faster, or the steps you can take to improve your credit rating so you qualify for a great rate when the time comes? Contact the team at MiMortgage.ca. Let’s talk!

 


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Six financial resolutions that can change your life.

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Feeling the post-holiday financial squeeze? You’re not alone. Credit card bills remind us how much we’ve spent during the festive season. That’s why this is the perfect time to make sure you have the financial control you need to achieve your goals. Here are some strategies that can help:

  1. Kill high-interest debt. If you’re carrying large credit card balances or other high-interest debt and have enough home equity, you may be able to consolidate that debt into one low-rate mortgage. You’ll improve your cash flow, and simplify your life with one easy payment. Best of all, you can pay down your debt faster and save thousands in interest. No more running up credit cards and you’re golden.
  2. Boost your credit rating. You can improve your rating pretty quickly with a few smart moves. Always pay your bills on time. Never let your credit card balance go past the 50% mark, i.e. if you have a $5,000 card, it should never go past $2,500. That goes for any lines of credit, too. And don’t apply for store cards when you’re asked at check-out. The better your credit rating, the better the rates you can negotiate on your next mortgage.
  3. Step up your payments. If you are paying your mortgage monthly, consider changing to accelerated bi-weekly or weekly, increasing your payment amount, and putting a lump sum such as tax refund money on your mortgage principal. You can save significant interest over the life of your mortgage. Even small amounts add up.
  4. Renovate, don’t relocate. Feeling like it’s time to trade up? Consider this: the right renovation might be all it takes to turn the house you’re in, into the home of your dreams. It is almost always less expensive to renovate than to relocate! T team at MiMortgage.ca have some fantastic renovation financing options to help you improve the quality of your life while increasing the value of your home.
  5. Choose low-interest debt.  According to a recent Mortgage Professionals Canada survey, in 2016, almost 10% of homeowners had enough home equity and turned to their mortgage for low-cost financing.  The average equity take out was $47,600, which was used for renovations (31%), debt consolidation (28%), investments including second homes and rental properties (22%), and purchases or education (9%).
  6. Do NOT sleepwalk through your mortgage renewal. Be sure to get in touch when you get a renewal notice. Your renewal is your golden moment to save thousands. The team at MiMortgage.ca can help make sure you get the best possible deal!

If you’re feeling financially overwhelmed, or if there is a new purchase, refinance, or renewal in your financial future, get in touch with the team at MiMortgage.ca at 1 866 452-1100, so we can help make sure you get where you want to go.