January 28, 2010
Case Study, Employed Persons, Interest Rates, Uncategorized
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In my time as a mortgage broker 75% of all mortgages I have done have had 5 year terms. This means that the specifics of the mortgage (amount, property, interest rates and payments) are set for that entire period. So if a home owner decides to change some of these arrangements then a new mortgage is required and pay out penalties need to be paid.
But what if a home owner decides to move to another property before the 5 years is up?
The lender wants to hold onto good customers so they implemented a clause called “Portability”. What this means is that you can move your mortgage without penalty to another property.
For example if Jane and John own a townhouse worth $300k with a mortgage of $200k and want to move to a single family detached home worth $450k. What is the process to port this mortgage?
- Jane and John would need to visit their mortgage broker to confirm that they would qualify for the increase in mortgage amount.
- They sell their property.
- They put an offer on the new property.
- Once accepted key data is sent to the lender.
- The lender reviews that application, supporting data and the property.
- Once accepted a the lender takes the original mortgage of $200k at its current rate and blends it with the additional $150k at the best current rate – giving them a new mortgage balance and a new rate.
- Then the lender instructs Jane and John’s lawyer.
- Jane and John sign the docs at the lawyer’s office.
- They take possession of their new house.
So the important things to note from this example are:
- You can move your mortgage to a new property without penalty.
- Get a good mortgage broker who can help you work through this process with confidence.
January 20, 2010
Credit, Employed Persons, First Time Home Buyer, Pre Approval
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In a previous blog post I ran through the steps that most people take to get their first property. One of the steps that I had written I didn’t have a previous blog post about – Get your down payment prepared.
The down payment is a critical part to getting a mortgage on a property. It determines how much equity you will have in the property after you purchase it. The more equity you have the less risk the lender and insurer will see in your file.
Down payments can come from many different resources:
- Personal savings – This is the money that you have squirreled away for years in a savings account. If it is not in a bank account and you intend to use it put it in a savings account today.
- RRSP – As you may know the Government of Canada has a First Time Home Buyers Program that allows people to take money out of their RRSPs tax free as long as they promise to repay it in a certain time. Check out the following link to the Government of Canada’s website that explains the program. Link
- Gift from an immediate family member – Just like it sounds your parents or your sibling gives you all or a piece of the down payment.
- Borrow the funds for the down payment - This method requires that you use a good mortgage broker to show you if this option will work for you. Depending on the lender there can be a maximum that you can borrow and there maybe other terms in the mortgage that you will need to be made aware of.
There are a couple more options available to you please call to find out more.
Down payments are very important and the lender has some specific needs in proving where the down payment comes from. If you have any questions please contact me and I will answer them.
January 14, 2010
Employed Persons, First Time Home Buyer, Interest Rates, Pre Approval
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On my last blog post I mentioned that clearing away debt is a good (and common) step to take before getting your first property.
The reasons for such actions are two fold.
-Firstly you can help out your debt ratios. In a previous blog post I explained that two specific ratios determine how much you can borrow. By paying down some of your debt you can increase the amount of money the lender will be willing to lend you.
-Secondly it is a great idea to pay down your debt because you will likely have some new purchases to make your property a home.
I recommend that you speak with a quality mortgage professional to determine how to best pay down outstanding debt so it helps you achieve your dream.
January 6, 2010
Employed Persons, First Time Home Buyer, Pre Approval, Proving income
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It is very common for people at this time of year to think back about the year before and to think ahead about what they want to achieve in the coming year.
Most people say that they would like to lose some weight or to be more active. May I suggest another goal for 2010? How about making a goal that by the end of the year you will own your first home?
For most people the amount of preparation to own a home is similar to any medium sized goal.
The steps are generally as follows:
- Get a Mortgage Broker – http://jasonpeatz.com/2009/06/step-1-get-a-mortgage-broker/
- Get pre approved – http://jasonpeatz.com/2009/06/step-2-get-educated-and-pre-approved/
- Clear away any debt that is in your way – I will discuss in up coming posts.
- Get your down payment prepared – I will discuss in up coming posts.
- Start collecting paperwork - http://jasonpeatz.com/2009/07/step-3-collect-all-paperwork-you-will-need/
- Make an offer – http://jasonpeatz.com/2009/07/step-4-put-down-and-offer-and-get-approved/
- Send MLS and Offert to Purchase to your Mortgage Broker – http://jasonpeatz.com/2009/07/step-4-put-down-and-offer-and-get-approved/
- Meet conditions of the lender – http://jasonpeatz.com/2009/07/step-4-put-down-and-offer-and-get-approved/
- Go to your lawyer’s office and sign some papers – http://jasonpeatz.com/2009/07/6-go-sign-some-docs-at-your-lawyers-office/
- Pick up your keys – http://jasonpeatz.com/2009/07/step-6-move-into-your-new-home/
- Smile – http://farm1.static.flickr.com/69/175764184_471aaa850a.jpg
As you can see I have included links to all the blog posts that I have written that relate to the steps above. This process may take some people just a couple of weeks while others months. But the sooner you get started the sooner you can make 2010 a great year.
