Mortgage Intelligence

Oshawa's Mortgage News Desk!


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Why early payout penalties matter now more than ever.

We are deep in the competitive spring real estate market! And we’re seeing a very interesting rate anomaly. Fixed-rate mortgages are very competitively priced and gaining in popularity, while variable-rate mortgages are looking overpriced. We’re even seeing ten-year mortgages at good rates back in the news. If the market is telling us that fixed-rate mortgages have an advantage, then be sure to look at the fine print because the devil is in the details and early payout penalties matter. 

Why? Sometimes you just need to get out of your mortgage! It’s impossible to plan for many of the things that will happen in our lives, like job loss, illness, divorce, relocation, or another personal matter. Or when much better mortgage rates become available. Your needs and the market can shift easily during the term of your mortgage and the last thing you want is a painful penalty to get out early. That’s why it’s important to consider what your early payout penalty might be before you get your mortgage. We all want to believe that none of these scenarios will transpire, but when they do, it’s a relief to have a cost-effective option to get out.

Generally, to break your mortgage, you can expect to pay the greater of either a) three months’ interest, or b) the interest-rate differential (IRD). With the IRD, your mortgage lender will want you to pay the equivalent of what they will lose by releasing you from your mortgage and lending the money at current rates.  Not all lenders calculate IRD the same way, and the differences can amount to thousands or even tens of thousands of dollars. 

Early payout penalties are particularly important to consider if you are looking at a 10-year mortgage. If you break a 10-year mortgage before 5 years, the penalty with most lenders can be substantial. If there is a chance you could break the mortgage in the first 5 years, you may not want to consider a 10-year term. 

Don’t let anyone tell you early payout penalties are “all the same”. They’re not. When choosing between mortgages, be sure to compare how the early payout penalty will be calculated. If you ever need to get out of your mortgage early, having the right mortgage could save you stress and big money. Get in touch with the team at MiMortgage.ca at 1.866.452.1100 to speak an expert now. Advice on how to avoid painful penalties is part of the service we provide to our clients every single day! 


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Purchase Plus Improvement

Found a perfect property in the perfect neighbourhood, but the property needs a bit of TLC? With a Purchase Plus Improvement mortgage, costs for renovations or upgrades over and above the purchase price can be added on to the mortgage.

For more information on purchase plus improvements, read our previous blog “This is how to buy and renovate.

Ask us how, by contacting us at 1.866.452.1100 now or visit www.davidhetti.com.


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Real Mortgage Story for May 2019

Whatever your financial circumstances, it’s worth having a conversation with your mortgage broker to find out your options. Contact us at 1.866.452.1100 to speak to expert today!


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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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What’s a monoline lender and how is it different from a bank?

We’re often asked about monoline lenders – who are they, what benefits do they offer, and how do you get access to a monoline lender anyway?

Good questions.  “Mono” means “one”.  So it’s a “one-line” lender that doesn’t do anything else except mortgage lending. They won’t be asking you to do your banking with them, or try to cross-sell you investments. They do one thing: mortgage lending. They’re an important factor in the mortgage market here in Canada because they improve consumer choice and ensure that our Banks remain competitive!

How do you access a monoline lender? Our only job is to get you the perfect mortgage – a combination of rate and features that allows you to live comfortably with your mortgage and save money in the long term. To do that, we work with most of the major banks and credit unions, private lenders, and we work with several monoline lenders. There are a few reasons why a monoline lender might be the perfect option for you.

  1. Lower penalties.  A monoline lender’s penalty to break a fixed-rate mortgage is typically much less than what Banks charge. If your circumstances change and you need to get out of your mortgage, this could save you thousands.  
  2. Easier to transfer. A mortgage with a monoline lender is registered on title as a “standard charge” rather than a “collateral charge”. That means it can be easier and cheaper to transfer your mortgage to another lender at renewal for a better deal.
  3. Great rates. Monoline lenders do not have bricks and mortar branches so they can keep their overhead costs low and focus on competitive interest rates.

Most monoline lenders are only available through mortgage brokers, which is one of the reasons so many Canadians are turning to mortgage brokers for their purchases, refinances and renewals.  Get in touch with the experts at MiMortgage.ca for a review of all your lender options for your next mortgage.  

Some of the monoline lenders we deal with – Merix, First National, MCAP, RMG, CMLS