Author Archive
Mortgage Qualifying Rates Explained
So you are looking for the best mortgage rate possible as well as how much you can afford. You are still undecided between the fixed and variable rate. Your mortgage broker tells you how much of a mortgage you can afford at the variable rate and the fixed rate.....but wait a second.....the amounts are different. Not only that, the variable rate option is a smaller mortgage amount even though the rate is less. How can that be? The answer is quite simple. When a lender qualifies you for a mortgage with a term of 5 years or greater, they use the contract rate to determine the affordability. In other words they use the rate quoted on the commitment. This is not the case for variable mortgages or terms less than 5 years. In these cases they use the MQR (Mortgage Qualifying Rate) rate which is the 5 year posted rate. So even though the quoted rate for a variable might be prime less .70% (currently 2.05%) they qualify you based on 5.49% (the current 5 year posted rate). Why do Banks use different rates to qualify my mortgage? Lenders ...
So you want to buy a rental property?
The benefits of using an experienced mortgage broker become more obvious in certain financing situations.....poor credit, new to Canada...self employed.....and finally, buying a rental property. How much of a down payment do I need? How much of the rental income can I use? Does the basement apartment need to be legal? The rules around financing a rental property can be significantly different than those that are in place for purchasing a primary residence and having access to a knowledgeable mortgage broker can certainly help. There are several different products available from various lenders and they all have specific guidelines. How Much of a Down Payment Do I Need? As of last spring you now require 20% to purchase a rental property with 1-4 units. Gone are the days of purchasing a rental property with only 5% down. If you purchased a rental property with 5% down before the new rules took affect this year, but have not yet closed on it.....you are going to have to come up with the additional 15% or risk losing the property. This mostly applies to those who purchased a new build ...
Mortgage Renewal – Don’t Accept Bank’s First Offer
I have been a loyal mortgage client with my bank for the past 5 years....they would only offer me there best rate upon renewal right? WRONG....Many Canadians believe their loyalty will translate in to preferential rates when it comes time to renew, but nothing could be further from the truth. Banks know that 85% of Canadians will sign their mortgage renewal notice without even looking around to make sure they have the best rate. Why would the bank offer their lowest rate when they can offer an inflated rate without any push back? in fact many times a stranger walking in to a bank branch looking for a mortgage will get a better rate than the long term client looking to renew. This does not have to be the case. Get in touch with your mortgage broker 3-4 months before your mortgage renews so he/she can start shopping around for the best rate. At the very least you can get a rate hold for 4 months to protect you in the case of rate increases before your actual renewal. Also take a moment to think about ...
Two Mortgage No-No’s
So you have your mortgage pre-approval or approval and you think you have a guarantee from the bank for your financing....Wrong! Most people do not realize nothing is guaranteed when it comes to mortgages and the piece of paper you have in your hand is nothing more than an outline of what the bank is willing to offer.There are a few mistakes some home buyers make that can put their financing in jeopardy:1. Shop around your mortgage or accumulate other debt. I have said it a million times, but one of the most damaging things you can do to your credit is have too many people look at your report. This raises a red flag for the lenders and gets you labeled as a "Credit Shopper".....someone who is trying to accumulate as much credit as they can. Even if you were just looking for ONE cell phone contract, but went to 4 different providers, it still is very damaging. I have had clients who have been pre-approved, but then could not get approved because they went shopping for credit.2. Make a major change to your employment situation. Try and ...
What is a Home Appraisal?
Why Do I Need a Home Appraisal? Depending on your mortgage lender and how much money you are putting down, the lender may or may not require an appraisal on the property. First, let's talk about what a home appraisal is. Your lender is giving you hundreds of thousands of dollars and wants to be confident that the asset (your home) which is securing the loan is worth what you say it is. They want to be sure if they ever need to take back your property in case of default they are going to be able to sell it for atleast enough to cover the outstanding loan and any fees incurred with repossessing the property. In most cases if you are putting down less than 20% and the mortgage is insured (via CMHC or one of the other insurers) there will not be an appraisal required. The insurer has a computer program that will verify the value of the house. In certain cases the insurer might still require an appraisal, but they will cover the cost. Appraisals are more common in cases where the client is putting ...
Mortgage Documents – What you need to provide
So you have bought your first house and now you need a mortgage. You find a qualified Mortgage Broker in your area and he gets you a great rate......what's next? Well, the lenders are going to require proof that everything you told them about yourself is true. The world would be a much simpler place if they would just take our word for it, but unfortunately life isn't that easy. But don't worry, most of the documents you need to provide are quite easy to find. Keep in mind this post is dealing with a purchase, but you will most likely need to provide the same pieces of information for mortgage refinances and renewals. Proof of Income Your income is obviously one of the main things the lender needs to feel comfortable with before they hand over their money. They want to be sure the income on your application reflects reality and you are not going to default on the mortgage. Salaried employees will need to provide a job letter from there employer as well as 1 or 2 recent pay stubs. If a large portion of your income ...
Mortgage Timeline – What you need to know
How much time do I need to complete my mortgage? One of the biggest things that most of my clients do not realize is that it takes time to get a mortgage. Contrary to to what some people believe (you know who you are) you can not walk into a bank on a Tuesday and expect to have a mortgage on Wednesday. There is a certain amount of due diligence the lender wants to to do on you and the property.....and this takes TIME. I'm going to lay out the steps and associated timeline for a mortgage below in the hopes that the small percentage of society that calls me up every week looking to fund a mortgage in 2 days will see it and take it into consideration the next time they need a mortgage. I am going to lay out the steps for purchasing a house, but it will also be approximate for refinances and switches. And of course always get your mortgage pre-approval before you go house hunting Step 1 - Approval (time to complete: 1-2 days) Once you have an accepted offer make sure ...
Is a Reverse Mortgage Right For You
If you are like most Canadians you are probably not familiar with Reverse Mortgages, let alone the possible benefits. Reverse Mortgages have been available in Canada for years, but have not been a popular solution due to the higher interest rates associated with this product and the fear of losing the equity in your home. I am going to attempt to explain how this might be a product that could help you or someone you know enjoy their retirement. First, let's talk about what made this product less than attractive in the past. Quite simply it was the interest rate. In the past you could expect to be paying 8-10% in interest. Over time this would definitely add up and significantly erode your equity in the home. The Canadian Home Income Plan became a chartered bank earlier this year giving them access to much cheaper funds. This results in you getting a rate that is currently around 4%. This now becomes a much more attractive solution. What is ...
Credit Pitfalls You Need To Know
How Can I Protect My Credit? There are a few common credit mistakes that I see people make over and over again. It is possible to never miss a payment on any of your loans and still have a poor credit score. So what is this common mistake......credit shopping. Most people do not realize that the more often your credit bureau is viewed by lenders the more damage you are doing to your credit score. How Much is Too Much? There is much debate about how often your credit can be viewed and how much time between viewings must pass in order to maintain a solid credit rating. The credit rating agencies such as Equifax and Transunion to not make this info available to the public, so it pays to use common sense. Obviously the rating agencies realize that most people will probably have their credit viewed a couple of times during the year. You can't get a cell phone or a Future Shop credit card without your ...
Take My Credit Score Poll!
[polldaddy poll=3316455]As a follow up to yesterday's post on managing credit I thought it would be interesting to see what my readers know about their own credit score. Don't worry you don't have to give any personal info, but I think it will be interesting to see how many people actually check their credit report on a frequent basis. [polldaddy poll=3316455]
