7 Sep

Unlocking Home Equity: The Benefits of a Reverse Mortgage vs a HELOC

General

Posted by: Jennifer Koop

Unlocking Home Equity: The Benefits of a Reverse Mortgage vs a HELOC.

Do you need help to meet your retirement income needs? With rising inflation, accessing sufficient cashflow for your desired lifestyle can be challenging. However, with over 70% of Canadians owning their homes, tapping into home equity can be the cashflow solution you need.

Tapping into Home Equity

If you want to remain in your current home, a home equity line of credit (HELOC) and a reverse mortgage are two of the most popular ways to access your home equity.

Take out a HELOC. HELOC lenders typically allow you to access up to 65% of the value of your home. You can borrow money as needed (based on an agreed-upon amount) and are only required to make minimum monthly interest payments on the amount taken out. Unlike traditional mortgages, there is no obligation to make scheduled payments towards the line of credit, and you have the freedom to repay the line of credit at your convenience.

Get a reverse mortgage. Another way to access the equity in your home is through a reverse mortgage. If you’re a Canadian aged 55 or better, the CHIP Reverse Mortgage by HomeEquity Bank allows you to access up to 55% of your home’s value and turn it into tax-free cash. There are no monthly mortgage payments while you live in the home; the full amount only becomes due when you move or sell your home. You can receive the funds as a lump sum or in regular monthly deposits. You can use the cash for any financial needs, including health care costs, home renos, debt consolidation or lifestyle expenses.

Advantages of a reverse mortgage

One of the biggest advantages of the CHIP Reverse Mortgage is that there are no monthly payments, but there are many more! Here are some of the other benefits of the CHIP Reverse Mortgage:

  • Simplified underwriting. The proceeds of the CHIP Reverse Mortgage are not based on income but on your age and the value of your residence.
  • No need to requalify. A regular HELOC from a bank may subject the borrower to continuous credit score checks over time, affecting the ability to access a HELOC when needed.
  • Spousal impact. The death of a spouse does not affect a reverse mortgage, unlike a HELOC, which may trigger the bank to review the credit score and income of the surviving spouse.
  • Rate stability. For fixed-rate terms, the reverse mortgage rate remains locked for the term, while HELOC rates fluctuate with the Bank of Canada’s prime rate, potentially increasing borrowing costs.

Contact Jennifer Koop, your Dominion Lending Centres mortgage expert to learn how the CHIP Reverse Mortgage can help you boost your retirement income.

Published by HomeEquity Bank

Contact us today for all your mortgage needs, 705-349-0502

6 Sep

Find Your Perfect Home Type

General

Posted by: Jennifer Koop

Find Your Perfect Home Type.

When it comes to finding your perfect home, there are so many more options for potential homeowners! From a single-family dwelling to a townhouse to a modular home, the choices are seemingly endless. But, before you start widening your search, let’s take a look at what makes these home types different – and which one is perfect for you!

Single-Family Detached: These homes provide more privacy with less noise from neighbours. They also tend to be larger dwellings (complete with a yard!) which gives you the space and freedom to really make it your own. Due to the popularity of these homes, there is often high demand in them which can drive up selling prices.

Single-Family, Semi-Detached: These homes are suitable for a single family and are typically attached to another house on one side making them more affordable to both buy and maintain. With this affordability does come somewhat less privacy and protection from noise.

Duplex: These are great options for individuals looking to reduce home purchase and carrying costs – live in one unit, rent the second! This type of home also provides unique flexibility for older families, giving you the option to move adult children or aging parents into the second unit.

Townhouse or Row House: These typically have private yards but, in some cases, it may be freehold or condo-style with shared ownership rights and responsibilities. Typically more affordable to buy and maintain, however, they tend to have less privacy and noise protection as well as coming with monthly maintenance or strata fees.

Condominium: These are low- or high-rise buildings containing multiple apartment units. These units are individually owned, with shared ownership rights and responsibilities over the building and the common area. Condos are excellent starter homes for single adults, or couples, as they are affordable and require minimal maintenance. Some buildings even have shared amenities, such as a fitness center or swimming pool or party room.

Modular or Mobile Home: These types of homes are highly affordable and extremely flexible; if you relocate, you can sell the mobile home with the property or keep the home and relocate it! As these are less common and somewhat newer home types, there is less resale demand than other housing types and they are much smaller than a detached or even a condominium. If renting land in a mobile home community, there are also those costs to consider.

Finding the right home to suit your needs means considering your lifestyle and budget now, as well as where you’ll be a few years down the road. Want more information or need help deciding the best option for you? Contact Jennifer Koop, your DLC mortgage expert to learn more about your options when it comes to buying and owning a home.

Published by DLC Marketing Team

For all your mortgage needs contact us today, 705-349-0502.

15 Aug

Second Mortgages: What You Need to Know

General

Posted by: Jennifer Koop

Second Mortgages: What You Need to Know.

One of the biggest benefits to purchasing your own home is the ability to build equity in your property. This equity can come in handy down the line for refinancing, renovations, or taking out additional loans – such as a second mortgage.

What is a second mortgage?

First things first, a second mortgage refers to an additional or secondary loan taken out on a property for which you already have a mortgage. This is not the same as purchasing a second home or property and taking out a separate mortgage for that. A second mortgage is a very different product from a traditional mortgage as you are using your existing home equity to qualify for the loan and put up in case of default. Similar to a traditional mortgage, a second mortgage will also come with its own interest rate, monthly payments, set terms, closing costs and more.

Second mortgages versus refinancing

As both refinancing your existing mortgage and taking out a second mortgage can take advantage of existing home equity, it is a good idea to look at the differences between them. Firstly, a refinance is typically only done when you’re at the end of your current mortgage term so as to avoid any penalties with refinancing the mortgage.

The purpose of refinancing is often to take advantage of a lower interest rate, change your mortgage terms or, in some cases, borrow against your home equity.

When you get a second mortgage, you are able to borrow a lump sum against the equity in your current home and can use that money for whatever purpose you see fit. You can even choose to borrow in installments through a credit line and refinance your second mortgage in the future.

What are the advantages of a second mortgage?

There are several advantages when it comes to taking out a second mortgage, including:

  • The ability to access a large loan sum (in some cases, up to 90% of your home equity) which is more than you can typically borrow on other traditional loans.
  • Better interest rate than a credit card as they are a ‘secured’ form of debt.
  • You can use the money however you see fit without any caveats.

What are the disadvantages of a second mortgage?

As always, when it comes to taking out an additional loan, there are a few things to consider:

  • Interest rates tend to be higher on a second mortgage than refinancing your mortgage.
  • Additional financial pressure from carrying a second loan and another set of monthly bills.

Before looking into any additional loans, such as a secondary mortgage (or even refinancing), be sure to speak to Jennifer Koop, your DLC Mortgage Expert! Regardless of why you are considering a second mortgage, it is a good idea to get a review of your current financial situation and determine if this is the best solution before proceeding.

Contact us today for all your mortgage needs, 705-349-0202

Published by DLC Marketing Team

2 Aug

In Search of Financial Wellness?

General

Posted by: Jennifer Koop

In Search of Financial Wellness?

Financial wellness is fast becoming the latest buzzword as soaring inflation and interest rates pile the pressure on Canadians. There is a strong connection between mental health and financial health, and financial stress is taking a heavy toll. So, what exactly does it mean to be “financially well”?

Financial wellness is described as a state of well-being where an individual or a household has achieved financial stability and is able to meet their current and future financial obligations without undue stress. Financial wellness is not about being rich, having a certain amount of net worth, nor achieving a specific financial goal. Rather, it is about having a sense of security and confidence in your financial capability and being able to manage financial issues, challenges and opportunities as they arise over time.

Financial wellbeing is a function of many different factors. Income is obviously a critical element, but it also depends heavily on how well we are able to manage our money. These tasks include budgeting, managing debt, and investing and planning our retirement. The degree to which we are able to handle these tasks successfully depends on our level of personal financial literacy and our ability to make informed decisions, solve financial problems, and manage financial risk.

The heightened stress and anxiety cause by poor financial wellness has significant effects on many aspects of our life including poor job performance and relationship issues.

How do you measure financial wellness?

Financial wellness can be measured in a number of ways, but it is often a feeling rather than some sort of tangible number. A financial health assessment is a comprehensive evaluation that involves reviewing income, expenses, debt, savings, investments, insurance coverage, and other financial assets and liabilities. It identifies areas of strength and weakness and provide insights into how to improve overall financial well-being.

A financial stress tests involve evaluating an individual’s or household’s ability to withstand financial shocks or unexpected events, such as a job loss or medical emergency. Financial stress tests can help identify potential vulnerabilities in one’s financial situation and provide insights into how to build financial resilience.

Financial behavior analysis involves examining an individual’s or household’s financial behavior and decision-making processes. It can help identify patterns of behavior that may be contributing to financial stress or instability, such as overspending or not saving enough.

Overall, measuring financial wellness is a complex process that requires taking into account multiple factors and indicators. Different methods may be appropriate for different individuals or households, depending on their specific financial circumstances and goals.

How can I improve my financial wellness?

There are plenty of options for improving your financial wellness and most of them revolve around bettering your financial literacy skills to effectively tackle expenses, use credit wisely, manage debt, save money, and build long-term wealth and security through investing. Working with a financial coach or financial planner can also provide the knowledge and support needed to achieve your financial goals.

In addition to individual actions, there are also broader solutions that can support financial wellness at the societal level. These may include policies that promote income equality, affordable housing, and access to financial services, as well as financial education in schools and employee financial wellness programs.

2023 is shaping up to be another tough year financially for Canadians and financial wellness will continue to be elusive, especially if your financial literacy is lacking. The good news is there are a lot of resources available and many of them are free or low-cost. The largest hurdle for most of us is willpower and maintaining our motivation — achieving financial wellness is not a sprint. It can be a time-consuming, slow process and you may not see the results from your efforts until many months or many years down the road!

Published by DLC Marketing Team

Contact us today for all your mortgage needs 705-349-0502

6 Jul

10 Questions to Ask Your Home Inspector

General

Posted by: Jennifer Koop

10 Questions to Ask Your Home Inspector.

While home inspections might not be the most exciting part of your home buying journey, they are extremely important and can save you money and a major headache in the long run.

In a competitive housing market, there can sometimes be pressure to make an offer right away without conditions. However, no matter how competitive a market may be, you should never skip out on things designed for buyer protection – such as a home inspection.

You may have a good eye for décor and love the layout of your potential new home, but what is under the surface is typically where headaches can lie. We have all heard the expression “don’t judge a book by its cover” so why would you make the most important purchase in your life without checking it out?

Below are a few key questions you can ask your home inspector to ensure that you are getting a complete and thorough inspection:

  1. Can I see your licence/professional credentials and proof of insurance?
  2. How many years of experience do you have as a home inspector?
    • Note: Make sure they’re talking specifically about home inspection and not just how much experience they have in a single trade.
  3. How many inspections have you personally completed?
  4. What qualifications and training do you have? Are you a member of a professional organization? What’s your background – construction, engineering, plumbing, etc?
  5. Can I see some references?
    • Note: Don’t just ask for references, be sure to follow up with them. Ask the clients how they felt about the home inspection, did any issues crop up down the line that they were not made aware of, etc.
  6. What kind of report do you provide? Do you take photos of the house and specific problem areas (if any) and include them in your report?
  7. What kind of tools do you use during your inspection?
  8. Can you give me an idea of what kind of repairs the house may need?
    • Note: Be hesitant if they offer to fix the issue themselves or are willing to recommend someone cheap. Home renovations and repairs are one area you should never skimp on.
  9. When do you typically do the inspections?
    • Note: Ideally you want a home inspector operating full-time and can view the house during the day to inspect all areas, especially the roof.
  10. How long do your inspections usually take?

While hiring a home inspector may seem daunting, it will be the best few hundred dollars you ever spend. There is no price on peace of mind!

Published by DLC Marketing Team

Contact us today for all your mortgage needs, 705-349-0502

28 Jun

Don’t Be House Poor

General

Posted by: Jennifer Koop

Don’t Be House Poor.

Having the biggest and best home on the block sounds great – but not if it is at the expense of your life and monthly finances! Be smart about your budget and avoid buying a home at the very top of your pre-approval value, which might lead to cash flow issues and being “house poor” down the line.

Home Expenses

When it comes to your home, it is more than just your purchase price and mortgage cost. While you might be able to afford to buy a $800,000 home, can you also afford the maintenance, property taxes, utilities and more?

When it comes to your home expenses and overall monthly budget, the goal is that the costs to maintain your home do not exceed 35% of your total monthly income.

Monthly Budget

To help you keep track of your finances, consider breaking up your monthly budget into the following categories:

  • Housing – mortgage payments, property taxes, utilities, etc.
  • Transit – car payments or transit passes, gas, maintenance, etc.
  • Debt – payments to credit cards, lines of credit, etc.
  • Savings – your long-term savings for retirement, etc.
  • Life – food, vacations, fun, medical, childcare, etc.

From there, you would want to look at how much you spend on each category. The below is a good rule of thumb:

  • Housing – 35% of your monthly income
  • Transit – 15% of your monthly income.
  • Debt – 15% of your monthly income
  • Savings – 10% of your monthly income
  • Life – 25% of your monthly income

By spending too much on housing, you are forced to sacrifice in other areas of spending such as your life or savings, but it is better to be life RICH than house POOR.

If you’re not sure what you should budget for your new home, or have questions about making your home costs more affordable (such as changing your mortgage payments), please don’t hesitate to reach out to Jennifer Koop, your Dominion Lending Centres expert today!

Published by DLC Marketing Team

For all your mortgage needs contact us today, 705-349-0502.

27 Jun

Top 8 Questions About Reverse Mortgages

General

Posted by: Jennifer Koop

Top 8 Questions About Reverse Mortgages.

Written by Mich Sneddon, CPA, CA – Reverse Mortgage Pros

Having completed dozens of reverse mortgage deals, there are some questions that I find I get over and over again.
So today I thought I’d write a piece on the 8 most common reverse mortgage questions that people in Canada have regarding reverse mortgages.

1. if i have an existing mortgage on the property, can i get a reverse mortgage?

Not only is this the most common question regarding reverse mortgages, it is actually one of the most common uses for a reverse mortgage – to pay off the current mortgage and eliminate that payment and help with monthly cash flow. However, it is important to realize that you would need to qualify for enough to pay that existing mortgage in full.

For example: If you have $70,000 remaining on the mortgage, you would need to qualify for at least $70,000 to be eligible for a reverse mortgage. If you owe $70,000 and qualify for $100,000 in reverse mortgage funds, the $70,000 would be paid first and you would be left with the remaining $30,000.

The good news is that the reverse mortgage funds can also be used to pay any penalties or charges for paying out your mortgage as well. However, the existing mortgage must always be paid off using the reverse mortgage funds and you get to keep whatever is left. Essentially, you are swapping your mortgage with a reverse mortgage and keeping the excess cash.

2. can i pay the interest or make payments on the amount i receive?

Yes, you can make monthly interest payment if you choose and you can also pay up to 10% of the amount borrowed (1 payment per year) if you wish.

However, you also have the option to pay nothing at all until you sell the property or until you pass away. Most people choose this option but it is nice to know that you can pay the interest every month (essentially turn the reverse mortgage into the same thing as a Home Equity Line Of Credit).

3. how do you determine how much i qualify for? i thought i could get 55% of my home value?

This is a common question that we get. It is important to note that you can qualify for up to 55% of the value of the property and not everyone will get this amount. The words ‘up to’ are very important in this statement.

To determine how much you qualify for, four different factors are used: The ages of all applicants, the property value, the property location (postal code) and the property type.

Here is a quick example for all 4 factors: Someone aged 80 will qualify for more than someone aged 60; someone in a city will qualify for more than someone in the countryside; someone with a property value of $500,000 will qualify for more than someone whose value is $200,000 and someone who lives in a detached house will usually qualify for more than someone who lives in a Condo.

4. i’m 60 but my wife is 53, can we still qualify?

Unfortunately, no. Both applicants need to be 55 or over to qualify. Even if just one of you is on the title, because it is deemed a ‘matrimonial home’ (meaning that the husband and wife both have a legal right to the home, by nature of being married) both of you need to be 55 or over.

5. what is involved in the application?

Reverse mortgages aren’t as difficult a process to go through as a traditional mortgage. However, you aren’t going to simply be given the money either – remember you are still talking about large amounts of money here and the lender is a Schedule A bank.

Your credit score and income are not usually significant factors in the application – but the lender will still check these. In addition to this, proof of identity and other such paperwork is required.

An appraisal is always required and is the first step – so the lender can identify the market value of your home and therefore how much they can lend. However, it is possible to get a ‘quote’ before this.

6. what if i want to sell my home?

You can sell your house at any time if you have a reverse mortgage. The mortgage amount (plus any accrued interest and prepayment penalties, if any) would then be paid from the proceeds of the sale. The process would be exactly the same as if you had any other kind of mortgage or HELOC on the property.

7. will i still own my home?

Yes, you will remain on the title for as long as you or your spouse live in the property and you can never be forced out of your home because of a reverse mortgage. In fact, from this point of view a reverse mortgage is ‘safer’ than a traditional mortgage. Under a traditional mortgage, you could lose your home for not paying your monthly mortgage payments. Since no such payments exist for a reverse mortgage, there is no such risk.

8. if i sell my house, can i re-apply for another reverse mortgage on my new property?

Absolutely! As long as the property is your primary residence – but just remember that you would need to qualify for enough to pay any mortgage on the new property. Reverse mortgages can be used for purchases in this way.

If you have any questions, please contact Jennifer Koop, your local Dominion Lending Centres mortgage expert.

Published by DLC Marketing Team

Contact us today for all your mortgage needs 705-349-0502

27 Jun

Self-Employed and Seeking a Mortgage

General

Posted by: Jennifer Koop

Self-Employed and Seeking a Mortgage.

Approximately 20% of Canadians are self-employed, making this an important segment in the mortgage and financing space. When it comes to self-employed individuals seeking a mortgage, there are some key things to note as this process can differ from the standard mortgage.

Qualifying for a Mortgage

In order to obtain a mortgage as a self-employed individual, most lenders require personal tax Notices of Assessment and respective T1 generals be included with the mortgage application for the previous two years. Typically, individuals who can provide this proof of income – and with acceptable income levels – have little issue obtaining a mortgage product and rates available to the traditional borrower.

Self-Employed Categories

  1. For those self-employed individuals who cannot provide the Revenue Canada documents, you will be required to put down 20% and may have higher interest rates.
  2. If you can provide the tax documents and don’t have enough stated income, due to write-offs, then you have to do a minimum of 10% down with standard interest rates.
    1. If you are able to put down less than 20% down payment when relying on stated income, the default insurance premiums are higher.
  3. If you can provide the tax documents, and you have high enough income, then there are no restrictions.

Documentation Requirements

For those individuals who are self-employed, you must provide the following, in addition to your standard documentation:

  • For incorporated businesses – two years of accountant prepared financial statements (Income Statement and Balance Sheet)
  • Two most recent years of Personal NOAs (Notice of Assessments) and tax returns
  • Potentially 6-12 months of business bank statements
  • Confirmation that HST/Source Deductions are current

Calculating Income

When it comes to calculating income for a self-employed application, lenders will either take an average of two years’ income or your most recent annual income if it’s lower.

If you’re self-employed and looking to qualify for a mortgage, or simply have, reach out to Jennifer Koop, your Dominion Lending Centres mortgage professional today! We can work with you to ensure you have the necessary documentation, talk about your options and obtain a pre-approval to help you understand how much you qualify for.

Published by DLC Marketing Team

Contact us today for all your mortgage needs, 705-349-0502.

9 Jun

What You Should Know About Mortgage Amortization

General

Posted by: Jennifer Koop

What You Should Know About Mortgage Amortization.

Your mortgage amortization period is the number of years it will take you to pay off your mortgage. Depending on your choice of amortization period, it will affect how quickly you become mortgage-free as well as how much interest you pay over the lifetime of your mortgage (longer lifetime equals more interest, whereas a shorter lifetime equals less interest but also bigger payments).

Let’s start by looking at the mortgage industry benchmark amortization period. This is typically a 25-year period and is the standard that is used by majority of lenders when it comes to discussing mortgage products. It is also typically the basis for standard mortgage calculators.

While this is the standard, it is not the only option when it comes to your mortgage amortization. In fact, mortgage amortizations can be as short as 5-years and as long as 35-years!

As mentioned,  opting for a shorter amortization period will result in paying less interest overall during the life of your mortgage. Choosing this amortization schedule means you will also become mortgage-free faster and have access to your home equity sooner! However, if you choose to pay off your mortgage over a shorter time-frame, you will have higher payments per month. If your income is irregular, you are at the maximum end of your monthly budget or this is your first home, you may not benefit from a shorter amortization and having more cash flow tied up in your monthly mortgage payments.

When it comes to choosing a longer amortization period, there are definitely still advantages. The first is that you have smaller monthly mortgage payments, which can make home ownership less daunting for first-time buyers as well as free up additional monthly cash flow for other bills or endeavors. A longer amortization also has its advantages when it comes to buying a home as choosing a longer amortization period can often get you into your dream home sooner, due to utilizing standard mortgage payments versus accelerated. In some cases, with your payments happening over a larger period of time, you may also qualify for a slightly higher value mortgage than a shorter amortization depending on your situation.

Your mortgage professional will be able to help you choose the amortization that best suits your unique requirements and ensures you have adequate cash flow. However, it is important to mention that you are not stuck with the amortization schedule you choose at the time you get your mortgage. You are able to shorten or lengthen your amortization, as well as consider making extra payments on your mortgage (if you set up pre-payment options), at a later date.

Ideally, you are re-evaluating your mortgage at renewal time (every 3, 5 or 10 years depending on your mortgage product). During renewal is a great time to review your amortization and payment schedules or make changes if they are no longer working for you.

If you have any questions or are looking to get started on purchasing a home, don’t hesitate to reach out to Jennifer Koop, your DLC mortgage professional for expert advice!

Contact us today 705-349-0502

Published by the DLC Marketing Team

26 May

Frequently (and not so frequently!) Asked Mortgage Questions

General

Posted by: Jennifer Koop

Frequently (and not so frequently!) Asked Mortgage Questions.

New to mortgages? Have questions but not sure where to start? We have the answers!

  1. What is the best interest rate I can qualify for?
    Your credit score plays a big role in the interest rate you can qualify for. The riskier you appear as a borrower, the higher your rate will be. While it is important to understand rate is NOT the most important aspect of your mortgage, it does still play a significant part. However, in some cases you may lose out on pre-payment privileges or porting options if you opt for the lowest rate. This is why it is important to look at your mortgage as a whole for your current and future needs.
  2. What credit score is needed to qualify for a mortgage?
    Generally, you are considered a prime candidate for a mortgage if your credit score is 680 and above. The higher you can get above 700 the better, as you will access lower rates. While almost anyone can obtain a mortgage via traditional or private lenders, if you have a lower credit score the key will be the size of your down payment. A sufficient down payment can reduce the risk to the lender providing you with the mortgage, thereby opening up lower rate options
  3. What happens if my credit score isn’t great?
    There are five main things you can do to improve a low credit score.

    • Pay down credit cards so they’re below 70% of your limits. Revolving credit like credit cards have a more significant impact on credit scores than car loans, lines of credit, or other types of debt.
    • Limit the use of credit cards. Racking up a large amount and then paying it off in monthly instalments can hurt your credit score. If there is a balance at the end of the month, this also affects your score.
    • Check credit limits. If your lender is slower at reporting monthly transactions, this can have a significant impact on how other interested parties view your file. Ensure everything’s up to date as old bills that have been paid can come back to haunt you.
    • Keep old cards. Older credit is better credit. If you stop using older credit cards, the issuers may stop updating your accounts. As such, the cards can lose their weight in the credit formula and, therefore, may not be as valuable – even though you have had the cards for a long time. Use these cards periodically and then pay them off.
    • Don’t let mistakes build up. Always dispute any mistakes or situations that may harm your score. If, for instance, a cell phone bill is incorrect and the company will not amend it, you can dispute this by making the credit bureau aware of the situation.
  4. What’s the maximum mortgage I can qualify for?
    To help you determine what you can afford, check out the My Mortgage Toolbox app on the iStore and Google Play. This app can assist with various calculations to determine the amount you can afford, how much your monthly mortgage payments will be, allow you to play around with payment frequencies, and so much more. You can also get pre-qualified on the app, which you can follow up with a proper mortgage pre-approval once you are ready to start shopping! This will also assist with solidifying your budget and understanding your mortgage costs.
  5. How much money do I need for a down payment?
    The minimum down payment required is 5% of the purchase price of the home. However, it is ideal to produce a down payment of 20% to avoid paying mortgage default insurance and, in some cases, to access a better interest rate.
  6. What happens if I don’t have the full down payment amount?
    It can be hard to put together a down payment. Fortunately, there are many programs available that will allow you to utilize different forms of down payments through cash-back products, RRSP withdrawal or gifting from an immediate family member.
  7. Should I go with a fixed- or variable-rate mortgage?
    The answer to this question depends on your personal risk tolerance. If you happen to be a first-time homebuyer, or you have a set budget that you can comfortably spend on your mortgage, it’s smart to lock into a fixed mortgage with predictable payments over a specific period of time. On the other hand, if your financial situation can handle the fluctuations of a variable-rate mortgage, this may save you some money in the long run. Another option is to opt for a variable rate, but make payments based on what you would have paid if you selected a fixed rate. There are also 50/50 mortgage options that enable you to split your mortgage into both fixed and variable portions.
  8. How much will my mortgage payments be?
    Your monthly mortgage payment cost will vary based on several factors, such as the size of your mortgage, whether you’re paying mortgage default insurance, your mortgage amortization, your interest rate, and your frequency of making mortgage payments. The My Mortgage Toolbox app from Google Play and the iStore has many calculators that can help you preview different mortgage and payment scenarios.
  9. What amortization will work best for me?
    While the benchmark and typically used standard amortization period for a mortgage is 25-years, shorter or longer timeframes are available. The main reason to opt for a shorter amortization period is that you’ll become mortgage-free sooner. In addition, by agreeing to pay off your mortgage in a shorter period of time, the interest you pay over the life of the mortgage is greatly reduced. A shorter amortization also affords you the luxury of building up equity in your home sooner. Equity is the difference between any outstanding mortgage on your home and its market value. While it pays to opt for a shorter amortization period, keep in mind you will have higher monthly payments as a shorter amortization period means less payments overall. If your income is irregular or you’re buying a home for the first time and will be carrying a large mortgage, a shorter amortization period that increases your regular payment amount and ties up your cash flow may not be the best option for you.
  10. How can I maximize my mortgage payments and own my home sooner?
    Most mortgage products include prepayment privileges that enable you to pay up to 20% of the principal (the true value of your mortgage minus the interest payments) per calendar year. This will also help reduce your amortization period (the length of your mortgage). Another way to reduce the time it takes to pay off your mortgage involves changing the way you make your payments by opting for accelerated bi-weekly mortgage payments. Not to be confused with semi-monthly mortgage payments (24 payments per year), accelerated bi-weekly mortgage payments (26 payments per year) will not only pay your mortgage off quicker, but it’s guaranteed to save you a significant amount of money over the term of your mortgage. With accelerated bi-weekly mortgage payments, you’re making one additional monthly payment per year. In addition to increased payment options, most lenders offer the opportunity to make lump-sum payments on your mortgage (as much as 20% of the original borrowed amount each year).
  11. Can I make lump-sum or other prepayments on my mortgage, or will I be penalized?
    Most lenders enable lump-sum payments and increased mortgage payments to a maximum amount per year. But, since each lender and product is different, it’s important to check stipulations on prepayments prior to signing your mortgage papers. Most “no frills” mortgage products offering the lowest rates often do not allow for prepayments. As well, please note that some lenders will only let you make these lump-sum payments on the anniversary date of your mortgage while others will allow you to spread out the lump-sum payments to the maximum allowable yearly amount.
  12. If I have mortgage default insurance, do I need mortgage life insurance?
    Yes. Mortgage life insurance is a life insurance policy on a homeowner, which will allow your family or dependents to pay off the mortgage on the home should something tragic happen to you. Mortgage default insurance is something lenders require you to purchase to cover their own assets if you have less than a 20% down payment. Mortgage life insurance is meant to protect the family of a homeowner and not the mortgage lender itself.
  13. Is my mortgage portable?
    Fixed-rate products usually have a portability option as lenders utilize a “blended” system where your current mortgage rate stays the same on the mortgage amount ported over to the new property, and the new balance is calculated using the current rate. With variable-rate mortgages, however, porting is usually not available. This means that when breaking your existing mortgage, a three-month interest penalty will be charged. This charge may or may not be reimbursed with your new mortgage. While porting typically ensures no penalty will be charged when you sell your existing property and buy a new one, it’s best to check with your mortgage professional for specific conditions before making any changes.
  14. If I want to move before my mortgage term is up, what are my options?
    This will depend greatly on your particular lender and the type of mortgage you have. While fixed mortgages are often portable, variable are not. Some lenders allow you to port your mortgage, but your sale and purchase have to happen on the same day, while others offer extended periods. As long as there’s not too much time between the sale of your existing home and the purchase of the new home, as a rule of thumb most lenders will allow you to port the mortgage. In other words, you keep your existing mortgage and add the extra funds you need to buy the new house on top. The interest rate is a blend between your existing mortgage rate and the current rate at the time you require the extra money.
  15. How much will I have to pay for closing costs?
    As a general rule of thumb, it’s recommended that you put aside at least 1.5% of the purchase price (in addition to the down payment) strictly to cover closing costs such as: property transfer taxes, lawyer/notary fee, survey costs, appraisal fee, title insurance and a home inspection.
  16. How do I ensure I get the best mortgage product and rate upon renewal at the end of my term?
    The best way to ensure you receive the best mortgage product and rate at renewal is to enlist Jennifer Koop, your mortgage professional, to review your current mortgage product, financial situation and shop the market for you. A lot can change over a single mortgage term, and you can miss out on a lot of savings and options if you simply sign a renewal with your existing lender without consulting your mortgage professional.
  17. What steps can I take to help ensure I don’t become a victim of title or mortgage fraud?

Red flags for mortgage fraud:

  • You’re offered money to use your name and credit information to obtain a mortgage
  • You’re encouraged to include false information on a mortgage application
  • You’re asked to leave signature lines or other important areas of your mortgage application blank
  • The seller or investment advisor discourages you from seeing or inspecting the property you will be purchasing
  • The seller or developer rebates you money on closing, and you don’t disclose this to your lending institution. Sadly, the only red flag for title fraud occurs when your mortgage mysteriously goes.

Ways to protect yourself from title fraud:

  • Always view the property you’re purchasing in person; check listings in the community where the property is located – compare features, size and location to establish if the asking price seems reasonable
  • Make sure your representative is a licensed real estate agent
  • Beware of a real estate agent or mortgage broker who has a financial interest in the transaction
  • Ask for a copy of the land title or go to a registry office and request a historical title search; in the offer to purchase, include the option to have the property appraised by a designated or accredited appraiser
  • Insist on a home inspection to guard against buying a home that has been cosmetically renovated or formerly used as a grow house or meth lab
  • Ask to see receipts for recent renovations; when you make a deposit, ensure your money is protected by being held “in trust”
  • Consider the purchase of title insurance.

Contact us today for all your mortgage needs.  705-349-0502

Published by DLC Marketing Team