Ontario Mortgage Amortization Calculator – How to Use Them Effectively

If you are thinking about buying a home in Ontario the best way to figure out how much of a home you can afford to buy is to use an Ontario mortgage amortization calculator. There are many mortgage amortization calculators available online on various websites including the banks websites. 

Before using the Ontario mortgage amortization calculator to calculate your payments, first consider how much of your income can be allocated towards a mortgage payment. In Canada, any time a purchaser wants to purchase a home with less than a 20% down payment and finance their mortgage through the bank, CMHC must approve their mortgage for high ratio insurance. CMHC guidelines state that no more than 32% of the home buyers gross income can be consumed by housing payments. Housing payments are comprised of the new mortgage payment, the property taxes and include $100 for heat.

If you take your gross monthly income, multiply it by 32% and then subtract an estimated monthly amount for property taxes and heat, the amount left over is your maximum allowable mortgage payment under CMHC mortgage guidelines.

Now when you open an Ontario mortgage amortization calculator you will see 6 fields. You will be prompted to enter the amount of the mortgage, interest rate of the mortgage, interest compounding period, payment frequency, term and amortization. Enter a mortgage amount, interest rate and choose monthly for your payment frequency. When indicating how the interest will compound; if you plan to take out a variable rate mortgage select “monthly compounding”, if you plan to take out a fixed rate mortgage select “semi-annually compounding”. CMHC will high ratio insure a maximum amortization of 30 years, so that is the maximum amortization you can place in the amortization field.

Next you will click calculate on the Ontario mortgage amortization calculator. Compare the monthly payment to the monthly payment you calculated based on CMHC lending guidelines. If the payment is lower than the one you calculated based on CMHC lending guidelines then this indicates that you can either obtain a higher mortgage or if the amount you indicated was based on the amount you want to spend already you can reduce your amortization to see how much faster you can get paid off.

If the payment on the Ontario mortgage calculator is higher than the one you calculated based on CMHC lending guidelines then to obtain the size of mortgage that your calculation was based on will mean that you have to make a larger down payment.

Some websites offer an Ontario mortgage calculator that is called a “maximum mortgage estimator”. This Ontario mortgage calculator enables you to input the amount of monthly payment that you can afford to pay and then will tell you the maximum mortgage that you qualify to finance again based on CMHC guidelines.

The reason Ontario mortgage calculators are important is because they enable you to get an idea of what you actually qualify to finance before you go out shopping for a home. There is nothing worse than finding your dream home only to learn that you can't afford it.

For more information about how to use an Ontario mortgage calculator or to see if you qualify to be pre-approved for a mortgage please contact Paul Mangion at 416-204-0156 or visit www.gtamortgagematters.com.

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