Tag Archives: mortgage

Where can I get a 5 or 10 Year Mortgage Term?

How to choose the best mortgage term and rate for your financial future

How to choose the best mortgage term and rate for your financial future

For the past 20 years mortgage rates have been falling and as a consequence, it has always been more advantageous to go with a variable rate mortgage. However, with rates at historic lows and expected to rise in the future the ground rules have changed. Mortgage debates are no longer focusing on whether to consider a fixed or variable mortgage but how long to lock in for. Five year rates are offered for as low as 2.79% versus the 10 year which are offered as low as 3.79%.

Unless you are planning on being mortgage free within the next 10 years it’s pretty much a no-brainer. With rates set to head substantially higher within the next 5 years, locking in the best fixed rate mortgage for 10 years may be a prudent thing to do as long as the mortgage is transferable and assumable.

Transferrable means if you move to another property you can transfer that same 10 year mortgage to the new property. Assumable means the mortgage can be assumed by the new buyer of your house if you no longer need the mortgage. Therefore if rates are higher at the time of sale of your house, you can offer it to the buyer to assume which would give you a huge marketing advantage over other houses on the market.

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Is bad credit the end of the world?

Bad Credit is Not the End of the World

Purchase options available to you if you have bad credit

Buying real estate with bad credit is not the end of the world, it just requires a carefully thought out plan by the investor and their mortgage agent.

Here are some common investment strategies for those who have sufficient capital to make a down payment and/or service the mortgage payments, but have damaged credit.

1. Buy owner-occupied properties with income suites

This investment strategy is great for new investors with damaged credit to build a real estate portfolio. Because these properties are partially occupied, the borrower can qualify for owner-occupied mortgages up to 90% of the property’s appraised value. Today there are more lending options for the self-employed and in the sub-prime mortgage market, which reduces the need for private financing.

These are typically residential dwellings – some are single-family dwellings with legal basement suites or multi-units up to four-plex¬es and may include vacation properties that you can rent during the different seasons.

As an owner-occupier, you have the option to convert part of the property for rental use as your credit improves. This allows you to take advantage of widely available insured renovation mortgage programs.

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How These Loans Affect Your Credit Score and Ability to Get a Mortgage

List of loans (secured and unsecured) that impacts your credit score

List of loans (secured and unsecured) that impacts your credit score

Want to get a new mortgage? Then, your credit score is a really big deal — it can make or break your mortgage payments, and ultimately determine whether or not you get the house you want.

But before we talk about credit scores, let’s talk about how loans affect your credit score. There are two types of debt: secured and unsecured. When you borrow money to buy a house, the bank can take back the house to recoup their money if you don’t pay the debt. That means the debt is secured — it’s being balanced against something that you want to keep, and gives the bank some measure of security that they’re going to be able to recover the money they’ve loaned you.

Unsecured debt, on the other hand, means the bank can’t reclaim the thing you’re buying with the borrowed money. (Credit card debt is unsecured, and so are student loans.)

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Mortgage Options for a Second Home Such as a Cottage

Financing options are different for second homes shrinking the pool of options you can afford

Financing options are different for second homes shrinking the pool of options you can afford

Here is an interesting article that was written by Susan Smith of the National Post. It outlines the pitfalls when it comes to mortgage financing for cottages. A very interesting read for those interested in the acquisition of cottage properties.

No furnace? No foundation? When it comes to buying a cottage, that could mean no financing.

City dwellers are beginning to think of ducks and docks as a respite from concrete and congestion. But unless you have the cash on hand, it’s important to understand mortgage options before you start looking for your slice of paradise.

“We like to make sure clients are fully educated so they’re not wasting their time,” says Jeremy Ridley, a Barrie, Ont.-based senior residential mortgage specialist at RBC Royal Bank. “Also that they don’t fall in love with a property that can’t be mortgaged within their means.” Preapproval is especially important, he adds, because of huge variances in location and the types of properties that are available.

RBC divides the cottage world into two categories that define financing options. “Vacation A” properties are those with permanent foundations (installed below the frost line), year-round access, a permanent heat source and potable water, whether it be from municipal services, a well or treated lake water. These properties are zoned residential and are for personal use.

“Basically, what insurers and banks want to know is that that house can sustain itself if no one is around for weeks or months at a time,” Mr. Ridley says. “In the winter, you can leave the water on and set the heat at 15 degrees. Also, because it has a permanent foundation, you’re not going to have every animal and the dog going to live under the house.” Maintained roads are also important so the property can be accessed year-round.

Qualifying for a Vacation A is similar to qualifying for a principle residence, he says. This is true even though CMHC, which provides mortgage default insurance for home buyers who put down less than 20%, no longer insures second homes. Buyers won’t notice the difference for Vacation A properties because the two big private mortgage insurers — Genworth Canada and Canada Guaranty — continue to provide the insurance.
Instead of using CMHC for approvals, Mr. Ridley says, “we’ll toggle over to the other two, so I think it’s going to be business as usual.”

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Top Strategies for Paying Off Your Mortgage Early

For a lot of people, their mortgage is their biggest monthly expense. How's how pay it off faster.

For a lot of people, their mortgage is their biggest monthly expense. How’s how pay it off faster.

A mortgage is one of the largest expenses a consumer will ever take on in their lives. That monthly payment eats a very large part of most people’s monthly budget. Imagine the options that would open up to you if that payment disappeared. You can use strategies to accelerate your mortgage payments for paying off your mortgage early. Most financially successful people have figured this out and do everything they can to destroy this expense. This is non-deductible debt, the type of debt we all need to reduce and eliminate if we want long-term financial success.

Below is a list of mortgage reduction strategies tips you can use to help remove that mortgage at a reasonable pace.

1). Never get an open mortgage at a fixed rate unless you plan on paying it off within its term.
Today’s closed mortgages generally offer 10-20% prepayment privileges, and can be obtained at a much lower rate. Open mortgages at fixed rates carry higher interest. Why pay higher interest unless you are going to exceed this 10-20% prepayment? You can always make bigger lump sum payments at renewal time with no penalty.

2). Use accelerated weekly, or bi-weekly payments.
Accelerated weekly payments are equivalent to ¼ of your monthly payment. Accelerated bi-weekly payments are equivalent to ½ your monthly payment. Both of these methods enable you to make one extra monthly payment a year – the effect of this alone reduces your amortization from 25 to less than 21 years.

3). Give your mortgage the same raise as you get each year.
If your income goes up 10%, so should your mortgage payment. This extra increase in payment will go directly towards principal repayment.

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Do Reverse Mortgages Benefit Retirees?

Seeking a lump sum loan after retirement? Is a reverse mortgage right for you?

Seeking a lump sum loan after retirement? Is a reverse mortgage right for you?

A reverse mortgage is a loan that is designed for homeowners 55 years of age and older. A reverse mortgage is secured by the equity in the home, which is the portion of the home’s value that is debt-free. It allows homeowners to obtain cash, without having to sell their home. Not all lenders offer reverse mortgages.

Unlike an ordinary mortgage, you don’t have to make any regular or lump sum payments on a reverse mortgage. Instead, the interest on your reverse mortgage accumulates, and the equity that you have in your home decreases with time. If you sell your house or your home is no longer your principal residence, you must repay the loan and any interest that has accumulated.

The loan amount can be up to 50 percent of the current value of your house. However, you must pay off any outstanding loans that are secured by your home with the funds you receive from your reverse mortgage. A breakdown of whether reverse mortgages benefit retirees:

Advantages

• You don’t have to make any regular payments on the loan.
• You can turn some of the value of your home into cash, without having to sell it.
• The money you borrow is a tax-free source of income.
• This income does not affect the Old-Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits you may be receiving.
• You maintain ownership of your home.
• You can decide how you want to receive the money. You can choose to receive:
– a lump-sum payment
– a loan to set up planned advances that provide you with a regular income, or
– a combination of these options.

Disadvantages

• Reverse mortgages are subject to higher interest rates than most other types of mortgages.
• The equity you hold in your home will decrease as the interest on your reverse mortgage accumulates over the years.
• At your death, your estate will have to repay the loan and interest in full within a limited time. The time required to settle an estate can often exceed the time allowed to repay a reverse mortgage. For full details, check with the reverse mortgage lender.
• Since the principal and interest will be repaid to the lender at your death, there will be less money in your estate to leave to your children or other heirs.
• The costs associated with a reverse mortgage are usually quite high. They can include:
– a higher interest rate than for a traditional mortgage or line of credit
– a home appraisal fee, application fee or closing fee
– a repayment penalty for selling your house or moving out within three years of obtaining a
reverse mortgage
-fees for independent legal advice.

The Canadian Home Income Plan (CHIP), which is offered by HomEquity Bank, is the main source of most reverse mortgage products that are available in Canada. You can also speak to your financial institution about other options that may meet your needs.

To determine whether you qualify for a reverse mortgage, a lender will look at the equity you have in your home. Lenders also take into account your age, the appraised value of your home, current interest rates and where you live. Usually, the older you are, the larger the loan you will be able to get.

Buying a Home – How Much Can You Afford?

Can you afford to balance the financial demands of home ownership with living expenses and retirement planning?

Can you afford to balance the financial demands of home ownership with living expenses and retirement planning?

Can you afford a home? I can bet you that a lot of people ask themselves this question over and over again. There are only two answers to this is question. It’s either a “yes” or a “no.” Let’s examine this question a bit more closer.

Throughout life we all have to make decisions. Whether its personal or professional, we find ourselves making decisions on a daily basis. For example, deciding what to make for dinner is something that is very simple. It’s a decision that is usually made on the spot and requires little to no thought. On the other hand, the decision to purchase a home can become a complicated decision and requires a significant amount of thought and planning. You have to carefully assess where you want to move and how much you are willing to spend. You have to consult with a mortgage broker and determine how much you can afford while factoring in all of your monthly and yearly expenditures. That requires a lot of work…doesn’t it?

Recently, I came across an article written by Rob Carrick of the Toronto Star. The article is titled “Can this young Toronto family really afford a house?” This is perhaps one of the most interesting articles I’ve read in some time. Carrick uses a Toronto couple as an example and carefully utilizes the information that they have given to him so as to make an informed decision as to whether or not they can afford to purchase a home.

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