Mortgage Intelligence

Oshawa's Mortgage News Desk!


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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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Why Mortgage Before March 17?

db14142_fb_homeowners_i14759090_miIf you’re in the market for an insured mortgage, then you might want to get that mortgage before March 17.

Canada Mortgage and Housing Corporation (CMHC) is raising premiums for insuring mortgages on Canadian homes for the third time in three years. Canadian homebuyers are required to have mortgage insurance if they have less than a 20 per cent downpayment. The insurance provides protection for the lender in the case of a default.

How will it hit your wallet? The increase is not too significant for those making the minimum downpayment required. A homebuyer with a $250,000 mortgage and a 5 per cent downpayment will only pay about $5 per month more in insurance premiums.  We can calculate exactly how much the increase will mean to you if you get your mortgage approval on or after March 17.

The increases are actually more substantial for larger downpayments of 15 per cent or more. Those with 20 per cent or more downpayment aren’t required to have mortgage insurance, although it’s used by lenders that securitize their mortgages. As a result, any increased cost will likely be passed on to customers through higher rates.

Premiums are also increasing for “non-traditional” insured mortgages i.e. home buyers with borrowed downpayments, a type of mortgage downpayment that could grow in popularity as homebuyers strive to gain entry in the housing market.

The premium change will come into effect on March 17. Homebuyers will be able to access the current lower rates if they have bought a home and are approved before the March 17 deadline, even if they have a later closing date.

If you are looking to buy, get in touch with the team at MiMortgage.ca today!


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Surviving and Thriving: Your Mortgage Blueprint for 2017

blueprints

Image by courtesy of scvnest.com

Canadians are definitely talking about the housing market – what do the new mortgage rules mean, is this the right time to buy, have mortgage rates bottomed out, is a lender’s renewal offer the best available, and on and on! For many, it feels like some uncertain times ahead. Often it’s just a few sensible strategies that can help you survive and thrive in the current climate:

  1. Take care of your credit. It’s so important to have good credit behaviours so you always qualify for the best mortgage rate. Pay your bills on time. Don’t let your credit accounts exceed 50% of the credit available. Also don’t apply for a store card just to save on your purchase that day! Before you cancel any credit cards, speak to an expert and get advice.
  2. Let renters help pay your mortgage. A home with a rental suite can be a great option for homebuyers, especially if the area you love is pricey or you don’t want to buy a condo at a lower cost. It’s also a great option for existing homeowners looking to lower their mortgage payment.
  3. What’s the prepayment penalty? If you ever need to get out of your mortgage early, the right mortgage could save you thousands!  Not all lenders calculate penalties the same way, and the differences can be substantial. It helps to know which lenders have the most fair prepayment penalties and your mortgage broker will have that information at their fingertips.
  4. Choose low-interest debt. Whatever your need might be – paying down high-interest debt, funding education, a large purchase, investments, or renovations, your mortgage might be your most cost-effective financing option, if you have enough home equity.
  5. If you bought your first home in 2016 you may be able to take advantage of the $5,000 non-refundable Home Buyer Tax Credit amount, which provides up to $750 in federal tax relief.  Not sure if you qualify, just ask!
  6. Renovate over relocate? 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! We have great renovation financing options if that’s where you’re heading!
  7. Renew with your eyes open. When your lender sends out a letter suggesting you renew your mortgage at their current offer, speak to your mortgage broker, get advice.  Don’t renew with your eyes closed! This is your opportunity to negotiate the best possible deal!
  8. Speed up your mortgage pay-down. Change from monthly payments to weekly or bi-weekly payments. Or take your tax refund and put it against your mortgage principal. Your interest costs will go down with every dollar you’ve reduced on your principal.
  9. Don’t neglect your savings. In managing debt, you want to make sure you don’t need to use credit to get you through a financial emergency when your car breaks down or your washing machine quits. Make a point of setting aside a small sum every paycheque into a special emergency fund.

And lastly, it’s always a good idea to get expert mortgage advice well in advance of buying your home, and then always on an annual basis. So take the time to meet with your mortgage broker and get your blueprint for surviving and thriving in 2017.

 

 


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

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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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Real Mortgage Story for September

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Cameron and Chloe are both employed and residing in Durham region. Cameron’s two children from his previous relationship are living with the couple. Shortly after the couple got together, Chloe’s parents and brother, turned to the couple for support and ended up residing with them.

During this time, Chloe was injured at work and was unable to care for her parents. Further as a result of Chloe being off work, the couple were behind on their mortgage and utility payments. They filed for a consumer proposal but were unable to maintain payments. In addition, their home was going in to power of sale.

In an attempt to remedy their situation the couple contacted the team at MiMortgage.ca with regard to refinancing their mortgage. Through the refinance the couple were able to pay off their consumer proposal, their outstanding collections and bring utilities upto date. The terms of their mortgage were:

  • Interest rate of 8.49% for one year
  • Monthly payments of $1,167.37 (interest only)

We were able to obtain financing through a private lender. In one year, we should be able to take them to an equity lender and obtain lower interest rates. Interest only payments will enable the couple to get financially back on track and re-establish their credit.

Whatever your financial circumstances maybe, it’s worth having a conversation with the experts at MiMortgage.ca to find out the way forward for you. Contact us to speak to an expert today!

 


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Homebuying For Beginners

 A Ten Point Plan For Smart Homebuying

Contact the mimortgage.ca team today, for advice on down payment options for a home, best possible rates or for assistance with planning your finances. To get pre-approved today, apply now through our secure online website or speak to one of our agents at (866) 452-1100.


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Keep Your Water Heater In Good Working Order!

Will you be in Hot Water?

It is never a good day when you turn on the hot water tap and nothing but cold comes out. Our first thought would to be to go and check the hot water tank to make sure you do not have a new swimming pool in your basement. If the floor is all clear of any water the problem might lie within the tank.

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Image by courtesy of activerain.com

If there is water in the basement (I have had this happen when the tank rusted and leaked the water onto the floor), do not step into the basement. Any source of electricity may cause a shock. Call a Plumber right away!

Lowes Homes centers published a great Hot Water Tank maintenance blog that we hope you find helpful.

This is one time you want to stay in Hot Water!

Let “MiMortgage Team” at Mortgage Intelligence help you with a low rate solution when you are making upgrades to your home.  Apply today & save!