Co-signer vs. Guarantor

When getting a mortgage you may be asked from either the lender or mortgage insurer to include a co-signer or guarantor.

Both have the same obligation to pay another person's mortgage if the primary applicant(s) fail to do so. However a co-signer will be put on the mortgage and also on title to the property, where as a guarantor will be put on the mortgage but not on title.

The reasons you may need a co-signer or guarantor:

-          bruised credit or lack of credit

-          income qualification

-          job stability

-          to add strength to the deal

If you are required to add a co-signer or guarantor they will need to have a full credit application taken and also provide supporting documentation. Some lenders don’t allow guarantors so the only option may to be to add a co-signer.

When that time comes to remove the co-signer or guarantor, you will need to do a full credit application with your lender. If you qualify on your own then the lender will move the mortgage into your name. If you had a co-signer then you will also need to visit a lawyer to have your co-signer removed from title. If you had a guarantor you will just need to take their name off of the mortgage. Your mortgage broker will counsel you on what to do in order to remove the guarantor or co-signer.

If you have any questions please do not hesitate to contact us.

Mortgage Penalties 101

It's important to understand all aspects of your mortgage prior to signing. If you choose a closed term you are making yourself subject to penalties if you decide to pay out your mortgage prior to the term being up. You should be aware of how these penalties could be calculated.

What could cause you to be penalized?

• Paying off your mortgage prior to the maturity date.
• Going over your pre-payment privilege amount per year. For example if your lender allows you to do lump sums of up to 20% per year and you put down more than that.

There are two different ways of calculating a penalty:

Interest Rate Differential (IRD)
The calculation of interest rate differential will depend on the lender and the terms of your mortgage contract. It's "an amount based on the difference between two interest rates. The first is the interest rate for your existing mortgage term. The second is today’s interest rate for a term that is similar in length to the time remaining on your existing term. For example, if you have three years left on a five-year term, your lender would use the interest rate it is currently offering for a three-year term to determine the second rate for comparison in the calculation." http://www.fcac-acfc.gc.ca/eng/resources/faq/qaview-eng.asp?id=285

Three Months Interest Penalty
This is calculated based on your balance of your mortgage on the date you want to pay it off. They will use that balance to calculate 3 months worth of interest and that will be your penalty.
For example: Mortgage amount $200,000
                      Interest rate 3%
                      Penalty would be $1500

Some lenders also prohibit you from breaking your mortgage early unless you have a bona fide sale. These mortgages are generally known as "no frills mortgages". So be aware of these conditions prior to accepting the mortgage.

Refer to these websites to see an estimate of your penalty.

• Bank of Montreal
• CIBC
• ING Direct
• Manulife Bank
• Royal Bank
• Scotiabank
• TD Canada Trust
• National Bank of Canada

If you have any questions please do not hesitate to contact us.

That low rate mortgage could actually cost you more!

Cheapest is not always best. We know that’s true when we’re shopping for anything else. But we still tend to believe that lowest rate is the one and only factor in choosing a mortgage.


Most Canadian homeowners would be shocked to discover that their low-rate mortgage could actually cost them more in the long run. Why? Because the right mortgage is about a lot more than just rate. It’s true that even a small reduction in rate can mean interest savings over the life of your mortgage. And mortgage brokers are experts at seeking out competitive rates from a wide range of lenders. But they also look deeper. Sometimes those cut rate mortgages come with higher fees, penalties, or restrictive terms, which could prove more costly over the long term than a slightly higher-rate mortgage with flexible terms. One of the best ways to save interest, for example, is to use pre-payment options. If you get a quarterly bonus, a tax refund, or a seasonal income boost, then you have some excellent opportunities to slash your mortgage costs. Putting extra money against your mortgage principal could save you thousands of dollars in interest. If your cut-rate mortgage doesn’t permit pre-payments, that’s a huge missed opportunity. We will help determine the features and privileges that best meet your personal situation, looking at:

 

· Refinancing penalties

· Fixed vs. variable rate 

· Term  

· Pre-payment options

· Payment flexibility

· Restriction

· Fees

· Portability

· Assumability 

 

Most people spend more time choosing the right car than choosing the right mortgage, although it’s likely the largest expense they'll likely ever undertake. Make sure you have a mortgage that is custom built for your personal situation. Cheapest isn’t always best. And obviously the most expensive mortgage is rarely the best choice either. But the right combination of rate and features – matched to your needs – is the fastest route to mortgage freedom. It’s our job to help you with that route planning: a map for your financial future. Whether you’re buying your first home, getting ready for renewal, refinancing a mortgage, taking out some equity for debt consolidation, renovations, or investing – it’s a good time to get some fresh, timely, expert perspective.