Mortgage Rate Hype

As you have seen in the media, BMO is offering a 5 year fixed rate of 2.99%. This mortgage is a no-frills mortgage product which means they have taken away all of the flexibility of the mortgage to offer you this low rate. This mortgage only allows you 10% pre-payment options (when the standard is 20%) and you cannot pay off this mortgage unless through a bona fide sale.

What the hype should be about is that Mortgage Brokers have many great lenders offering lower rates than 2.99% for 5 years with all of the normal mortgage frills. With these mortgages some of the features include full pre-payment options, portability & it's assumable.

It's worth it to check out your options and don't let the media lead you astray. You may think taking a no-frill product won't affect you, but a lot can change in 5 years so why not take a great rate and have all the mortgage features available to you if you need them.

Purchase Plus Improvements

Can’t find your dream home, buy a house and make it your dream home! Most people don’t realize that you can get additional funds with your mortgage to do improvements.

Purchase plus improvements is a great way to take advantage of low rates and make your house into your dream home. Once you put an offer on a house, you will need to get quotes based on the improvements you would like to complete. It’s important to only pick improvements you know you will actually have completed. We then send the quotes to the lender and they will include the extra funds into your mortgage proceeds. When the home purchase completes the mortgage funds will be advanced however the lawyer will hold back the improvement money. The reason for this is the lender wants to be sure that you complete the renovations and not just take a trip to Hawaii instead. So you will need to hire a contractor who is okay with not being paid until everything is complete or have some funds to pay for everything (get some points on your credit cards), once the improvements are complete the lawyer will then release the funds to you.

Here are a few points to keep in mind when doing purchase plus improvements:

• If going through Genworth as your mortgage insurer the max improvements they will allow is 20% of the purchase price. With CMHC it’s 10% of the purchase price.
• Appliances do not count as improvements to the property.
• Every lender has their own guidelines when it comes to doing purchase plus improvements. Some require an appraisal before and after the improvements are made, some require receipts once complete and others require an appraiser to verify the work is complete.
• Some lenders set a time frame for how soon you have to complete the improvements.
• You will receive the best available rate offered by the lender. Your rate does not get increased because you are borrowing extra funds.

If you would like more information on purchase plus improvements please feel free to call either of us anytime!

Importance of using a Realtor

When purchasing or selling a home using a realtor is extremely benefical. They are experts in real estate and help make the process as easy and stressfree as possible.

Here are some reasons why we strongly support hiring a realtor when making the largest investment in your life:

• They will educate you through out the process. Plus walk with you every step of the way to ensure you understand all details of the property and terms of the contract.
• They know the real estate market, know the area and the history of the area
• They will negotiate on your behalf which helps take the emotion out of it, if you were to do it yourself.
• They make sure you receive top dollar for your home when selling and that you don't over pay when purchasing.
• They will advertise and market you house for you when you're selling. 
• When it comes to putting an offer on a home, the realtor will do up a purchase agreement and ensure you have correct subjects that suit the property you are buying.
• When selling your home a realtor can help you with staging and give your tips on what may make your house sell sooner than later.
• They work for you and at the end of the day have your best interests at heart.

If you have any further questions here are a few realtors you can contact for information.

Mark Dial                                                                                     
Re/max                                                                                            
250-981-3425

Summer Cirko
Re/max
250-649-6789                                                                            

Colin Breadner                                                                                 
Re/max                                                                                              
250-552-3949  

Stacey Herlehy
Doucette Realty
250-552-8828                                                                              
                                                                                                     

Mortgage Check-up

Most people sign up for their initial mortgage, pay their payment as required and forget about the details until renewal time. A mortgage is the biggest debt you’re most likely going to have and it should be something you review at least once a year just to make sure you are maximizing your potential.

Here are a few examples to explain what we mean:

·       Payment frequency – Perhaps when you signed your mortgage documents you were being paid monthly, so it was easier to make your payment monthly. However now that may have changed and you’re paid bi-weekly. Changing your payment frequency is great way to pay off your mortgage faster and save on interest.

·       Refinancing – Maybe in the last few years you have incurred some personal debt. That debt may have interest rates up to 29% if its credit card debt. Looking to consolidate it into your mortgage may be a good option and we can help you decide that.

·       Rate change – Rates may have changed drastically and it may be in your best interest to see what the cost would be to lock in at a lower rate.

·       Pre-payment options – Most lenders offer pre-payment privileges and it may be something you forgot you even have available to you. A mortgage check up is a good time to have a refresher on that info and see if you can take advantage of them.

No matter who your mortgage is currently with we can perform a mortgage check-up with you. We provide unbiased advice and work to save you money. By reviewing your mortgage annually it is the first step in becoming mortgage free faster.

Breakdown on Fixed and Variable Rates

A common question mortgage brokers receive is what is the difference between fixed and variable rates? Deciding between the two options when getting your mortgage can be a hard decision.

A fixed rate mortgage will guarantee you a locked in rate for whatever term you choose. The rate will remain unchanged through out that term which allows you to always know what to expect when it comes to your required payment.

A variable rate mortgage is based on prime rate. You can receive a discount off prime rate or you may have a premium added to the rate. You will receive a variable rate for a set term however if prime rate changes, so does your interest rate. The Bank of Canada determines where prime rate is set. They have 8 scheduled meetings a year to determine if any changes should be made to prime rate. This means your mortgage payment can fluctuate throughout the term. With a variable rate mortgage you can lock in to a fixed rate term at anytime, however you will be locking in at present day rates offered. Variable rate may not be the best choice for you if you feel you will always be worrying about when you should lock in.

There are different situations when either option may work better for you. The penalties do differ between fixed and variable. With a fixed rate mortgage your penalty could be either 3 months interest or interest rate differential, where with a variable rate mortgage it will only be 3 months interest. It is always a good idea to refer to a mortgage broker to help gain insight on what may work best for you.

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.