Mortgages.ca

blog, Home Ownership, Mortgage Education

Should I Set Up a Home Equity Line of Credit?

Home equity lines of credit can be a financial lifeline when emergencies happen.

But waiting until retirement to set one up can throw homeowners a real curve-ball.

An older adult couple living in a million-dollar home called it quits on their careers after their mortgage was paid off.

They considered applying for a $600,000 home equity line of credit before retiring but decided against it in the end. They figured if they ever needed to access a large amount of cash, they could easily get it because of the equity they had in their home. A year later, they decided they wanted to spend less time in the city and more time enjoying the peace and quiet of lake life. They wanted to buy a cottage. 

Bad news came when they applied for a mortgage: their retirement income wasn’t enough to qualify. Had they secured that home equity line of credit before retiring, however, they could have used that to pay for their slice of heaven by the water.

Whether retirement is on the horizon or you have dreams of giving up corporate life for self-employment, it’s important to have the conversation with a professional about shoring up financial safety nets, including a home equity line of credit, before making the leap.

How does a home equity line of credit work?

A home equity line of credit is secured against the value of your home but approval is based on your income at the time you apply for it. 

You may never need to tap into it, but if you do, the interest rate with a home equity line of credit is better than with any credit card or unsecured line of credit. It really is the cheapest line of credit on the planet.

Paying off a home equity line of credit also comes with greater flexibility. The balance can be paid in full, unlike a mortgage, or you can choose to pay the interest only.

Home equity lines of credit also remain in place as long as you own your home.

When should you get a home equity line of credit?

Most people are never offered a home equity line of credit by their bank, but they should speak to a mortgage professional about applying for one as soon as they’ve built up equity in their home — and while they’re still earning a secure and stable salary.

The key is to be prepared for whatever life might throw your way, and that includes getting a home equity line of credit in place sooner than later regardless of career ambitions or retirement plans.

blog, Mortgage News

Getting a Mortgage During a Pandemic

Home buyers getting into the market and home owners looking to refinance wonder whether a new mortgage is possible right now.

It is, but with some caveats.

A recent first-time home buyer decided honesty was the best policy when he lost his job during the current COVID-19 crisis.

With just two weeks before the deal closed on his new home, he told his bank what happened. His parents co-signed on the mortgage and the deal moved forward, but the home buyer could have landed in serious financial trouble without that safety net.

He was at risk of losing his deposit and being sued by the sellers for money they would have lost had the deal fallen through.

Can I get a mortgage right now?

All this to say Canada’s large banks are still financing home purchases, even with an economy that’s all but halted. But they are being more conservative with their lending, says James Harrison, president and mortgage broker with mortgages.ca.

For starters, they’re no longer making exceptions on debt-service ratios and they’re eliminating discounts on prime and variable mortgages. Self-employed applicants will also have a harder time getting a mortgage with banks more thoroughly scrutinizing the industries in which they work.

Updated letters of employment are now essential for approval. Banks have started asking mortgage applicants for pay stubs up to two weeks before deals close, too, and they’re calling employers to confirm clients still have a job.

“Get your files in order,” Harrison advises. “Get your conditions met as soon as possible so there are no problems later and deals can close.”

Be prepared to wait.

Still, it will take longer for deals to be funded because banks are swamped right now. Mortgage applications were up 400 per cent when the pandemic started taking its toll economically, Harrison says.

Home buyers were taking advantage of low fixed rates at the time. Homeowners looking to refinance also jumped at lower interest offered after the Bank of Canada dropped rates.

Approval on financing can now take up to 10 days with clients waiting up to four weeks to get that cash in hand.

The key is to work with an experienced mortgage broker who can help navigate financing during these unprecedented times and get the best rates for homebuyers and homeowners in the process.

“It’s not the time to drag your feet and rate shop,” Harrison says. “Have the conversation with an experienced mortgage broker, know what’s out there and get your approval in place. Don’t be left in the dark because everything is changing so fast.”

 

blog, Home Ownership, Mortgage Education, Mortgage News

CMHC’s New Incentives for First-Time Home Buyers

Everything You Need to Know About CMHC’s New Incentives for First-Time Home Buyers

First Time Home Buyers

James Harrison, AMP
Mortgage Broker
Mortgages.ca

 

Breaking into the Canada mortgage market as a first-time homebuyer can be daunting, especially when it comes to navigating incentives, offers, and financial hurdles. Luckily, CMHC’s newest Home Buyer Incentive Plan for 2019 is full of incentives tailored perfectly for first-time homebuyers, the most important of which are broken down below:

 

Payment for Equity

As part of the latest First-Time Home Buyer Incentive Plan, CMHC will pay 5% of the purchase price for an existing home and up to 10% for the value of a new home as part of a down payment assistance program in exchange for an equity stake. This means that the Government of Canada partners with you in a Shared Equity Mortgage, taking a share of the increase (or decrease!) in the property’s market value. To qualify for this incentive, first-time homebuyers must meet a short set of criteria:

 

  • Minimum down payment amount based on mortgage amount
  • Qualifying income is $120,000 or below
  • Total mortgage is no greater than four times the qualifying income
  • Homes must be below the purchase price of $500,000

 

The government’s equity stake, otherwise referred to as a Shared Equity Mortgage, is then repaid as a percentage of the selling price, which takes into account the gain or loss in property value.

 

Taking Advantage of Your Money: RRSP Withdrawals

The Home Buyer’s Plan, a federal program that acts as a first-time homebuyer incentive, allows you to use a $35,000 RRSP withdrawal (in one year) towards your new home purchase. Making your RRSP withdrawal requires you to fill out a Home Buyers Plan Redemption Form to declare the amount that is being withdrawn, whether in a single amount or in installments. 

 

Why First-Time Homebuyer Incentives?

In today’s housing market, it can take individuals years to save up enough for the minimum down payment of 5% on a home. With the help of the First-Time Home Buyer down payment assistance incentive and the RRSP withdrawal allowance, purchasing a home can come much sooner. 

 

These incentives, developed for Canada’s real estate market and the first-time homebuyer, offer a number of benefits that help one transition into home ownership, such as: 

 

  • Purchase a home with the future in mind
  • Reduce the financial burden without delaying property purchase
  • Shared equity mortgage means interest-free down payment assistance
  • First-Time Home Buyer Incentive allows choices for repayment based on property value, not interest
  • Savings on mortgage payments of up to $3,430 per year

 

Your first home is one of the biggest, most important purchases of your life. The Government of Canada has developed a system to help first-time homebuyers comfortably acquire and pay back a mortgage, with assistance that is based on property value, rather than an established interest rate. With CMHC’s First-Time Home Buyer Incentive, buying your first home just got much easier.

 

Apply now for a mortgage with Mortgages.ca and learn more! 

blog, Home Ownership, Mortgage Education

How To Pay Down Your Mortgage Faster

Paying down your mortgage will not only lower your debt, but it will also reduce the amount of money you spend on interest.

Happy Couple Saving Money

By: Scott Nazareth
Mortgage Broker

Your mortgage is one of the biggest and longest-running debts you pay. Your monthly payments can consume a big chunk of your earnings, reducing your cash flow. Paying down your mortgage will not only lower your debt, but it will also reduce the amount of money you spend on interest.

You can pay off your mortgage fast with lower interest rate loans and short amortization terms. Amortizations can range from thirty to thirty-five years. Many homeowners opt for longer time frames to lower their regular payments, but those increase the total amount of interest paid over the life of the mortgage contract. If a short timeline is not financially viable, here are some ways you can pay off a mortgage fast.

 

Lump Sum Payments

Paying a lump sum payment on your mortgage will shorten the time it takes to pay off your loan. Whether you put extra money down monthly, quarterly or yearly, the long-term savings will be substantial.

Every year, you can pay a lump sum of up to 20% of the outstanding principal. An annual lump sum payment will not only reduce the total amount of interest you pay, but it can also shave years off of the life of your mortgage.  For example, if you paid 10% of the remaining mortgage each year for five years, you will have paid 50% of the mortgage and halved the projected amortization period.

 

Accelerated Payment Plans

If your mortgage payment schedule only includes monthly payments, consider opting for an accelerated payment plan. An accelerated payment breaks your monthly bill into smaller amounts that are withdrawn weekly or biweekly. Accelerated plans with more frequent installments reduce the interest you’d pay over time. That is the equivalent of making one extra payment each year.

 

Same Payment on Lower Interest Loans

If your mortgage renewal has a lower interest rate, request to keep your monthly installments the same as they were with your previous rate. By maintaining a consistent payment plan on a lower interest loan, you will be paying more of your mortgage without impacting your budget. That will reduce the total interest you pay and the length of your mortgage.

 

Increase Mortgage Payments

When refinancing your mortgage, ask to increase your payments rather than accept the monthly rate set by the lender. Even a small increase of $100.00 more per month will lower the total interest you pay and take years off the life of your mortgage.

A home loan is typically the biggest debt most Canadians have, taking much of your hard-earned money, especially considering the interest fees. There are many simple and highly effective measures you can take to pay off your mortgage fast. Talk with a mortgage broker about the best mortgage renewal terms as well as strategies to lower debt so that you can be debt-free sooner.  

 

To find out how you can pay off your mortgage faster, contact one of our mortgage brokers for your free consultation by clicking on our ‘Apply Now’ button, emailing us at info@mortgages.ca, or by calling #647-795-8700 ext. 0 today.

 

With Mortgages.ca, you have nothing to lose and only great INSIGHTS to gain.

blog, Home Ownership

How to Budget Closing Costs for a Home Purchase

Forgetting to budget for closing costs is one of the most common mistakes new homeowners make

 

Calculate-Closing-Costs-Calculator

 

By:
Steve Harrison,
Mortgage Broker

If you are thinking of buying a home, you’ve probably started saving for the down payment. But have you considered how much you will need to save for the closing costs? If you haven’t, you are not alone. 

What are Closing Costs?

Closing costs are all the fees you will need to pay when the sale of the home or property is finalized. Some expenses are mandatory while others are optional, but before looking for a new home, it is important to talk to a mortgage broker about all of the financial obligations that come with buying a home. Your professional mortgage broker will explain what fees you will have to pay so that you can plan your closing day budget.

Why It Is Important to Save for Closing Fees

Not planning for closing fees will create unnecessary and unwanted financial challenges. Homeowners who are unprepared for closing day fees are often surprised, frustrated, and stressed by the additional expenses they’re asked to pay. Before buying a home, ask your broker about all of the fees that you’ll have to pay in addition to the mortgage.

Financial experts recommend saving between 1.5% to 2% of your home’s total value on your final mortgage closing costs. For example, if you are planning to buy a house for $600,000.00, you will need to save between $9,000.00 to $12,000.00 for your closing costs, such as land transfer taxes and legal fees.

Mandatory Closing Costs

Mandatory costs are the fees you have to pay on the closing day, such as lawyer fees, land transfer fees, homeowner’s insurance, and mortgage insurance taxes (if applicable).

You might also be responsible for paying prorated property tax and utility bill monies to the previous owner if they have prepaid these expenses. That would be outlined by your lawyer in your statement of adjustments.

Optional Closing Day Fees

Optional mortgage fees are expenses that you might have to save for, but they are not necessities. Moving costs, some utility hookup fees, changing the locks to your new home, renovations or upgrades, purchasing household items, pest control inspections, and unexpected repairs are all considered optional closing costs.

Photo by Douglas Sheppard on Unsplash

Buying a home can be expensive from start to finish. From deposits to closing fees, home buyers must save enough money to cover all the costs associated with purchasing a property.  Speaking to a mortgage broker before you start looking for your first home can help you plan for all areas of the purchase so that you can set realistic financial goals for your home purchase.

Need Mortgage Advice?

For a free consultation, visit our website and click on the ‘Apply Now’ button. You can also contact us by email at info@mortgages.ca or by phone at 647-795-8700 x 0.

With Mortgages.ca, you have nothing to lose and only great insights to gain.

blog

Mortgage Broker vs. Bank: Which Makes Sense For Me?

Purchasing a home is one of the most exciting experiences for first-time homeowners, but it can also be quite stressful.

mortgage broker meeting

Image Credit: Nik Macmillan

James Harrison, AMP
President / Mortgage Broker
Mortgages.ca

 

There are many steps to walk through before getting the keys to your new property, and a big challenge is securing a mortgage. Traditionally, most homebuyers use their own banks to finance a home purchase. In recent years, more mortgage holders have wondered if they should renew with a bank or look at other finance options. Let’s look at why more buyers are visiting brokers instead of a bank to refinance their home loan.

 

More Lenders & Options

As the cost of home ownership rises, buyers are looking for ways to save money. Bank representatives can only give homebuyers the services and rates offered by their company. On the other hand, mortgage brokers are not working for one lender but will work with 30 or more lenders from a variety of institutions, including major banks, credit unions, trust companies, and more. Your options are far more varied when working with a mortgage broker, and they do the work of researching and vetting for you.

 

Greater Knowledge of the Industry

Banks provide many different services to their clients, and while knowledgeable, representatives are not experts on mortgages and loans. Their expertise is limited to the bank’s services, policies, and loan structures.

Brokers specialize in mortgages, so they have superior knowledge of the industry as a whole. They work with tens of lenders and have an understanding of all the loans each lender provides. A mortgage broker’s job is to find the best options for loans and mortgage renewals, and they are always keeping up with the latest industry news and trends. So you can rest assured your broker can assess your needs and match you with the best mortgages.

 

A Mortgage Broker Works for You

A bank works primarily for itself, not its customers. The services are based on the institution’s gains, not on the client’s. Bankers make sure mortgage loans will not hurt their bottom line and will limit risks at all costs.  

Mortgage brokers work for their clients. Their job is to find the deal that best suits your needs. A broker looks at your situation, including your short-term and long-term goals, then helps you find a suitable mortgage from the right lender. They will go through all the pros and cons of each agency and answer your questions to ensure you have a clear understanding of the loan and lender.

Buying real estate is one of the most significant and expensive investments you will ever make, and struggling to find the right lender can add unnecessary stress. Whether you are a first-time homebuyer or you want to refinance your existing mortgage, a mortgage broker can help you choose the right lender to meet your current and future needs.  

While most consumers went to their own bank in the past, more homeowners are seeking the help of a mortgage broker. Good mortgage brokers are experts who work to find the best deal for each client. If you’re getting a mortgage or adjusting one, research different brokerages and full-time brokers that can help you. Read reviews online or ask your friends, family, co-workers, and realtor for recommendations.

 

For more information on how a mortgage broker can help you, contact Mortgages.ca today for your free, no-obligation consultation. You can contact us by phone at 647-795-8700 x 0, by email at info@mortgages.ca, or by visiting our website and clicking ‘Apply Now’ to speak to a mortgage broker today.

With a mortgage broker, you have nothing to lose and only great INSIGHTS to gain.