Ontario Mortgage News– Types of Mortgages Part 1: Fixed Rate Mortgage

Are you getting ready to buy a home and obtain mortgage financing? Knowing your options before jumping in is important. This is part 1 of a 4 part series that gives you important Ontario mortgage news and information about the various types of mortgages available in Ontario. Getting a mortgage does not have to be stressful, and knowing what mortgage types are available to you can help keep the search for your perfect home stress-free.

This first Ontario mortgage news blog will focus on the fixed rate mortgage. The fixed rate mortgage is often the most popular, but what is a fixed rate mortgage? Well, a fixed rate mortgage is a type of mortgage financing loan where the interest stays the same throughout the entire loan period, as opposed to other mortgage loans where the interest rate may adjust. This means that your interest rate is ‘fixed’ and that it does not fluctuate over the course of the term.

There are many benefits to this type of mortgage, and many things to consider when looking for the best mortgage financing rates to suit your needs.

Firstly, a fixed rate mortgage offers you the convenience of a set monthly payment that does not change. Set at the beginning of the mortgage loan period, a fixed rate mortgage will not increase or decrease as interest rates change. This means that there are never any unwelcome surprises when it comes to that monthly withdrawal.

A second, and arguably even more attractive benefit, is that, since a fixed rate mortgage will not change even if interest rates change, that you are protected in case of a dramatic interest rate hike. So, even if two years from now the interest rate skyrockets, your rate will remain the same throughout the entire term of the mortgage, ultimately saving you a great deal in terms of interest fees.

What is the normal length for a fixed rate mortgage? Although term lengths differ from lender to lender, the most common length for a fixed rate mortgage is 5 years. However, most lenders will offer a one year term mortgage, two year term mortgage, three year term mortgage, four year term mortgage, and some lenders may even offer a ten year term mortgage. The term you choose will largely depend on your future financial goals and all options should be discussed with your mortgage broker.

Why choose a fixed rate mortgage? As mentioned, the convenience of a set monthly mortgage payment and a never changing interest rate make a fixed rate mortgage ideal for many. Compared to a variable rate mortgage, a fixed rate mortgage may be a bit more expensive, but it also involves a lot less risk to you (since a variable rate mortgage fluctuates depending on an ever changing interest rate). No hassle means less stress for you!

For more Ontario mortgage news or to find out more about a fixed rate mortgage, please contact Paul Mangion of The Mortgage Centre at 416-204-0156 or visit www.themortgagecentretoronto.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 Rates - Part 4 --- How to Get Approved for a Mortgage at the Lowest Mortgage Interest Rate

If you are looking to purchase a home you must be thinking about how to get approved for a mortgage at the lowest possible mortgage interest rate. Different lending institutions offer different mortgage interest rates to applicants based on the risk that they represent as a potential client.

Usually financial institutions that offer CMHC mortgage insurance offer the lowest interest rates. That is because if your mortgage is CMHC insured and you default, CMHC will pay the bank for any shortfall. That’s not to say that CMHC won’t try to collect the money back from you in the future.

This means that if you want to get approved for a CMHC insured low interest mortgage you will have to satisfy CMHC’s requirements as well as the banks. Both CMHC and the bank have common criteria.

1. You must be able to prove your income.

2. You must demonstrate stability.

3. Your income to debt service ratios must be in line.

4. You must have the minimum required down payment.

5. You must meet their credit score requirements.

Generally a financial institution will want to see that you have had the same income source for the past 3 years. They will sometimes request your tax assessments as evidence. If you are employed they may ask for a job letter and paystub.

Your debt service ratios consist of two numbers, your GDS and TDS. Your TDS is your “total debt service ratio” This is the amount of your monthly income that is consumed by your housing payments and payments to debt divided into your gross monthly income expressed as a percentage. CMHC and most lenders will require that your TDS does not exceed 42% (with your new mortgage).

Your GDS is your “gross debt service ratio” which is the amount of your monthly income that is consumed by your housing payments alone, against your gross monthly income, expressed as a percentage. CMHC and most lenders will require that your GDS does not exceed 32% (with your new mortgage).

You must be able to prove that you have the required down payment or if you are refinancing, that you have the sufficient equity.

Finally, the minimum credit score required to be approved for a mortgage at a bank is 680. Set that as your benchmark if you want to get approved for Ontario’s lowest mortgage interest rate. For more information about how to get approved for a mortgage at the lowest mortgage interest rate please visit http://www.gtamortgagematters.com/

Who Regulates Ontario Mortgage Brokers?

In Ontario, mortgage brokers and the mortgage broker industry in general is regulated by the Financial Services Commission of Ontario (FSCO).

If you are planning to use the services of an Ontario Mortgage Broker, it is important that you educate yourself on the industry and that you are informed about the Mortgage Brokers and Lenders Administration Act (2006). It is also imperative that you:

• Confirm that the Ontario Mortgage Brokerage is licensed
• Confirm that the Ontario Mortgage Broker is licensed
• Understand how Ontario mortgages work
• Understand how Ontario Mortgage Brokers are regulated

It is against the law for an Ontario Mortgage Broker to operate business without a valid license. The FSCO exists to protect consumers against fraudulent mortgage practices, by requiring that all agents and brokers in Ontario prominently display their licensing information on their websites. If you are dealing with an agent or broker in Ontario, ask to see their license and qualifications before conducting business with that individual. If the agent or broker cannot provide documentation, always consult the FSCO first, before conducting business with that individual.

There are several benefits to dealing with a licensed and regulated Ontario Mortgage Broker or Brokerage:

• The Ontario Mortgage Broker will be properly educated and have experience in the field of Ontario mortgages
• The Ontario Mortgage Broker will be experienced and be able to provide advice confidently and accurately
• The Ontario Mortgage Brokerage will be held accountable for ensuring all Mortgage Brokers follow the law
• Should fraudulent activities occur, the Brokerage will have errors and omissions insurance with the proper coverage to protect consumers against these types of activities
• All Ontario Mortgage Brokers must disclose the nature of their relationship with borrowers and lenders

The FSCO monitors and investigates all incidents of non-compliance, and takes appropriate action against Ontario Mortgage Brokers and Ontario Mortgage Brokerages who do not follow the law. If the Ontario Mortgage Broker or Ontario Brokerage is not licensed with the Financial Services Commission of Ontario, it is recommended that you find an individual who is.

For more information visit http://www.gtamortgagematters.com/