Mortgage Intelligence

Oshawa's Mortgage News Desk!


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Bridge financing: what you need to know

A bridge loan is a short-term financing tool that helps you “bridge” the gap between old and new mortgages when you move from one home to another. You may be taking possession of your new home a week or two in advance of closing on your current home, either because of how your closing dates worked out, or because you want to do some renovating on your new home before you move in. Whatever the reason, bridge financing is going to be your best friend for a few weeks: making it possible to easily transition from the old to the new.

Here’s what you need to know:

  1. It’s for a specific amount, which is your home’s selling price minus your current mortgage and costs (realtor and legal fees).
  2. It’s for a short period of time e. 1 to 30 days, and your lender will want to see a firm sale agreement for your existing place, with conditions waived.
  3. Not all lenders offer bridge loans, although there are private lenders that meet this need.  Since you are working with a mortgage broker, you are in good hands: We can put together a combination of a new mortgage and bridge loan even if it’s not with the same lender.
  4. Expect to pay more. Your bridge is going to be at a higher rate than your mortgage, and will include administration fees, even when the bridge loan is with the same lender. Bridge loans from private lenders will likely have higher rates and fees, although they may offer more flexible terms.  For most homebuyers, the convenience is worth it!
  5. Plan in advance just in case. Together we’ll discuss your ability to carry two mortgages in the event that a rare worst-case scenario plays out. Your lawyer will pay out your bridge loan from the sale proceeds of your home. If for any reason the sale falls through, your lawyer will register the bridge loan as a charge on the property. And if you require a longer bridge i.e over 30 days, or for an amount over the lender’s maximum, your lender may register a charge against the property and your costs will increase

Most homebuyers say a bridge was well worth it to buy some extra time for a smooth transition. If you think you’ll need a bridge, let’s talk. Contact the team at MiMortgage.ca at 1 866 452-1100 to speak to an expert now. Our ability to offer you multiple lending options definitely works in your favour!


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Does your financial house need a good spring clean?

Wouldn’t spring cleaning be so much more gratifying if – somewhere under dusty barbecue parts and outgrown hockey skates – you found an envelope with, say, $5,000 in cash? Wouldn’t that make spring cleaning worthwhile? While you may not uncover a financial windfall when you’re cleaning the garage this spring, a little time and attention to the task of spring cleaning your financial house can be very rewarding.

Are you continuously carrying a large monthly balance on your credit cards; financial clutter that can be very costly? You may have a golden opportunity to roll this debt into a low-rate mortgage, giving you big interest cost savings, and greatly improving your monthly cash flow.

Worried about penalties? Don’t think it can make much difference? Think again. It can be as good – or better – than finding the $5,000 envelope of cash in your garage.  If you have enough equity in your home (you can’t refinance a mortgage above an 80 per cent loan to value), it’s worth taking the time to have your situation reviewed to see if you can benefit. Contact the experts at MiMortgage.ca at 1 866 452-1100 today!


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Capital gains tax: a quick primer

Leading up to the last federal budget, there was speculation that Canadians should brace for some changes in capital gains rules. That didn’t happen, and that’s good news. The sale of your principal residence for a gain is still a tax freebie.  If you are selling a property other than your principal residence, then you’ll pay tax on 50% of any gain you realize. That rate first went into effect in 1972. The inclusion rate was increased to 66.6% in 1988 and then to 75% in 1990 as part of a two-stage increase.  But it was ratcheted back down in 2000, and landed once again at the 50% rate where it has remained to today. You are now required to report the sale of your principal residence on your tax return. While still tax exempt, you may be asked to prove that it was your principal residence. If the feds do once again increase the inclusion rate, we can expect the government to provide ample advance warning to allow people to adjust their financial situations. So basically no real changes, but keep good records!

Want to find out more information on how capital gains from the sale of your residence will affect you? Speak to an extpert at MiMortgage.ca at 1 866 452-1100 now!


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Verifying Your Downpayment

If you are at the downpayment verification stage of the homebuying process, you are either looking at putting an offer in or you have already made an offer on a property. Please remember to make the offer subject to financing, so that your mortgage broker has sufficient time to obtain the necessary approval for financing. Once an approval has been granted for your mortgage, your lender will require confirmation of downpayment.

Here’s how you can show where your downpayment is coming from:

Need help with understanding how much downpayment you should put down and the required documents to show your downpayment? Contact the team at MiMortgage.ca at 1 866 452-1100 or apply online now!


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How much downpayment do I need?

If you are looking to purchase a home in Canada, the minimum downpayment requirement to purchase is 5 percent up to a purchase price of $500,000. For purchases over $500,000 but less than $1,000,000 the mortgage lending requirements changed in 2016. You are now required to have a minimum downpayment of 5 percent for the first $500,000 and 10 percent for the balance amount.

Here’s how it all works…

 

Looking to buy a home and need help with understanding the downpayment requirement and insurance premiums? It’s time to 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!