Ontario Mortgage News – No Money Down Mortgages Are More Expensive!

For those who are finding it difficult saving up the minimum 5% required down payment to buy a home, you will be happy to learn that no money down mortgages are still available. While it has been in the Ontario mortgage news that CMHC is tightening its lending guidelines and TD Bank economists have suggested that CMHC should increase the minimum required down payment, CMHC is still high ratio insuring no money down mortgages and banks are still financing them.

No money down mortgages cannot be obtained unless an applicant has excellent credit. The minimum required beacon score for an applicant to qualify for a no money down mortgage is 680. The applicant must also have good income and stability.

When consumers obtain no money down mortgages the bank essentially finances the 5% down payment. This is not financed through a conventional loan or line of credit but rather it is financed through the mortgage interest rate. This means that if you want a no money down mortgage you can expect to pay 1%-2% higher interest than whatever the current prime lending rate is. The increased interest results in the bank receiving back the equivalent of a 5% down payment over the mortgage term.

There is less flexibility with no money down mortgages. You cannot obtain a variable rate no money down mortgage. You also cannot have any less than a 5 year mortgage term on no money down mortgages because the 5% down payment is repaid through interest over the 5 year mortgage terms. No money down mortgages almost always bears a 5 year fixed rate mortgage term.

At the end of the day if you can come up with a 5% down payment to buy a home, try to do it. There are just too many benefits to ignore. Not only will you have more flexibility when it comes to arranging your mortgage terms but you will also benefit from significantly lower interest rates on your mortgage. A mortgage that is 1%-2% less interest will result on a mortgage payment that is much lower (more than one hundred dollars per/month) and when you look at the interest savings over a 5 year time period it amounts to thousands of dollars.

If coming up with a 5% down payment is too difficult then a no money down mortgage may be your only option to realize your dream of owning a home. With interest rates at historic lows, a no money down mortgage even at the higher rate is still a very affordable option, considering that the higher rate no money down mortgage is still less interest than what your interest rate would have been had you purchased a home with a 5% down payment 5 years ago. With that in mind, if you need a no money down mortgage now is the time to do it. Not only are interest rates low enough but the Canadian Government has been consistently tightening Canadian Mortgage and Housing Corporation guidelines, so if you wait too long, no money down mortgages may not even be available in the future.  It will be important to pay attention to Ontario mortgage news.

For more information about Ontario mortgage news and no money down mortgages please call Paul Mangion at 416-204-0156 or visit www.gtamortgagematters.com.

Ontario Mortgage News – Is a Fixed Rate Mortgage The Best Choice? A CIBC Poll Seems to Think So

In the past few years interest rates have been some of lowest we’ve ever seen. Ontario mortgage news outlets have continuously speculated about when they are going to go up. Whether or not interest rates go up and down depends on so many factors including not only the economy at home but also the economy in the US and abroad.

Ontario mortgage news outlets are now reporting on a shift in the types of mortgages consumers are choosing which seems to indicate that Canadians are thinking that interest rates are on their way up. 

CIBC released a Poll conducted by Harris/Decima that revealed that half of Canadians said they would choose a fixed rate mortgage if they had to decide today, which was a substantial increase over last year. The poll also found that Canadians expect that mortgage interest rates will go up over the next 12 months and that Canadians are seeking to lock-in at today’s low fixed rate mortgage rates.

Here are some of the statistics that were revealed in the poll:

·         50 percent of Canadians said they would choose a fixed rate mortgage today, compared to only 39 percent last year

·         32 percent of Canadians said they would choose a variable rate mortgage today, the same percentage as last year

·         Another 18 percent said they were uncertain which mortgage would be right for them, considerably lower than the 30 percent who were undecided in 2011

·         86 percent of Canadians believe mortgage rates will either stay the same or be higher 12 months from now

·         Only 6 percent of Canadians believe mortgage rates will be lower 12 months from now

Variable rate mortgages carry more risk than fixed rate mortgages because if mortgage interest rates increase so does the interest on a variable rate mortgage. This can result in an increase to a consumer’s mortgage payment or in the interest portion of the mortgage payments that are applied to principal. Fixed rate mortgages are fixed for a pre-determined period of time so if you lock-in to a fixed rate mortgage for 5 years for example, your mortgage rate will not change during the 5 year term. 

This is why so many Canadians are turning towards fixed rate mortgages. Let’s face it, interest rates are not going to stay at the historic lows that they have been forever. While some banks may still have rate wars from time to time, interest rates are bound to go up eventually.  

Those who want to take advantage of variable rate mortgages and mitigate their risk can opt for a variable rate mortgage that offers the option to lock-in. This way if interest rates start to rise you can lock-in at any time.  

With that said, with mortgages at some banks as low as 3% interest, you can’t really go wrong by locking in at these types of rates over a 4-5 year term. The best thing you can do if you are in the market for a new mortgage is to pay attention to Ontario mortgage news so that when the time is right you will be ready to make your move. 

For more information about Ontario mortgage news and fixed rate mortgages please call Paul Mangion at 416-204-0156 or visit www.gtamortgagematters.com.

Ontario Mortgage News – Mortgage Interest Rates Increased by Two of Canada’s Banks

In Ontario mortgages news this week it seems that the rate wars are over; with RBC and TD Banks recent announcement that they are increasing their mortgage interest rates. Their five year closed interest rate will be increased by .2% to 5.44% and their fixed 4 year interest rate will be increased by .5% to 3.49%. Likely the rest of the banks will follow suit in coming days and weeks. 

This change comes amidst growing concerns from bank economists and even the Canadian Government about the ability of some Canadians to manage their high personal debt loads. The CBC reported that the mortgage interest rate increases follow recent comments by Finance Minister Jim Flaherty Thursday, criticizing banks who have called on Ottawa to tighten lending and saying that it’s their job. 

In recent Ontario mortgage news, a TD bank economist suggested that Minster Flaherty should further tighten CMHC lending guidelines by increasing the amount of down payment that Canadians have to make in order to qualify for high ratio mortgage financing and it seems that, at least for the time being, Minister Flaherty is sending a message to the banks that he has no intentions of doing so.

Household debt does continue to be a growing concern and a concern that has been repeatedly raised by The Bank of Canada. The average ratio of debt to personal disposable income is now over 150% and economists are predicting that this will rise over 160% in the next year. The CBC and in other Ontario mortgage news outlets reported that TD Bank chief economist Craig Alexander has estimated more than one million Canadian households, or about 10 percent of those that currently have debt, will have to devote 40 percent or more of their income to making their monthly debt payments if rates rise by two-to-three points to more normal levels.

The Canadian Government has already intervened a number of times to tighten up on high ratio mortgage financing requirements in recent years and while Minster Flaherty is not prepared to do so again, immediately he has been clear that he is prepared to tighten mortgage insurance rules again, if necessary.

Canadians who own homes and are currently in debt should be thinking of a plan to deal with their debt. Looking at a home equity loan to consolidate debt is often a great option. Home equity loans can enable homeowners to cut the interest on their debt, reduce their monthly income which increases cash flow and do away with dangerous high interest credit cards.

The fact remains that if an improvement in the job market doesn’t occur resulting in Canadians incomes increasing and Canadians don’t come up with a way to deal with their debt, Canadians will be at risk of CMHC further tightening lending guidelines which will make it more difficult and more expensive for the average Canadian to obtain a mortgage. If you have been thinking about buying a home and have been waiting for the right time, now is it. The wait and see approach could have consequences that include not being able to obtain a mortgage at all.

For more information about mortgage interest rates or to see if you qualify for mortgage financing please visit www.gtamortgagematters.com  or call Paul Mangion at 416-204-0145.

Ontario Mortgage News - TD Bank Wants Government to Increase Required Down Payment

Canada is quite different than the US and a major reason why is because of the Federal Governments oversight of our banking system. In Canada, if banks want to be able to lend more than 75% of a property’s value they must obtain high ratio mortgage insurance from the Canadian Mortgage and Housing Corporation (CMHC). When a mortgage is insured by CMHC, both CMHC and the bank will have to approve your mortgage application. CMHC has legislated guidelines that banks must follow in order to obtain high ratio mortgage financing. 

Last year Minister Flaherty tightened up CMHC guidelines and Canadians can no longer amortize CMHC insured mortgages longer than 30 years. In addition, they reduced the percentage to which you can refinance your home and no longer will high ratio insure home equity lines of credit.

This week in Ontario’s mortgage news, TD bank released a report asking the government to increase the minimum down payment required to purchase a home from 5% up to 7%.

Minister Flaherty met with economists in early March and received advice that he should clamp down on Canadian’s appetite for housing and new debt.  TD Bank's chief economist Craig Alexander suggests that the Minister reduce the maximum amortization on mortgages to 25 years from 30, or increase the minimum down payment that Canadians are required to make when purchasing a home from 5% to 7%, or mandate a “means test” for those seeking loans by ensuring they can afford to make payments as if mortgage interest charges rise to 5.5 percent, about twice as high as many current rates.

Debt has continued to rise in Canada and especially in Ontario faster than incomes; the average debt service ratio in Canadian households exceeds 150%. With the latest figures released indicating that household debt accumulation is still rising at six percent annually and the fact that The Bank of Canada has asserted that household debt is the “biggest domestic risk” to Canadians; one or more of these options may be considered by CMHC.

With that said, Minister Flaherty has expressed fears that discouraging home buying could cause a loss of construction jobs, a sector the economy  was hit very hard with in Ontario during the last recession and was covered extensively in Ontario mortgage news. Disruption to other parts of the economy has also been a major reason that The Bank of Canada has held back on raising interest rates.

What does this mean to you? Well, if you are someone who has aspirations of owning a home and only has a 5% down payment or cannot afford a large mortgage payment, the time is now to act to ensure that you can secure your mortgage financing before more changes come down the pipeline. Increased pressure from economists may result in Minister Flaherty taking recommendations in the coming months that could seriously impact your ability to buy a home and qualify for mortgage financing. One thing that is important is that you pay attention to Ontario mortgage news and keep on top of announcements so that you don’t find out that something major has changed after it’s too late.

For more information about Ontario mortgage news or to see if you qualify for mortgage financing in Ontario please contact Paul Mangion at 416-204-0156 or visit www.gtamortgagematters.com

CMHC Insured Mortgages vs. Non CMHC Insured Mortgages

Any time you are looking to purchase or refinance a home it is a good idea to understand the difference between CMHC insured mortgages vs. non CMHC insured mortgages. CMHC, otherwise known as the Canadian Mortgage and Housing Corporation, is an organization that was created by the Canadian government to create affordable housing in Canada. 

CMHC offers high ratio mortgage insurance to the banks which protects them in the event that you default on your mortgage. Prior to the existence of CMHC high ratio insurance if you wanted to purchase a home you would need a 25% down payment. 

When comparing CMHC insured mortgages vs. non CMHC insured mortgages it is important to consider the benefits associated to a CMHC insured mortgage.

The biggest benefit is that CMHC insured mortgages enable homeowners to purchase a home with as little as no money down. No money down mortgages are usually only offered to those who have excellent credit, so if your credit is average you will likely need 5% down payment even if you are taking out a CMHC insured mortgage. Refinance mortgages are slightly different. Last year the laws changed and now CMHC will only high ratio insure a refinance mortgage up to 85% the value of the home.

CMHC insured mortgages do not require appraisals. This is a major benefit when refinancing a home because an appraisal can cost approx. $300 and is a cost you can save by having a CMHC insured mortgage.

Obtaining a CMHC insured mortgage will mean that in addition to your bank, CMHC will also have to approve your credit application. They will consider your credit, income and debt and you will have to meet their guidelines to be approved for CMHC high ratio insurance. Also, if approved, a CMHC high ratio insurance premium will be added to your mortgage. The CMHC high ratio insurance fee will depend on the loan to value of your mortgage. The loan to value is the percentage of your mortgage against the value of your home. Your CMHC mortgage insurance premium could be up to 3.5% of the amount of your mortgage.

When looking at CMHC insured mortgages vs. non CMHC mortgages the main difference is that to obtain a non CMHC insured mortgage you will require at least 20%-25% down payment if you are purchasing a home or 20%-25% equity if you are refinancing. You will also require a property appraisal. Banks will not finance a mortgage without CMHC high ratio insurance that is more than 75% the value of the home not because they don’t want to but because they cannot under the Chartered Banks Act.

Only finance companies, trust companies, mortgage investment corporation and private lenders can offer uninsured mortgage financing at loan to values greater than 75% and can usually only be obtained through Mortgage Brokers. Some trust companies and mortgage investment corporations will offer non CMHC insured mortgage financing up to 90% of a properties’ value.

The type of mortgage you will be able to obtain will depend on your credit, income and financial circumstances. If you have less than 25% down payment a CMHC insured mortgage is likely the best way to go.

For more information about CMHC insured mortgages vs. non CMHC insured mortgages please contact Paul Mangion at The Mortgage Centre by calling 416-204-0156 or visit www.gtamortgagematters.com

Equity Only Mortgages in Ontario

There are so many different types of mortgage products available these days that it's hard to know what’s what. Equity only mortgages in Ontario are a great mortgage product for a consumer who has unconventional financial circumstances. So what are equity mortgages in Ontario anyways? 

Equity only mortgages in Ontario are mortgage loans that are approved primarily on the equity that a person has in their property. When an individual is purchasing or refinancing a unique property type, has problem credit or difficulty proving their income they will generally have to look at taking out an equity only mortgage. 

In Canada, banks who loan more than 75% of a property's value must obtain high ratio default insurance from CMHC (Canadian Mortgage and Housing Corporation). This protects the bank in case the homeowner defaults on their mortgage. CMHC insurance is one reason that folks can purchase homes with low down payments. When a mortgage is CMHC insured the applicant will have to have their credit and finances reviewed by both CMHC and the bank. If the bank approves the mortgage and CMHC does not then the bank cannot offer financing in excess of 75% of the property's value.

Does that mean that a mortgage that is less than 75% of a property is an equity only mortgage? Not necessarily. Where banks are concerned if you have bad credit or have little income, a bank may still reject your financing even if you have more than 25% down payment or 25% equity in your home.

Generally, equity only mortgages are offered by finance companies, trust companies, mortgage investment corporations and private lenders. Equity only mortgages in Ontario are usually arranged through a Mortgage Broker. Interest rates will generally vary on equity only mortgages in Ontario depending on who the mortgage lender is.

Because equity only mortgages are approved based on the amount of equity in a home, an appraisal is always required so that the lender can verify the amount of equity in the property. Also, the amount of equity you will need to have in the property to qualify will depend on your personal and financial circumstances. For example, if you have excellent credit but are self-employed and have difficulty proving your income you may be able to obtain an equity only mortgage of up to 75%-80% of the value of your home. Alternately, if you had really, really terrible credit you may only be able to borrow 65%-70% of the value of your home.

Whether you are purchasing a home or refinancing, working with an experienced Mortgage Broker is your best bet. They can review your credit and mortgage application with you to help you understand which type of mortgage you will need, which lenders would be likely to offer you the financing and who can give you the best deal. The good news is as a Canadian consumer there are many mortgage financing options out there for both purchasers and refinancers. Good planning and a clear understanding of your credit and finances are sure to enable you to find the financing you need at terms you can live with.

For more information about equity only mortgages in Ontario please contact Paul Mangion at The Mortgage Centre by calling 416-204-0156 or visit www.gtamortgagematters.com

Second Mortgage Financing in Ontario – Second Mortgage Application Process

Second mortgage financing in Ontario is something that many homeowners use to raise capital to finance debt consolidations, home improvements and more. Refinancing your home and taking out a second mortgage is slightly more complex than taking out a loan or line of credit because they involve securing the loan against your home. Second mortgages offer many benefits. The three top benefits are they are often less interest, offer more flexible repayment terms and enable you to affordably borrow large sums of money. A second mortgage is a fabulous tool for taking out a large loan and well worth the slightly more involved process.  

This first step in the second mortgage application process is you will have to make an application. It is important to check your paper work like your paystubs and house sales in the area etc. to ensure that the information you provide to your bank or mortgage broker is accurate. Over-estimating your income or property value could result in an approval but ultimately could cause your deal not to fund once your application goes into the verification process. 

There is key information that must be disclosed when you apply for a mortgage. In addition to your income and property value having to be accurate and verifiable, your property must be owner occupied and must not be under construction. If it happens that your property is a rental property, is under construction or you cannot verify your income, it will change the nature of your financing. Usually institutional lenders like banks and finance companies will not want to finance these types of applications but with equity and a good Mortgage Broker you can sometimes secure financing under these circumstances from a private lender. 

Once the application has been approved, if your second mortgage is not CMHC insured you will have to have an appraisal on the property. A property appraiser will come to your home to do an inspection and then issue a report to the lender that validates the value of the property. You will have to pay for the appraisal and the appraisal fee is paid when the appraiser attends your home. 

After the appraisal is completed you will have to go to the lender or your Mortgage Broker to sign the preliminary paper work and will have to then provide any supporting documents that they require like your current first mortgage statement and income verification. We always recommend asking the lender or Mortgage Broker what supporting documents they will require before having your appraisal done. While they don’t need them until you sign your paper work, providing them in advance and getting them approved will ensure that you don’t face any surprises after you have an appraisal. 

After you have signed all the paperwork, the paperwork is then sent to a lawyer so that they can prepare the final documents. You will have to attend an appointment at the lawyer’s office where you will sign the final documents. Then the lawyer will register the mortgage and you will be able to pick up your funds within 1-2 business days.  

It takes about 2-3 weeks to arrange a second mortgage but is well worth the wait. For more information about second mortgage financing in Ontario or second mortgage application process please contact Paul Mangion at The Mortgage Centre by calling 416-204-0156 or visit www.gtamortgagematters.com 

How to Effectively Use Your Home to Get Out of Debt

There is so much “get out of debt” advertising out there that it is hard to know which the right choice is when it comes to dealing with your debt. Here is a brief overview of the types of companies who offer solutions to get out of debt, what their solution is and the impact they can have on your credit. 

Banks generally offer lines of credit as a solution to individuals who want to get out of debt. The challenge with lines of credit is that they are essentially like taking out one big large credit card to pay off your debts. Because there is no fixed repayment to term we do not recommend lines of credit as a tool to get out of debt. A line of credit is an effective tool that can be used to consolidate debt but not a really good choice to get out of debt because, like credit cards, if you only make minimum payments you will never payoff your balance. Line of credit minimum payments are so low that it can be very tempting to get caught into a cycle of only making minimum payments. 

Bankruptcy trustees, credit counsellors and debt consultants offer programs to consumers who want to get out of debt but they carry huge implications. Any program that involves freezing interest to creditors, re-paying less than what you owe, settling debts for less than what you owe, a consumer proposal or bankruptcy will have long term consequences to your credit that last 3 years, 6 years or even longer. Many people are misinformed thinking that a consumer proposal, debt settlement or bankruptcy will give them a fresh start and that they will quickly recover from the bad credit because they did pay something to their creditors. This could not be further from the truth. When the time comes to rebuild credit after one of these programs, new creditors will see that you didn’t honour your full obligation to your past creditors and it will take significant re-established credit before creditors will trust you again. These companies often advertise debt consolidations but these aren’t really debt consolidations and so unless you have already totalled your credit, this is not really the best choice for getting out of debt. 

A loan that has a fixed repayment is the best way to get out of debt and preserve your credit at the same time. 

If you are a homeowner, leveraging your home equity is an excellent way to get out of debt. You do not have to refinance your first mortgage to obtain a loan against your home to get out of debt. You can obtain a second mortgage with its own term, amortization and payment that can be used to consolidate your debt. The reason that this is a good choice is because your creditors will be paid in full so your credit will not be damaged, second mortgage interest rates are less interest than unsecured loans and you will know when you will be out of debt. While your first mortgage may be amortized over 25 or 30 years, you can amortize your second mortgage over 5 years. This way you will know that after 5 years your debt will be paid off. For example; a $20,000 second mortgage at 12% interest amortized over 5 years bears a monthly payment of approx. $450 per/mo. 

With so many options out there for people who struggle with debt it is important to do research to ensure that the option that you choose is right for you! The right choice will consider your personal circumstances, income, credit, assets and future financial goals.

Buying a New Home Blog Series – Part Four – Types of Real Estate Professionals

There are many moving variables to consider when buying a new home. You will count on a team of different types of real estate professionals to make your home buying dream a reality. The types of real estate professionals you will need to have a relationship when buying a home include; a real estate agent, a mortgage broker, a property inspector, an insurance broker, a real estate lawyer and a contractor if you plan on doing work to your new home. 

When buying a new home, your real estate agent will take you to see prospect homes, will educate you about the neighbourhood, prices of sales in the area, will make an offer to the purchaser on your behalf once you find a home that you want to buy, negotiate the final purchase price of your home and manage the paper work between the purchaser and your real estate lawyer to process the purchase of your home. 

When buying a new home, your mortgage broker will work with you to obtain the best deal for mortgage financing that is available. Mortgage brokers are very useful because they have relationships with all of the banks so they are able to make you aware of all of the different banks interest rates. They are able to independently review your application for mortgage financing and identify any issues that could come up as it relates to your credit or income. If for some reason you do not qualify for mortgage financing at the bank, they can also access alternate sources of financing to get you a mortgage. This can include accessing financing at credit unions, trust companies, mortgage investment companies and more.  Dealing with a mortgage broker will reduce your risk when buying a home and will ensure that you get the best deal. 

A property inspector will be relied upon to inspect the home to ensure that there are no problems that you are unaware of. The inspector will check the foundation, electrical, structure and other vital parts of the home for issues. If something comes up, you can ask that the seller correct the problem before you finalize on the purchase or if the issue is too severe, you can walk away from the deal entirely. 

Your insurance broker will help you to obtain homeowners insurance. He or she will obtain quotes from all of the different insurance companies to secure the best insurance rate with you at the maximum benefit. Like a mortgage broker, an insurance broker is knowledgeable about the products that all companies have to offer and can educate you through the process to ensure that you choose the right insurance, from the right company, at the right price. 

Finally, your real estate lawyer will represent you in the purchase of your home and with the arrangement of your mortgage financing. He or she will ensure that you are purchasing a home that contains a clear title and doesn’t have any property tax arrears or liens. He or she will prepare all of your legal documents and will also be the last real estate professional that you will work with before taking possession of your home. 

Knowing the types of real estate professionals you will need when buying a new home will enable you to research and establish relationships with the right people to make your home buying dream a reality. 

For more information about buying a home and the types of real estate professionals who will be needed through the process please contact Paul Mangion by calling The Mortgage Centre at 416-204-0156 or visit www.gtamortgagematters.com

Buying a New Home Blog Series – Part Three – Closing Costs

Buying a new home can get very expensive, very fast. When people think of closing costs, they may think about their down payment and legal fees but there are many additional small costs that are incurred when buying a new home and they can add up. The 5 most common closing costs are the down payment, land transfer tax, inspection fees, legal fees and homeowners insurance. 

While there is “no money down” mortgage financing available to those who have very good credit and income, it is always best to make at least a 5% down payment. When buying a new home you will qualify for a lower interest rate if you have at least a 5% down payment. “No money down” mortgages often bear a slightly higher interest rate. The more money you can raise towards a down payment on a home, the lower your mortgage payment will be. 

When buying a new home, your land transfer tax is usually 1% of the amount of the property purchase price, except for in the City of Toronto. In Toronto, the land transfer tax is higher because there will be a land transfer tax payable to both the City of Toronto and the Province of Ontario. First time home buyers can qualify for a rebate of up to $2,000.00 of the land transfer taxes payable.  

Home inspections are important. Even if you are buying a new home you should have a home inspection done. Home inspections usually cost about $500. The home inspector will ensure that your home is in good condition and there are no surprises when you take possession of the home. 

When buying a new home you will need a lawyer both to handle the purchase of your property and to close your mortgage. Using a lawyer that can represent you in both the purchase of your home and in the financing of your mortgage will save you money. Usually the cost of a single lawyer who handles the property purchase and your mortgage closing will cost between $1,000 and $1,500 including disbursements. 

Homeowners insurance is mandatory and required by the bank. It protects both you and the bank in the event that there is a fire in the home or other disaster. Homeowners insurance can be purchased and paid for up front or you can make payments on a monthly basis. If you are concerned about the cost to carry your new home, you can reduce your monthly carrying cost by purchasing your homeowner insurance up front. 

Another consideration that many people don’t think of when purchasing a new home is their property tax holdback. Anytime you buy a new home where the bank includes your property tax payment into your mortgage payment, there will be a property tax holdback. Your property tax holdback is usually equal to 3 months of property taxes. When your property and mortgage closes, your bank will hold back your property tax and so you will have to pay the amount of your property tax holdback in addition to your down payment. Your land transfer taxes are also due on closing. 

Being aware and planning for costs that you will have to pay on closing will ensure that you are financially prepared when making the decision to buy a new home. 

For more information about buying a new home and closing costs please call Paul Mangion at 416-204-0156 or visit www.gtamortgagematters.com

Buying a New Home Blog Series – Part Two – First Time Home Buyer Tips

Buying a new home when you are a first time home buyer is very different from buying a new home when you have already purchased a home in the past. Many first time home buyers underestimate what’s involved with buying a home, so here are some first time home buyer tips. 

The first thing a first time home buyer needs to consider when buying a new home is the true cost and what tax credits are available to them. When buying a new home a first time home buyer should prepare for the following costs:

1.       Down payment

2.       Land transfer tax

3.       Homeowners insurance

4.       Property tax holdback

5.       Inspection costs

6.       Legal fees, both for the property transfer and mortgage

7.       Moving expenses and more. 

There are tax credits available to first time home buyers to offset some of these costs. For example, in Ontario there is a land transfer tax rebate available to first time home buyers. This tax credit enables first time home buyers to a rebate on closing of up to $2,000 of the land transfer taxes. Some people, especially unionized employees have benefits that may offset legal costs so if your employer offers you benefits, it is always prudent to check to see if you have any benefits that help when buying a new home. 

The next think that a first time home buyer should consider when buying a new home is “conditions”. There will are different conditions that will apply to the purchase of your home and as it relates to your mortgage financing. When purchasing a home, there are some standards that first time home buyers may want to include. Two of the most common conditions are financing and inspection. When making an offer that is conditional on financing and inspection and if the offer is accepted, the buyers will have 5 days (this is an average and more or less days can be negotiated) to secure their mortgage financing and to have a home inspector inspect the home. 

A home inspection is very important, even in a newer home. A home inspector will check for issues that you may not be able to see. These can include electrical and structural issues. A home inspection usually costs less than $500.00 and will be money well spent. 

When obtaining a commitment for mortgage financing from a bank, there will be conditions in the commitment that will have to be met in order for them to fund your mortgage. The sooner you meet these conditions the better. These conditions can include; proof of your down payment, proof of income (job letter, paystub and sometimes tax assessments), proof of homeowner insurance and more. To avoid surprises on closing, it is always best to at least satisfy the mortgage lenders proof of income and down payment requirements as soon as you get your mortgage approved. 

Home insurance will be required by the bank and will protect you and your bank in the event that there is a fire or disaster like a flood. When arranging home insurance, shop around. Your car insurance company may not provide you with the most competitive quote for home insurance.  

Take advantage of brokers. Whether it is for insurance or your mortgage, brokers will be able to access the best rates offered by all companies in a particular industry and is your best chance at getting the best deal.  

For more information about buying a new home and first time home buyer tips contact Paul Mangion at The Mortgage Centre by calling 416-204-0156 or visit www.gtamortgagematters.com.

Buying a New Home Blog Series – Part One – Low Interest Mortgage Approvals

Buying a new home is exciting but involves preparation if you want to get the best deal. Getting the best deal will mean getting a good price on your home, negotiating a low interest mortgage, getting competitive quotes on homeowners insurance and mortgage protection insurance and more. 

A low interest mortgage when buying a home will be important because a mortgage payment for most people represents their largest debt and monthly payment. 

Mortgage interest rates in Canada have been so low for so long that buying a new home is very affordable and in some cases you may be able to buy a new home that bears a mortgage payment comparable with a monthly payment for rent. 

When thinking about how much of a mortgage payment you can afford, it is important to remember that in addition to a mortgage payment you will also have a monthly payment to property taxes, hydro, gas and homeowners insurance. This can really add up and because utility costs in Ontario have increased dramatically over the past few years, it is important to get a low interest mortgage approval that gives you a low monthly mortgage payment so that if your utility costs rise, you can still afford to carry your home. 

There are many different types of low interest mortgage products out there. Your mortgage interest rate will often depend on the type of mortgage product that you choose and the amount of your down payment. 

Those who want to take advantage of the current historically low interest rates but may not have planned to buy a home may not have substantial savings accumulated to cover the cost of a down payment. There is no money down programs offered by many banks that enable families who don’t have a down payment to be able to buy a new home.  

Before buying a new home with a no money down mortgage, you must consider that this will not get you the lowest rate mortgage available. This is because in most cases, a no money down mortgage will involve a slightly higher interest rate because the bank will recover the equivalent of a 5% down payment through interest in the first 5 years of your mortgage. For example, right now National Bank’s 5 year fixed mortgage interest rate is 3.49% if you have a down payment of at least 5%, whereas, their mortgage rate with no money down bears a 5 year fixed mortgage rate of 5.29%. This represents about a $300 difference in monthly payment to the homeowner.  

Also, when buying a new home choosing a variable rate mortgage is often cheaper than choosing a fixed rate mortgage. Variable rate mortgages are less interest because they float with prime. The homeowners carry some risk because if interest rates rise, so will the variable rate on the mortgage. The safest bet is often to choose a low variable rate mortgage with an option to lock in. This allows you to receive the lowest interest rate with the safety net that if rates start to rise, you can lock into a higher fixed rate mortgage. 

Buying a new home is often the single biggest purchase that an individual will make. For this reason it makes sense to research, prepare and establish a relationship with a local mortgage broker who can educate you on what rates are available with all the banks so that you can make the best informed decision.

Ontario Mortgage Financing A-Z – What You Need to Know to Get Approved for the Best Mortgage

Ontario mortgage financing can be complex so it pays to be an informed consumer. If you want to get approved for the best mortgage, start doing research in advance of house shopping to make sure that you understand everything you will need to know. This will reduce the likelihood of finding a home and then finding out that you don’t qualify for Ontario mortgage financing. 

Before looking to buy a home, the first thing you need to know to get approved for the best mortgage is that you are going to shop around for a house that you can afford. Lenders will require that your mortgage payment does not exceed 32% of your gross monthly income. A great way to find out how much of a home you can afford to finance is to perform the following steps: 

1.       Take your gross monthly income and then multiply it by 32%.

2.       There are mortgage calculators online that you can use to calculate mortgage payments.

3.       Input the amount of mortgage that you are looking for and then compare it to your initial calculation of 32% of your gross monthly income.

4.       If your mortgage is producing a payment that is greater than the above calculation, reduce it until the monthly payment fits within the 32% guideline.

5.       The difference in the amount of the mortgage within the 32% guideline and the amount of mortgage you had initially planned on financing will be the increased amount of down payment that you will need to purchase a home at the amount of purchase you had initially intended. 

The above exercise may be a rude awakening but a worthy one because this will reduce the chance of making an offer and deposit on a home and then getting to closing only to learn that you cannot get a mortgage in the amount of money that you need. 

You also should request your credit report from Equifax and Trans Union. You want to ensure that you address any issue or errors on your credit report before making an offer and deposit on a home.

Another thing you need to know to get approved for the best mortgage in Ontario is that a bank will require you to verify your income on closing. This means that they may ask for a paystub and job letter. If your bank has any concern over the income verification that you provide, they may ask you to provide two years of Notice of Assessments from The Canada Revenue Agency.

The bank will also ask for proof of down payment. Proof of down payment consists of proof that you have the money for your down payment in the bank, proof of an investment or if the down payment is being made to you as a gift, they will ask you for a gift letter from the individual who is gifting you your down payment.

As a good rule of thumb, speak with a Mortgage Broker before you start house shopping. A Mortgage Broker cannot only prepare you for what will be needed to get approved for a mortgage but can also obtain a mortgage pre-approval from a bank before you start house shopping. They can review your credit and income to ensure that you qualify for a mortgage to finance a home and provide you with a list of the items that you will need to ensure that you can get approved for the best mortgage.

For more information about Ontario mortgage financing and what you need to know to get approved for the best mortgage please call Paul Mangion at 416-204-0156 or visit www.gtamortgagematters.com.

How to Get a Good Credit Rating to Get Approved for a Low Interest Mortgage in Ontario

If you would like to get approved for a low interest mortgage in Ontario, you will need to have decent credit. In Ontario and across Canada, if you plan to purchase a home with less than 25% down payment, you will have to qualify for high ratio mortgage insurance through The Canadian Mortgage and Housing Corporation (CMHC).

CMHC high ratio mortgage insurance insures the bank so that if you default on your mortgage, the bank can make an insurance claim for the money that they lose if they sell your home and there is a short fall. A bank in Canada cannot finance a mortgage with less than a 25% down payment without CMHC Mortgage Insurance. Mortgage investment corporations and finance companies that are not owned by banks can charge slightly higher interest rates.

This means that when you apply to get approved for a low interest mortgage in Ontario with a bank, your credit application will be scrutinized by both CMHC and your bank. If CMHC says that they will not high ratio insure your mortgage, then your bank won’t approve your mortgage financing.

Here is how you can get a good credit rating to get approved for a low interest mortgage in Ontario.

First, most banks have a minimum credit score requirement in order for you to even qualify for a low interest mortgage in Ontario, or any mortgage at all for that matter. The minimum credit score required by the bank is usually 680. This means if your credit score is less than 680, the bank may not submit your application to CMHC and may decline your mortgage application outright.

Many factors go into having a good credit rating. These factors include the number of applications that you have made for credit in any given calendar year, your payment habits, how you use the credit you have, the balances on your credit cards in proportion to your credit limits, the amount that you owe to your creditors and the amount of credit available to you.

If you want to know how to get a good credit rating to get approved for a low interest mortgage in Ontario, your first step is to know what’s on your credit report. You can request your credit report from Equifax and Trans Union online. If you request your credit report from Equifax, make sure to request a credit report that includes your FICO score because your FICO score is your credit score. Your credit report will show you what information your creditors are reporting to your credit report. If there is any information that is incorrect, file a dispute with the credit reporting agency online.

Even if you only have a single credit card that has a balance that is over 75% of your credit limit, work on a plan to pay it down below 75% below the credit limit. If you have a number of credit cards that you don’t use, close some of them. If you have a number of inquiries or late payments reporting to the credit report, this is a problem that only time can heal. You credit score will be impacted by credit inquires in the past 12 months, so if you have had many, you will need 12 months to pass without credit inquiries before your credit score reflects the improved behaviour. With respect to late payments, you will need at least 2-3 years of good payment habits after having late payments to see significant improvement to your credit score.

For more information about how to get a good credit rating to get approved for a low interest mortgage in Ontario please visit www.gtamortgagematters.com or call Paul Mangion at 416-204-0156.

Qualify for the Best Ontario Mortgage Rate by Organizing Your Finances and Having the Best Credit

Organizing your finances and having the best credit will ensure that you qualify for the best Ontario mortgage rate. When you apply for a mortgage with a bank, they will determine how hard they want to compete for your business based on the strength of your credit and finances. 

There are key criteria that the bank will look for when determining whether or not you qualify for the best Ontario mortgage rate. These include: 

1.       Your stability which is how long you have maintained employment at the same job and residence.

2.       The type of employment that you maintain and whether you are employed at a company or self- employed.

3.       Whether or not you can prove your income. If you are self-employed, they may ask to see your Notice of Assessments that you receive back from the Canada Revenue Agency when filing your income tax returns.

4.       Your gross debt service ratio (GDS) which is the amount of your housing payments balanced against your gross monthly income and expressed as a percentage.

5.       Your total debt service ratio (TDS) which is the amount of your housing payment plus your monthly payments to debts balanced against your gross monthly income and expressed as a percentage.

6.       Your overall unsecured debt load.

7.       Your assets and savings.

8.       The strength of your credit. 

Having the best credit will mean: 

1.       Having a minimum credit score of 680 which is also referred to as a beacon or fico score.

2.       Having at least 3 years of established credit.

3.       Not having too many inquiries for credit. The general rule of thumb is not more than 4 credit    inquiries in a given calendar year.

4.       Not having late payments to debt.

5.       Not having credit card balances that exceed 75% of the credit limits.

6.       Not having too much debt.

7.       Not having the ability to go into too much debt – too many credit cards and more. 

If you want to organize your financings and work towards having the best credit so that you can qualify for the best Ontario mortgage rate, we recommend that you take the following steps: 

·         Request your Equifax credit report to check your credit score.

·         If you have any credit card balances that are more than 75% of their limits, pay them down below 75% of their limits.

·         If you have more than 4 credit inquiries in the past year, wait to apply for your mortgage until the 12^th month of the oldest inquiry of the 4.

·         Close credit cards that you are not using.

·         Use mortgage calculators to calculate the mortgage payments. Figure out a mortgage amount that your bank will consider you can afford to pay each month.

·         Ensure that you can prove where your down payment is coming from. 

Taking these steps will help you to work towards having the best credit so that you can qualify for the best Ontario mortgage rate. For more information about how to qualify for the best Ontario mortgage rate, organizing your finances and working towards having the best credit please visit www.gtamortgagematters.com or call Paul Mangion at 416-204-0156.

Ontario Mortgage Pre-Approval – Too Much Shopping Around For the Best Ontario Mortgage Can Harm Your Credit

When planning to buy a home, it is a natural instinct to want to shop around for the best mortgage. The challenge is that too much shopping around for the best Ontario mortgages can actually harm your credit. 

When purchasing a home you may approach your bank for mortgage financing. Even when applying for a pre-approval, they will ask for permission to obtain a credit report. Your realtor may also offer to get you a competitive mortgage pre-approval and they will also ask for permission to obtain your credit report. You may even decide to research mortgage interest rates and deals online and may choose to apply to another financial institution and at that time you will have to consent to having your credit report accessed. 

When you provide consent to a financial institution, they will access your credit report on Equifax, Trans Union or both. Each time a financial institution accesses your credit report, an inquiry is reported to your credit report. 

Inquiries directly affect your credit score. Too many inquiries will make it appear to a perspective lender as though you are a credit seeker or perhaps are having a credit problem. The problem is that the financial institution will only see the date and the name of the financial institution on the inquiry. They will not know what type of credit you applied for. If a financial institution sees several inquiries in one month, Royal Bank, BMO, TD Canada Trust and CIBC for example, for all they know, you have applied for credit cards. Should you be approved for unsecured credit by all of the companies who have requested inquiries, then you may be in a position to go into more debt than what your credit report reflects on the date that a lender requests your credit report. 

The less inquiries you have on your credit report at the time you apply for an Ontario mortgage pre-approval, the better. Fewer inquiries are a sign of stability to a perspective lender and indicate that you are not a credit seeker. Too much shopping around for the best mortgage can actually harm your credit and your ability to get a mortgage altogether.

Generally, the credit score will be impacted based on the number of credit inquiries in the past 12 months. Usually any more than 4 inquiries in a 12 month period are considered a lot and will begin to impact your credit score. You can find out how many inquiries have been made to your credit report by requesting your credit report from Equifax and/or Trans union. Equifax’s data is most important because more lenders rely on Equifax data than Trans union. 

One way to reduce the number of inquiries to your credit report when shopping around for the best Ontario mortgage is to deal with a Mortgage Broker. A good Mortgage Broker will work with all of the banks and will pull your credit report a single time, then submitting it to the banks to obtain a competitive mortgage pre-approval for you. Mortgage Brokers are also often paid by the banks, so in many cases you will not have to pay them a fee. 

For more information about Ontario mortgage pre-approval and about how too much shopping around for the best Ontario mortgage can harm your credit please visit www.gtamortgagematters.com or call Paul Mangion at 416-204-0156

Liens on Property – How to Deal with a Property Tax Lien

There are many different types of liens that can end up on an individual’s property. The liens on property can include; Canada Revenue Agency Tax liens, condo fee liens, liens that result from a judgement and property tax liens. A property tax lien, Canada Revenue Agency tax lien and a condo fee lien do not require a court order to be placed on your property. Whereas in Ontario if a private individual or company who wants to file a lien on your property first has to obtain a judgement against you through the Superior Court of Justice. 

Property tax liens in Canada are very serious because they take priority over all other liens and mortgages. When you have property tax arrears in Canada, you owe money to the government or the Queen. When a Municipality files a property tax lien against your property, it takes priority over even your mortgage. 

A property cannot be sold or refinanced with a property tax lien on it. In Ontario, a property tax lien is filed on the Province of Ontario Land Information System online and a bank or potential buyer of a property can find out if there is a property tax lien on your property at the click of a mouse. 

A property tax lien can grow at an alarming rate and falling into arrears on your property taxes has a real snowball effect. Liens on property once filed will be subject to interest and legal charges. Even if you come up with the money to pay off the debt that is associated with a property tax lien, the interest and legal fee will have to be paid in order for it to be removed. 

A property tax lien filed on a property by a municipality will result in a notification being sent to any mortgage holders. Because of the severity of a property tax lien and the position on title it will hold, many mortgage lenders once notified of a property tax lien may pay it on your behalf and then demand to be repaid in full. If you do not repay the mortgage lender, they could force your property into power of sale. 

The best thing to do if you have property tax arrears or liens registered on property that you own it to come up with a plan to pay the property tax arrears off. Easier said than done right? There are options. If you have some equity in your home, it is a better choice to refinance your home to come up with proceeds to pay off a property tax lien than to see your mortgage lender involuntarily do it on your behalf. 

Refinancing your first mortgage or taking out a new second mortgage is the best way to eliminate property tax arrears because the mortgage amortization will result in very little difference in increase to your mortgage payment. Using a line of credit or loan is less advisable because payments will be higher and you will still have your monthly property tax obligation so it may cause strain to your budget. 

Finally, it is always best to ask your first mortgage lender to collect your property tax payment with your mortgage payment. Doing so will feel like one less payment on a monthly basis and will reduce the opportunity for you to fall behind on your property taxes, ending up with a property tax lien. 

For more information about liens on property and how to deal with a property tax lien please contact Paul Mangion at GTA Mortgage Matters by calling 416 204 0156 or visit www.gtamortgagematters.com.

Mortgage Arrears! What You Can Do If Your Mortgage Payments are in Arrears?

The past few years have been very tough for many Ontario homeowners. Skyrocketing costs of food, gas, home heating, in addition to credit card and personal debt has left many families strapped for cash and wondering how they will make ends meet each month. 

The absolute last thing you want to have happen is to have your mortgage payments fall into arrears. When mortgage arrears occur you can become at risk of losing your home. Also, when mortgage arrears compound they can become so high that they become difficult to pay up to date. 

Before you can deal with your mortgage payment arrears you must first explore what led to the arrears in the first place. The tools that you can use to deal with mortgage arrears are the same tools that you can use to deal with other financial problems that are fuelling the issue. 

If your mortgage arrears were caused because your personal expenses to maintain your home have increased and that combined with payments to credit cards and loans have become impossible to pay each month, will be crucial to come up with a strategy to reduce your overall monthly payments.

Bankruptcy trustees and debt counsellors promote Federal Government programs and debt consolidation to reduce interest on debt and monthly payments. The problem is that the vehicle used to achieve this is often a debt settlement or consumer proposal which will have a devastating impact to your credit and will permanently destroy relationships with creditors that you have built up over the years. 

If you want to reduce your monthly payments and reduce relationships with your creditors and preserve your credits, you must pursue debt consolidation options that honour your obligations to your creditors but also reduce your monthly payments. 

If you do not yet have mortgage arrears but know that things are headed in that direction, you must act fast because your options will change once your mortgage payments are in arrears. 

Using your home is the fastest and most affordable way to consolidate debt and reduce monthly payments. You may be thinking that your bank has already said no but the bank is not the only option. There are many other lenders like trust companies, credit unions, mortgage investment companies and even private lenders that will offer mortgage financing when the bank won't. A good Mortgage Broker will have access to these financial resources. 

Once your mortgage payments are in arrears your options will be less. Most mortgage lenders will require that your mortgage payments are up to date before they will extend mortgage financing. The only lenders that will make a concession in this scenario are lenders who offer equity only mortgages. This means that they will lend to you based on the amount of equity you have in your home, not based on your personal credit. In this case, you will require a little bit more equity in your property. 

If you are in this situation, the best thing you can do is take the steps to resolve your mortgage arrears or impending mortgage arrears before you put your house at risk. For more information about mortgage arrears and what you can do if your mortgage payments are in arrears, please contact Paul Mangion at GTA Mortgage Matters by calling 416-204-0156 or visit www.gtamortgagematters.com