Canadian Mortgage Refinancing can be complex and the lowest interest rate doesn’t mean that you have the lowest interest mortgage. A mortgage involves a mortgage term, mortgage amortization and interest rate. Each will impact the amount of interest that you pay on your mortgage.
Mortgage interest compounds. There are several different ways that mortgage interest can compound and they are daily, monthly, semi-annually and annually (to name the most common frequencies to which mortgage interest can compound). For example, line of credit interest will almost always compound monthly (12x per/year), whereas conventional mortgages will often compound semi-annually (2x per/year). The more frequent the interest compounds, the more interest you pay. If a bank offered a 6% interest rate compounded monthly or a 6% interest rate compounded semi-annually, you would pay more interest in the example where the interest compounded monthly.
Some mortgages are “interest only” meaning that the monthly payments are calculated based on you only making interest payments monthly and interest only mortgages often compound monthly. Lines of credit and interest only mortgages offer the least likelihood of paying down your mortgage, unless you pay much more than your minimum monthly payment each month.
An ideal mortgage is one where the interest compounds semi-annually or annually and involves a monthly payment that pays both principal and interest. Usually a fixed rate mortgage will involve and interest rate that compounds semi-annually whereas a variable rate mortgage will often compound monthly.
Your mortgage term is the amount of time that your interest rate is guaranteed. This can be a double edge sword because locking in for a long time will ensure that your interest rate is secured but if interest goes down, the interest rate on your mortgage will not. With mortgage interest rates in Canada being at all-time lows many folks opt for variable rate mortgages that offer an option to lock in.
Your mortgage amortization will dictate how long you have to repay your mortgage. If you want to pay the lowest mortgage interest, well, the lower your amortization, the less mortgage interest you will pay. You don’t have to take out a mortgage that is amortized over 30 years. Plan your budget and mortgage payment based on a 20 or 25 year amortization and you will save thousands of dollars in interest overall.
Canadian mortgage refinancing can be negotiated at interest rates and terms that gives you the most for your borrowing buck but should be planned carefully. A local mortgage broker will almost always understand real-estate in your area and what mortgage products are available. You don’t want to end up with a mortgage where you think you have the lowest mortgage interest rate but are not actually paying the lowest mortgage that you could be.
You work hard for your money and you deserve to have a mortgage that will provide you with a great mortgage interest rate and terms that you can live with. This will not just come to you, you have to be informed and look around to find it.
For more information about Canadian mortgage refinancing, how to get the lowest mortgage interest rate and actually pay the lowest mortgage interest visit www.gtamortgagematters.com or call Paul Mangion at 416-204-0156.
Tuesday, October 25, 2011
Monday, October 17, 2011
Canadian Mortgage Refinancing Part 3 – What Does it Mean to Refinance Your Home or Get a 2nd Mortgage?
Canadian Mortgage refinancing could be the refinancing of a first mortgage or it could be a new second mortgage. Any time you own your home and obtain new mortgage financing, it is considered mortgage refinancing. The question is with all of the choices available it is often unclear which is the best choice?
Refinancing your first mortgage can be a good choice but can also carry negative implications if it is not arranged properly. The longer you agree to repay debt, the more money the bank earns. For example, if you have 19 years left on your mortgage amortization, many financial institutions and brokers will quote your new mortgage based on a 25 year or 30 year mortgage. This may save you a couple of hundred dollars per/mo. When you look at the amount that you are paying to debt and what the mortgage would look like if amortized over the 19 years as an example, a mortgage refinance keeping your existing amortization at the 19 years will in many cases still free up a significant amount of cash flow and save you a significant amount of interest.
Refinancing your first mortgage carries many benefits. More and more folks are choosing second mortgages as an effective way to keep their consumer debt separated from their first mortgage debt. This is the best way to see that you actually pay off your first mortgage. Choosing to refinance your home and get a second mortgage provides a lot of flexibility, but the bank in this case will often recommend a line of credit or that you amortize your new second mortgage over 20 or 25 years to provide you with “the lowest monthly mortgage payment”. The end result is a never ending payment that never gets your debt paid off because it will often only pay interest. Most people will just pay the minimum amount due on their statement each month, which often represents mostly interest. This makes the banks a lot of money.
Canadian mortgage refinancing can be achieved in a manner that is favourable to a consumer but for this to happen the consumer must be informed. If you were to get a second mortgage, amortization is important. If you owed $20,000 as an example and you amortized your repayment over 15 years you would have a monthly payment of approx. $250 per/mo. If you amortized the same amount of debt over 5 years you would have a monthly payment of approx. $450 per/mo. The 5 year amortization would see that you would be debt free in 5 years and that your first mortgage was not interrupted. When you look at your minimum payments to your credit cards, which only cover interest in most cases, the 5 year amortization could put hundreds of dollars per/mo. of cash flow back into your pocket.
We don’t really advocate lines of credit because they are like taking out one big credit card and there is no fixed repayment term (no end in sight) so we would recommend that you get a second mortgage over a line of credit.
No matter which way you go, don’t make any choices before you get informed about Canadian mortgage refinancing. You can get a second mortgage, first mortgage or line of credit through a mortgage broker which is a more competitive option than going directly to your bank. A mortgage broker represents your best interest first. For more information about Canadian mortgage refinancing and what it means to refinance your home or get a second mortgage, first mortgage or line of credit please visit www.gtamortgagematters.com or call Paul Mangion at 416-204-0156.
Refinancing your first mortgage can be a good choice but can also carry negative implications if it is not arranged properly. The longer you agree to repay debt, the more money the bank earns. For example, if you have 19 years left on your mortgage amortization, many financial institutions and brokers will quote your new mortgage based on a 25 year or 30 year mortgage. This may save you a couple of hundred dollars per/mo. When you look at the amount that you are paying to debt and what the mortgage would look like if amortized over the 19 years as an example, a mortgage refinance keeping your existing amortization at the 19 years will in many cases still free up a significant amount of cash flow and save you a significant amount of interest.
Refinancing your first mortgage carries many benefits. More and more folks are choosing second mortgages as an effective way to keep their consumer debt separated from their first mortgage debt. This is the best way to see that you actually pay off your first mortgage. Choosing to refinance your home and get a second mortgage provides a lot of flexibility, but the bank in this case will often recommend a line of credit or that you amortize your new second mortgage over 20 or 25 years to provide you with “the lowest monthly mortgage payment”. The end result is a never ending payment that never gets your debt paid off because it will often only pay interest. Most people will just pay the minimum amount due on their statement each month, which often represents mostly interest. This makes the banks a lot of money.
Canadian mortgage refinancing can be achieved in a manner that is favourable to a consumer but for this to happen the consumer must be informed. If you were to get a second mortgage, amortization is important. If you owed $20,000 as an example and you amortized your repayment over 15 years you would have a monthly payment of approx. $250 per/mo. If you amortized the same amount of debt over 5 years you would have a monthly payment of approx. $450 per/mo. The 5 year amortization would see that you would be debt free in 5 years and that your first mortgage was not interrupted. When you look at your minimum payments to your credit cards, which only cover interest in most cases, the 5 year amortization could put hundreds of dollars per/mo. of cash flow back into your pocket.
We don’t really advocate lines of credit because they are like taking out one big credit card and there is no fixed repayment term (no end in sight) so we would recommend that you get a second mortgage over a line of credit.
No matter which way you go, don’t make any choices before you get informed about Canadian mortgage refinancing. You can get a second mortgage, first mortgage or line of credit through a mortgage broker which is a more competitive option than going directly to your bank. A mortgage broker represents your best interest first. For more information about Canadian mortgage refinancing and what it means to refinance your home or get a second mortgage, first mortgage or line of credit please visit www.gtamortgagematters.com or call Paul Mangion at 416-204-0156.
Thursday, October 13, 2011
Canadian Mortgage Refinancing Part 2 – Average Debt in GTA is $40k and Homeowners Refinance to Consolidate Debt
Canadian Mortgage Refinancing rates are a clear sign of the times. It is a sad day when the average debt load carried by a GTA homeowner is $40,000. That does not reflect money owed to mortgages, that reflects’ pure debt.
We cannot ignore the fact that the cost of living has skyrocketed in the GTA. Many people are still carrying debt that they took on 4-5 years ago and have not been able to pay down since because of the unexpected increase in the cost of living. The cost of living increase is due primarily to increased transportation costs that companies are passing down to the consumer. Everything is more expensive, from hydro to food to vehicle maintenance and more.
The fact that Ontario has elected a minority government in the 2011 provincial election is sending a clear message that many average families in Ontario are struggling financially and need some relief.
So let’s not focus on what the government can do for us but rather what we can do for ourselves. When debt reaches the point where credit cards are at their limits and your budget can only afford to cover minimum payments financial, decisions have to be made. The issue is that the big banks have set minimum payments so low that these payments are mostly only covering interest. You can pay and pay and pay but the likelihood of your balance getting paid off this way is low (unless you want to make minimum payments for the next 10-15 years).
Homeowners refinance to consolidate debt because it is often much less interest, much lower monthly payments and puts much needed cash flow into the budget. Canadian mortgage refinancing is more and more common because when it gets to the point (like in Toronto) that the average debt load is $40,000, well this is just too much.
$40,000 in debt at current credit card interest rates cost an average of $1,500 to $2,000 per/month in minimum monthly payments. Homeowners who refinance to consolidate debt are able to reduce their monthly payments to as low as $400 per/mo. This is a drastic monthly savings and a testament to why more and more homeowners refinance to consolidate debt.
Many reading this may be thinking that they have approached their banks for mortgage refinancing to consolidate debt and were told no. There are many reasons that this occurs. First, the big banks earn more when you are stuck making minimum payments at credit card interest rates. Because credit card interest rates are so high and because of the length of time it takes to repay at minimum payments, they will often earn more if you do not refinance to consolidate your debt.
Second, the bank’s lending practices have become much more stringent and even having credit cards that are maxed out is considered (by many banks) poor credit. Third, the real estate market has seen so much turbulence in the past couple of years that banks are lending on a more conservative basis.
Canadian mortgage refinancing is available through local mortgage brokers who access other institutional lenders like trust companies, finance companies, mortgage investment firms and even private lenders. If your bank has said no, that doesn’t mean that you do not qualify elsewhere for a mortgage.
If you would like more information about Canadian mortgage refinancing and how you can use your home to refinance to consolidate debt please contact Paul Mangion, Principal Mortgage Broker at the Mortgage Centre at 416-204-0156 or visit www.gtamortgagematters.com
We cannot ignore the fact that the cost of living has skyrocketed in the GTA. Many people are still carrying debt that they took on 4-5 years ago and have not been able to pay down since because of the unexpected increase in the cost of living. The cost of living increase is due primarily to increased transportation costs that companies are passing down to the consumer. Everything is more expensive, from hydro to food to vehicle maintenance and more.
The fact that Ontario has elected a minority government in the 2011 provincial election is sending a clear message that many average families in Ontario are struggling financially and need some relief.
So let’s not focus on what the government can do for us but rather what we can do for ourselves. When debt reaches the point where credit cards are at their limits and your budget can only afford to cover minimum payments financial, decisions have to be made. The issue is that the big banks have set minimum payments so low that these payments are mostly only covering interest. You can pay and pay and pay but the likelihood of your balance getting paid off this way is low (unless you want to make minimum payments for the next 10-15 years).
Homeowners refinance to consolidate debt because it is often much less interest, much lower monthly payments and puts much needed cash flow into the budget. Canadian mortgage refinancing is more and more common because when it gets to the point (like in Toronto) that the average debt load is $40,000, well this is just too much.
$40,000 in debt at current credit card interest rates cost an average of $1,500 to $2,000 per/month in minimum monthly payments. Homeowners who refinance to consolidate debt are able to reduce their monthly payments to as low as $400 per/mo. This is a drastic monthly savings and a testament to why more and more homeowners refinance to consolidate debt.
Many reading this may be thinking that they have approached their banks for mortgage refinancing to consolidate debt and were told no. There are many reasons that this occurs. First, the big banks earn more when you are stuck making minimum payments at credit card interest rates. Because credit card interest rates are so high and because of the length of time it takes to repay at minimum payments, they will often earn more if you do not refinance to consolidate your debt.
Second, the bank’s lending practices have become much more stringent and even having credit cards that are maxed out is considered (by many banks) poor credit. Third, the real estate market has seen so much turbulence in the past couple of years that banks are lending on a more conservative basis.
Canadian mortgage refinancing is available through local mortgage brokers who access other institutional lenders like trust companies, finance companies, mortgage investment firms and even private lenders. If your bank has said no, that doesn’t mean that you do not qualify elsewhere for a mortgage.
If you would like more information about Canadian mortgage refinancing and how you can use your home to refinance to consolidate debt please contact Paul Mangion, Principal Mortgage Broker at the Mortgage Centre at 416-204-0156 or visit www.gtamortgagematters.com
Thursday, October 6, 2011
Canadian Mortgage Refinancing Part 1 – Refinancing Your Home When you Have Credit Problems
Refinancing your home when you have credit problems can be done with the assistance of an experienced mortgage broker who works with lenders that don’t mind helping someone who has experienced problems with credit.
The difficulty you experience when trying to find financing will depend on the type of credit problem you have. Canadian mortgage refinancing has come a long way in the past 20 years. More lenders are willing to work with someone who has credit problems.
Before the last decade, the primary choices as it relates to mortgage refinancing in Canada were the bank or a private lender. In the past decade however, a host of companies have emerged that will offer bad credit mortgages. These include mortgage investment corporations, trust companies and finance companies.
Generally consumer’s who have credit problems that are currently impacting their credit or recently impacted their credit, will find that lenders will approve them on an equity basis. This means that if the client does not have equity, it will be less likely they will be approved. The rule of the thumb that most equity lenders follow is that they will lend between 75%-80% of a property's value including the new funds required.
We mentioned that the difficulty you experience will depend on the type of credit problem you have because some people think that their credit problem is much worse than it actually is. Lenders that will lend to a consumer who has had credit problems will usually look at a few primary factors.
What is the credit score? While many private lenders will not have a minimum credit score, finance companies and trust companies who will consider a bad credit loan will have a minimum “credit score threshold”. When refinancing your home, the minimum credit score could be 550, 580, 600, and sometimes 620. When a credit score is below 550, you will almost always have to obtain mortgage refinancing through a private lender.
Is there a history of recent late payments? If the borrower has made many late payments to loans and credit cards within the past year or two, this too could impact their ability to get a mortgage with a finance company or trust company and will likely mean that you will have to consider a private lender.
Someone who has previously had a bankruptcy or consumer proposal that was completed at least 2-3 year ago and they have 2-3 years of solid re-established credit, may not be considered as having credit problems at all. The same is true for a client who in the past year has only make one or two late payments but has paid all other credit well and all accounts are up to date and in good standing.
The best thing you can do if you think you may have credit problems and want to apply for Canadian mortgage refinancing is speak to your local mortgage broker. They will be able to review your credit with you, talk to you about what options are available and secure a mortgage for you.
For more information about Canadian mortgage refinancing or refinancing your home when you have credit problems please contact Paul Mangion at GTA Mortgage Matter by calling 416-204-0156 or visiting www.gtamortgagematters.com
The difficulty you experience when trying to find financing will depend on the type of credit problem you have. Canadian mortgage refinancing has come a long way in the past 20 years. More lenders are willing to work with someone who has credit problems.
Before the last decade, the primary choices as it relates to mortgage refinancing in Canada were the bank or a private lender. In the past decade however, a host of companies have emerged that will offer bad credit mortgages. These include mortgage investment corporations, trust companies and finance companies.
Generally consumer’s who have credit problems that are currently impacting their credit or recently impacted their credit, will find that lenders will approve them on an equity basis. This means that if the client does not have equity, it will be less likely they will be approved. The rule of the thumb that most equity lenders follow is that they will lend between 75%-80% of a property's value including the new funds required.
We mentioned that the difficulty you experience will depend on the type of credit problem you have because some people think that their credit problem is much worse than it actually is. Lenders that will lend to a consumer who has had credit problems will usually look at a few primary factors.
What is the credit score? While many private lenders will not have a minimum credit score, finance companies and trust companies who will consider a bad credit loan will have a minimum “credit score threshold”. When refinancing your home, the minimum credit score could be 550, 580, 600, and sometimes 620. When a credit score is below 550, you will almost always have to obtain mortgage refinancing through a private lender.
Is there a history of recent late payments? If the borrower has made many late payments to loans and credit cards within the past year or two, this too could impact their ability to get a mortgage with a finance company or trust company and will likely mean that you will have to consider a private lender.
Someone who has previously had a bankruptcy or consumer proposal that was completed at least 2-3 year ago and they have 2-3 years of solid re-established credit, may not be considered as having credit problems at all. The same is true for a client who in the past year has only make one or two late payments but has paid all other credit well and all accounts are up to date and in good standing.
The best thing you can do if you think you may have credit problems and want to apply for Canadian mortgage refinancing is speak to your local mortgage broker. They will be able to review your credit with you, talk to you about what options are available and secure a mortgage for you.
For more information about Canadian mortgage refinancing or refinancing your home when you have credit problems please contact Paul Mangion at GTA Mortgage Matter by calling 416-204-0156 or visiting www.gtamortgagematters.com
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