Mortgage Intelligence

Oshawa's Mortgage News Desk!


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How to get a kitchen with your new mortgage

Canadians know that a smart home renovation can both increase their property value, and improve the way they live in their home. Putting a renovation on your high-interest credit card can wipe out the value you’re adding, and create months – or years – of financial stress. Good news, there is a better way. You may be able to get that new kitchen (or bathroom, backyard etc.) through your mortgage, typically your most cost-effective way to finance. Here’s how we can help:

PURCHASE Plus Improvements: Perfect for those looking at buying a fixer-upper, a Purchase Plus Improvements Mortgage covers the sale price of the home, plus the cost of any renovations that will increase the value of the property, up to $40,000. Then you can look at financing up to 95% of this future post-reno value. If you’ve found a house with “great bones” that can be renovated into the home of your dreams, then this is the mortgage that can make those dreams come true.

REFINANCE Plus Improvements: Tailor-made for those that don’t have enough equity to refinance, the Refinance Plus Improvements Mortgage allows you to finance up to 80% of the improved value of your home once the up to $40,000 in home improvement renovations are completed. Your lender will advance the total mortgage, pay off your existing mortgage, and instruct the solicitor to hold back the amount for the improvements. Once the lender is satisfied the renos are complete, the solicitor is instructed to release the funds for the renos. There are options we can discuss for carrying your expenditures until the funds are released. Should you have more than 20% equity in your current home, you may be able to simply do a conventional refinance and take out the equity you need.

It’s almost always better to protect your savings, keep large expenses off your credit card, and simply access funds through your mortgage. The team at MiMortgage.ca can even help structure a mortgage with features to help you pay your project off faster – for more savings. There are several steps required to complete these types of mortgages and our experts would be happy to review the process with you. Let’s make your dream a reality!

 

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Wow. All these mortgage renewals!

Is your mortgage coming up for renewal this year? If so, you’re not alone. In fact, there’s an unprecedented spike in the number of mortgages renewing in 2018! If you’re one of them, then you’ve got a perfect opportunity to potentially save thousands of dollars. Get in touch with the team at MiMortgage.ca at 1.866.452.1100 to speak to an expert now. Together we can review what your current lender is offering, and also look at the marketplace to see if it makes sense for you to take your mortgage elsewhere.


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Why Variable Rate drops are creating a surge in activity

This Spring we’re seeing lenders getting aggressive with their pricing for variable rate mortgages: a sign that lenders are fighting for market share, making it a great time to be shopping for a mortgage!

First a reminder of the difference between fixed vs variable.  Fixed rates are often well suited to first-time buyers or those who haven’t owned a home for long because they want to know with absolute certainty what their payment will be for a set number of years.  A variable mortgage has an interest rate that will move in conjunction with your lender’s Prime rate, which in turn tracks the Bank of Canada’s overnight rate, and will be expressed as “prime minus x percent.”  If the Bank of Canada raises or lowers its rate, then you’ll likely see that reflected in your mortgage payment.

Right now, lenders are shaving off those variable rate mortgage offers: creating some of the best rates we’ve seen in many months. Consider the advantages:

  1. Save big on interest. It’s true that your payments could go up if the Bank of Canada’s rate starts to move up. But it would have to go WAY up to wipe out the savings you’d get from some of the current deep “prime minus” variables being offered right now.
  2. Build a buffer. You can set up your payments at what they would be if you took the higher fixed rate, which helps you pay down your mortgage faster, and creates a financial buffer for you if rates rise later.
  3. Easier to get out. If your circumstances change and you need to get out of your mortgage – a situation that happens more frequently than people anticipate — you will appreciate the lower penalty to get out of a variable vs a fixed mortgage. You could save thousands!
  4. Lock in later. 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.

We’ve even got clients breaking their existing mortgages to take advantage of this sudden crop of very low variable rates being offered right now.

However variable rates are not for everyone. But the possibility of big savings is out there right now, and it won’t last forever. Get in touch with the team at MiMortgage.ca at 1.866.452.1100 and we can review the numbers to see if it’s something you should be taking advantage of.


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What is the Qualifying Rate?

You’re probably aware that there have been many mortgage rule changes over the last several years, and you’re almost certainly affected whether you’re an existing homeowner or first-time buyer. These rules are designed to ensure a sable long-term housing market, and to make sure Canadians can handle their debt should rates begin to rise.

As a result of the rule changes, lenders must ensure that you can handle payments at a certain qualifying rate. That rate will vary depending if your mortgage is high ratio (less than 20% equity/downpayment), or conventional (more than 20% equity/downpayment). The qualifying rate will be higher than the rate of your actual mortgage: a situation that some may find frustrating. But rest assured that your actual payments will be based on the lower mortgage contract rate that we negotiate for you.

Qualifying Rate for High Ratio Mortgages

The Department of Finance introduced the qualifying rate for high ratio mortgages in 2010. The high-ratio qualifying rate is a 5-year rate published every week by the Bank of Canada. The Bank surveys the six major banks’ posted 5-year rates every Wednesday and uses a mode average of those rates to set the official benchmark rate. Your lender is required to use this rate to calculate debt service ratios when reviewing mortgage applications for all insured high-ratio mortgages.

Qualifying Rate for Conventional Mortgages

The Office of the Superintendent of Financial Institutions (OSFI) implemented a new “stress test” or qualifying rate for conventional mortgages that went into effect January 1, 2018.  This requires federally regulated lenders to qualify all new conventional mortgages at whichever rate is higher: the benchmark rate (described above), or your actual contracted mortgage rate plus 2%.  An interesting outcome is that this qualifying rate is often higher than the rate used when qualifying high-ratio mortgages where there is less equity or downpayment.

Why the difference? One reason is simply because these rules were implemented by two different government bodies.

While mortgages have become more complex, this doesn’t mean that Canadians can’t get into their dream homes, consolidate debt, take out equity, or buy a second property. It just means that if you have an upcoming new mortgage need, we should discuss your plans as early as possible. We have access to many lenders that aren’t federally regulated and strategies that you can employ to improve your credit and ensure you are in the best situation possible when you need financing. We are here to help you so please get in touch with the experts at MiMortgage.ca at any time.


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Six reasons why a second mortgage can be a smart move

Every month, you put money against your mortgage. Over the years, thanks to all those payments (and a healthy increase in home values), you’ve built up some equity. Way to go! Sometimes, we want to be able to tap into that equity. But new mortgage rules have made it harder to refinance a mortgage. No surprise, then, that we’re seeing a jump in second mortgage financing. Here are six reasons why a second mortgage might be a smart move for you too:

  1. A second mortgage can be a great way to access available equity without having to break your first mortgage.
  2. Ability in some cases to refinance up to 85 per cent loan to value.
  3. Second mortgage interest rates can be significantly less than credit cards. You can use the second mortgage to pay off your high-interest credit card debt, which will clean up any bruised credit and get you in a better position to qualify for the best rates later.
  4. Ability to use this lower-cost financing as you see fit – pay off debt, renovations, cash flow for your business, an investment, tuition, wedding, trip, or other major expenditure.
  5. That second mortgage can help you complete your purchase if your downpayment is a little short of what you need.
  6. A second mortgage is often easier to qualify for than a secured line of credit.

The value you’ve built up in your home is a wealth-building tool, and usually the best place to borrow funds when you need them. That’s why – for a growing number of financially savvy Canadians – a second mortgage can be a smart move! Get in touch with an expert at MiMortgage.ca to find out if this is the way forward for you.


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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.