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.
June 8, 2009
Employed Persons, First Time Home Buyer, Interest Rates, Pre Approval, Proving income, Rental, Small Business, Uncategorized
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If you are like me at all you like order. Most of us get bothered by chaos and crave a process that gets us the things or the situations we want. People who are looking for a mortgage are the same way and from my experience they want to work with a person who takes out the guess work.
So lets look at the general process for getting you a mortgage.
1 – Get a mortgage broker
2 – Get educated and pre approved
3 – Collect all the paperwork you will need
4 – Put down an offer and get approved
5 – Go sign some documents at a lawyer’s office
6 – Move into your new home
There it is in a nutshell. Simple. Easy.
Things only get tough when there you don’t know what the current step is or what the next step is going to be.
Over the next few weeks I will share my insights into each of these steps because I want to help you to get to where you want to be in the easiest way possible.
All the best.
April 30, 2009
Uncategorized
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I have been quite fortunate in my business to work with many first time home buyers and am happy to take the time to explain all parts of the mortgage process and all mortgage terminology.
Invariably we always get to the topic of amortization and amortization period.
For those of you who do not know what amortization is the Alberta Mortgage Brokers Association (AMBA) uses this definition:
“The gradual retirement of a debt by means of partial payments of the principal at regular intervals…
The Amortization Period is a time of arrangement for paying off a mortgage by equal installments or periodic constant payments.”
The Amortization Period has a huge effect on the size of the borrower’s monthly payment. This, in turn, effects how much home they may qualify for. It stands to reason that if you borrow $100,000 and you decide to pay it off in 10 years that your monthly payments will be bigger ($1,005) than if you decide to pay it down in 20 years ($598).
Sometimes the “standard” Amortization Period of 25 years does not allow a couple to purchase the home that they really want. So I present them with the idea of extending the Amortization Period to the maximum – 35 years. This allows them to qualify for more and in turn get the property they want.
But it is really important for people to understand that there are two draw backs for extending the Amortizaton Period:
- If their down payment is less than 20% and they decide to extend the Amortization Period then the Mortgage Insurance fee will be increased by0.4%. On a $100,000 mortgage their fee would increase by $400.
- By extending the Amortization Period people will be paying more in interest payments over the course of their mortgage. On a $100,000 mortgage with a 25 year Amortization Period the total interest paid is $56,022 but on the same amount with a 35 year Amortization Period the interest paid is $82,426.
As long as the borrowers know that taking this action will effect how much they will pay and decide that they are ok with this then we will move forward with the 35 year Amortization Period.
In future blog posts I will reveal some strategies for paying down your mortgage faster thereby reducing the overall interest payments and negating some of the effect of extending the Amortization Period.
Call if you have any questions.
February 3, 2009
Uncategorized
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Purchasing a new home can be an exciting and overwhelming time. You’ve thought about where you want to live, what features you want in the house and community, what your schedule and priorities are, and the proximity to the places you want to be near such as parks, school or stores. Once you’ve found your new home, it’s time for the hard part: the purchase. Purchasing a home is more complex than just making an offer and getting a home inspection. One major challenge is deciding on which financing option is best for you.
Many people believe a traditional bank mortgage is the only from of financing available. The truth is, you have many options on how to find financing for your purchase. It seems like everyone is the mortgage business these days. There are banks, trusts, credit unions and private money; recently even retail establishments are getting into the money-lending business. Each of these lenders has many different products including fixed interest rates, variable interest rates, recreation property programs, second home programs, and home equity lines of credit. With most lenders offering all of these choices how does one choose their best option?
The mortgage industry is constantly changing. The average person cannot be expected to keep up with the industry and what is right for them – not because it is too complex, but because it is vast and dynamic. In order to make the best decisions for your specific situation, many would suggest using a certified Mortgage Broker.
A Mortgage Broker is right for you because:
- We are experts in mortgages.
- We have access to most lenders and can speak with them on your behalf.
- We understand the underwriting process and how to present a file in order to give you more options.
- We work when and where it is convenient for you. If you get home at 5 pm then we can meet at 6 pm or use email and fax to do most of the leg work.
- When dealing with the lending institutions, we eliminate the need for you to haggle for the best rate because we do it for you.
- Our services are typically complementary for residential mortgages. This means that you get the best service and the best rate all at no charge to you.
- We also understand financial issues and won’t judge. Although your financial history will affect your credit rating, which in turn affects your mortgage, we are professionals who will treat you with the respect and confidentiality you deserve.
A reputable Mortgage Broker can take over much of the hassle that can detract from the joy of your home purchase. We offer great value for anyone looking to purchase or refinance: we do the work at no cost to you. For your next purchase or refinancing, reduce the stress and the work and call a reputable Mortgage Broker.
November 19, 2008
Uncategorized
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Unless you have been in a hole for the past two months I am sure that you have heard about or seen the results of the current financial markets. People who are retired are losing large amounts of their retirement savings. People who bought a house within the last few years are seeing the equity that they built up evaporate into nothingness. There have been big layoffs in the financial sector and maybe the manufacturing sectors will follow. Even China and India are seeing their growth rates decline.
Is the sky falling? No.
Many people throughout the course of history have managed to weather storms as bad if not worse than this one. In fact, there are hundreds of examples of smart and thoughtful people making their dreams come true at times like these.
So what can you do during this time to protect yourself and prepare to build for the future?
- Start thinking about your finances. Spend less than what you make and save the rest.
- Read good books on entrepreneurs. There are thousands of books to choose from. I have my favourites and would be glad to share them with you but for now just start reading.
- And lastly start to dream. Dream vividly. Dream often. We take actions on the things that are important to us. If our dreams are important to us we have the ability to make all of them come true.
I write this because I truly believe that many people will use this “crisis” as an opportunity to see their dreams come true. I sincerely hope you are one of them.
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