Mortgage Intelligence

Oshawa's Mortgage News Desk!


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Fixed or Variable-Rate Mortgage?

If you are rate shopping, you’ll notice that the lowest available rate will be for a variable mortgage, which is why we’re often asked “what does variable mean and how is it different from a fixed-rate mortgage?”

With a variable mortgage, your mortgage rate will move in conjunction with your lender’s Prime lending rate, which in turn tracks the Bank of Canada’s benchmark rate, and will typically be quoted as Prime minus a specified percentage. It can be difficult to predict our economic future so you won’t know for sure what kind of rate ups and downs might be ahead of you.

With a fixed-rate mortgage, your payments are fixed for the term of the mortgage, which offers stability.  Fixed-rates are usually better suited to first-time buyers or those who haven’t owned a home for a very long period. Ask yourself these questions: Do you like or need to know exactly what your payment is going to be over a longer period of time? Do you want to avoid the need to consistently watch rates? Do you have less than 20% down? If you answered “yes” to all or most, a fixed-rate mortgage could be the better choice for you.  

A variable-rate mortgage is best suited to people who have a flexible budget and can tolerate slightly more risk. Ask yourself these questions: Do you watch market conditions? Can you handle any rate increases that could increase your payment? Do you have more than 20% equity in your home? If you answered “yes” to all or most, a variable-rate mortgage might best suit your needs. Most variables allow you to exercise an option to “lock in” a fixed rate at any time for the remaining portion of your mortgage term or longer. You can also set up your payments at what they would be if you took the higher rate, which helps you pay down your mortgage faster, and creates a financial buffer for you if rates rise later.  

If the uncertainty of a variable rate is going to give you sleepless nights, you’re in good company. Many Canadians prefer the certainty of a fixed-rate mortgage. They know exactly how much they will pay over the term of their mortgage, and they can plan accordingly… with no financial surprises. However, lower-rate variable mortgages with a strong Prime minus offer give you the potential to save a lot on interest. And, if your circumstances change and you need to get of out of your mortgage, you will appreciate the lower penalty to get out of a variable versus a fixed-rate mortgage.  

Your best option is to get professional and personalized advice. The team of experts at MiMortgage.ca would be happy to help you determine which option is best suited to your needs. Contact us at 1.866.452.1100 to speak to an expert now.


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This is what the federal budget means for homebuyers

The recent federal budget included Housing Affordability Measures that may be applicable to your situation, now or in the future.  There are three key measures intended to help: an incentive for first-time homebuyers, an increase in the amount of RRSP funds first-time buyers can access for a downpayment, and allowing divorced individuals to use their RRSP funds under the Home Buyers Plan. Let’s take a closer look at each:

First-Time Home Buyer Incentive (available Fall 2019)

This new measure is basically a shared equity program designed to reduce mortgage payments for first-time buyers with the minimum 5% downpayment. The Canada Mortgage and Housing Corporation (CMHC) will provide 5% of the cost of an existing home, or 10% of a new home in what amounts to an interest-free loan that isn’t payable until you sell the property. The extra encouragement to purchase a newly built home is expected to boost home construction and help address a housing shortage in many areas. 

There are a few caveats. If your household income is more than $120,000, you aren’t eligible for the program. And your total borrowed amount (including the incentive portion) can’t be more than four times your household income. With a 5% downpayment and a household income of $120,000, the maximum purchase price would be approximately $505,000.

The program is expected to be launched this Fall.  We’re still waiting for some details on how the incentive is paid back, and how increases or decreases in equity will be handled.  Stay tuned! In the meantime, we can certainly run some numbers to determine if this is something you, or someone you know, may want to take advantage of later this year.  

Bolstering the Home Buyers’ Plan (available now)

The Home Buyers’ Plan (HBP) has allowed first-time buyers to withdraw up to $25,000 ($50,000 per couple) from their RRSP to help with downpayment and closing costs, without having to pay tax on the withdrawal. HBP withdrawals are not added to a person’s income when withdrawn, but instead must be repaid over a 15-year period. The budget increased the maximum withdrawal amount to $35,000 per qualified buyer, which is effective immediately.  

Divorced individuals eligible for Home Buyers’ Plan (available 2020)

The budget also proposed that those experiencing the breakdown of a marriage or common-law partnership can now participate in the Home Buyers’ Plan. This measure will be available for withdrawals made after 2019, and is great news. After all, a financial plan that starts with homeownership can help both parties make the best possible start on a new path.  

The bottom line on budget 2019? There are some good measures for some homebuyer groups that needed a boost. The new first-time buyer incentive program has certainly added another layer of complexity to the already complicated mortgage world that includes two different stress tests. Getting expert advice throughout your mortgage years is more important than ever. Got a homebuying dream? Feel free to get in touch with the experts at MiMortgage.ca for a review of your situation at any time!


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For 2018: Ten mortgage tips you won’t get from your bank

More new mortgage rules come into effect January 1, which will make it trickier to negotiate a mortgage for many Canadians. But with a little expert advice, we can help ensure you have a happy new year that keeps you on the path to prosperity for the coming year and beyond.

  1. That “best” 5-year rate? It probably isn’t. Fact is, a “best rate quote” is now meaningless, because mortgage pricing is now based on multiple factors. Everything depends on your personal situation. That’s why we start with an in-depth assessment, and then review a broad range of lenders and products for the best fit for you.
  2. Going variable and long may pay off. If you have over 20% equity, you may want to consider a 30-year amortization mortgage. Benefits can be significant and outweigh any rate premium – more purchasing power, easier mortgage qualifying, and lower payments to boost cash flow or to allow you to divert cash to build a savings buffer or use for investing. Taking a variable-rate mortgage could also improve your mortgage qualifying, then you can lock in later. Let’s discuss if these strategies might work for you.
  3. The devil is in the details. You can save thousands by making sure you get a mortgage that has a fair prepayment penalty and will also treat you fairly at renewal. Don’t end up paying exorbitant fees or be forced to take a high rate at renewal. Look deeper than rate.
  4. High-ratio insurance costs more, except when it doesn’t. While counter intuitive, lenders offer the best rates to borrowers who need mortgage insurance because they have less than 20% down. So even if you have more than 20% down and don’t need mortgage insurance, it may actually be worth purchasing. You’ll get a lower rate and better options at renewal. We can run the numbers and see if it makes sense for you.
  5. At renewal, insured mortgages are gold. Lenders love insured mortgages. If you have one, be sure to check out the competitive landscape at renewal. If you aren’t sure if your mortgage is insured or not, we can find out.
  6. No company paycheque? Start building your case. If you are self-employed, get in touch now for advice on mortgage planning for the future. We will advise you on what documentation and information you’ll need so that we can build a strong case on your behalf for lenders.
  7. Does a collateral mortgage make sense? A bank collateral mortgage is registered for more than the value of the home at closing. It can be difficult to transfer and you may find yourself locked in with that bank. Always get a second opinion!
  8. Let renters help pay your mortgage. A home with a rental suite could help you become a homeowner in that neighbourhood you love, or help you offset mortgage payments in the house you’re in.
  9. Keep good credit habits. The best rates go to borrowers with the best credit scores. Keep up good credit habits: pay your bills on time, never let your debt exceed more than 30% of your limit, and don’t be tempted to apply for store cards “to save on your purchase today”.
  10. Let’s keep a dialogue going. Wherever you are in your homeownership journey, a great conversation at any time can identify all the ways you can save thousands of dollars in interest and fees during your mortgage years.

New year. New rules. New chance to review your mortgage and wealth-building options. Get in touch with the experts at MiMortgage.ca at 1 866 452-1100 now, for a review of your situation.


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New mortgage rules start January 1, 2018.

Act now to restructure your debt.

 

By using the equity in your home to consolidate your high-interest debt into a new or existing mortgage, you can boost your monthly cashflow, pay down your debt faster and save potentially thousands of dollars in interest. Unfortunately, new mortgage rules may affect your ability to access your home equity. Act now to realize these benefits:

Consider the following example – existing mortgage, car loan and credit cards total $400,000. Roll all that debt into a new $412,000 mortgage (including a fee to break the existing mortgage) and just look at the payoff:

 MONTHLY PAYMENTS*
TOTAL DEBT CURRENT NEW
Mortgage $350,000 $1,746 $2,055
Car Loan $25,000 $517 $0
All credit cards $25,000 $650 $0
TOTAL $400,000 $2,913 $2,055

That’s $858 less each month!

If you put $500 of your monthly savings back into your mortgage payment, you’ll reduce your amortization from 25 years to 19. Or you could invest in RRSPs or RESPs and reap some tax benefits. The choice is yours.

To find out how you can lower your debt, boost your monthly cashflow and be mortgage-free quicker, before the new rules come into effect, contact the experts at MiMortgage.ca at 1 866 452-1100 today!

*3.49% mortgage, 5 yr term, 25 yr amortization. Credit cards 19.9% and car loan 9%, both 5 yr am. OAC. Subject to change. For illustration purposes only.


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Should you stress about the stress test? What you should know about new mortgage rules.

mi_stresstest

On October 3rd, Finance Minister Bill Morneau announced that new mortgage rules will include more stringent “stress testing” for borrowers.  The new rules are designed to lower debt levels, enforce some belt-tightening, and protect the housing market over the long term. Here’s how these new rules will affect Canadians.

The High-Ratio Rule (for buyers with less than 20% downpayment)
There has been a long-time rule that you must have “high-ratio mortgage insurance” if you have less than 20% downpayment.  This insurance is there to protect the lender, and the premium is almost always added to your mortgage amount.

  • 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.

That means that – although I can find you a much better mortgage rate – you’d still need to show you can handle the mortgage using the qualifying rate. This financial “stress test” was already applicable for fixed and variable mortgages with terms of 1 to 4 years.  Now, it also applies to fixed-rate mortgages of 5 years or longer.

  • Why the new rule? The government wants to be sure that borrowers can withstand any increases in mortgage rates when their mortgages come up for renewal.
  • Will my payments be higher? Your 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 potential change will be in how much mortgage you will qualify for: up to 20% less. You may need to plan on purchasing a less expensive home, or save up a larger downpayment, or ensure you eliminate all or most of your other debts.
  • Are any loans grandfathered? The new mortgage rate stress test does not apply when:
    • A mortgage loan insurance application was received before October 17, 2016;
    • The lender made a legally binding commitment to make the loan before October 17, 2016; or,
    • The borrower entered into a legally binding agreement of purchase and sale for the property against which the loan was secured before October 17, 2016.

The Conventional Mortgage Rule (with more than 20% down/equity).
Maybe you have more than 20% down or equity in your home and you are planning to purchase, renew or refinance. Since you have strong equity, you aren’t considered a “high-ratio” borrower.

  • What’s changed? Effective November 30th, 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 rental properties, properties over $1 million, and mortgages with an amortization greater than 25 years will no longer be eligible for portfolio insurance.
  • Does this mean I will have trouble getting a mortgage? Certainly not. The change will only affect certain lenders that insure or securitize these types of mortgages. I have access to a wide-range of lenders, which means I can help you find the best mortgage for your situation. But if you are thinking of refinancing, get in touch now just to be sure you lock in a low rate.

The Capital Gains Reporting Rule

Canadians love the capital gains exemption they get on their primary residence: if your home grows in value, you aren’t taxed on that growth when you sell.

  • What’s changed? Starting this tax year, the sale of a primary residence must be reported at tax time to the Canada Revenue Agency, even though all capital gains are still tax exempt.
  • Why? This new rule was designed to prevent foreign property purchasers from claiming a primary residence tax exemption to which they are not entitled.

Although there are definite regional variations, the Canadian housing market is strong. A good part of the reason for that strength is that we have had stringent mortgage requirements. Mortgage defaults in Canada continue to be very low: in spite of the ups and downs of the economy.

The new rules are aimed at ensuring home ownership continues to be a solid, long-term investment. Contact the team at MiMortgage.ca: We’ll help ensure you make the most of it!


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Who’s Got An Unbelievable 5 Yr Rate Today????

Look No Further!

Mortgage Intelligence has  5 yr fixed rates as low as 2.79%

lowest mortgage rate specialIf you need a mortgage contact us today using the handy form below or Apply now with our secure on-line application!


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Your Best Option Is Using a Mortgage Broker.

Mortgage Brokers Gain More Ground!

But don’t take our word for it! On the Go Magazine published an article expelling the reasons that wise consumers use Mortgage Brokers. Four advantages are:

$ reasons to use  a Mortgage Broker

  1. Choice of many lenders rather than just one Bank
  2. Advice of experienced brokers that can offer alternatives and complimentary financial options
  3. Service when you need it. Most Mortgage Brokers are more flexible to meet with you than a Bank
  4. Savings through their wide choice of lenders and directing you to the best mortgage to meet your financial goals.

Visit On the Go Magazine to read the entire article.

If you have used the services of a Mortgage Broker, tell us why you did?

Apply Now.

It's So Easy!

It’s So Easy!