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.

How to Consolidate Debt by Refinancing Your Mortgage

If you are a homeowner with substantial debts you may be asking yourself ‘should I refinance my mortgage in order to consolidate debt?.’ Getting rid of debt by refinancing your mortgage can often be a smart financial option to consider to eliminate those pesky interest fees that often leave you paying very little of your overall debt load.

With current mortgage rates at an all-time low, refinancing your mortgage to consolidate debt can mean big savings to you. Rather than continuing to carry those other debts (credit cards) with high interest rates, accessing the equity in your home by refinancing your mortgage allows you to pay them off and save with a much lower mortgage interest rate.

What is mortgage refinancing? Mortgage refinancing means paying off your current mortgage, as well as other debts that you want to get rid of, by setting up a new mortgage. Basically, your old mortgage is paid off with your new one – rather than getting a second mortgage and tacking it on top of the original one.

A second advantage of refinancing your mortgage to consolidate debt is that it gets rid of all of those individual monthly payments and leaves you with one tidy monthly payment. Trying to keep track of all of those payments (many of which are primarily interest) can get you into trouble as far as your credit score, and so consolidating payments into one leaves you with less stress and more time (not to mention more free cash flow)!

Yet another benefit of refinancing your mortgage to consolidate debt is that you can change the type of mortgage or get a new interest rate. Depending on your financial goals, switching from a fixed rate mortgage to a variable rate mortgage or an adjustable rate mortgage, or vice versa, can end up saving you money on interest. Refinancing your mortgage gives you this opportunity, so not only can you save interest by consolidating debt, you can also save by switching mortgage types.

So how can you go about refinancing your mortgage to consolidate debt? There are a few things you need to do/know before you go to your mortgage broker for approval.

1.       Make sure that your credit score is up to par – if it is low, you may not be able to secure mortgage refinancing, so clean it up (a mortgage broker can help you with this).

2.       Be truthful – if you are refinancing to consolidate debt, be upfront with your mortgage broker so that they are able to provide you with the options that best suit your individual needs. There are several reasons that people refinance, so make sure that your mortgage broker knows so that they can provide you with the right services.

3.       Seek mortgage refinancing through a mortgage broker rather than through an individual bank. A good mortgage broker will have access to several different lenders and financial institutions and thus will be able to secure you the best rate for your mortgage refinancing.

Refinancing your mortgage to consolidate debt is a smart financial solution that can save you thousands on interest. Working with a mortgage broker to find the best rates and find the mortgage refinancing solution that meets your needs is crucial.

To find out more about refinancing your mortgage to consolidate debt, please contact Paul Mangion of The Mortgage Centre at 416-204-0156 or visit www.themortgagecentretoronto.com.

Ontario First Time Home Buyer? The Importance of a Mortgage Affordability Calculator

Are you getting ready to buy your first home but asking yourself ‘what mortgage can I afford?’ Don’t worry; there are some great resources out there for the Ontario first time home buyer, one of which is crucial: the mortgage affordability calculator. Before setting out to get a mortgage or making an offer on that perfect home, use a mortgage affordability calculator to make sure that you can afford and feel comfortable with the amount that you are spending on a mortgage.

What is a mortgage affordability calculator and how will it answer the question ‘what mortgage can I afford?’ A mortgage affordability calculator is a program that inputs both your monthly income and monthly output and calculates what an affordable monthly mortgage payment would be. By using a mortgage affordability calculator you can quickly determine what a maximum monthly payment would be and then decide how much you would actually be comfortable spending.

What criteria does a mortgage affordability calculator use to determine what mortgage you can afford? The equation is based on a number of factors, both actual and anticipated.

Actual: Actual factors include both input and output. Input refers to your gross monthly household income – or how much money you bring in every month. Subtracted from this is your actual monthly output, which refers to all financial obligations you are required to make on a monthly basis. This includes all debt (credit card, personal loans, etc.), car payments, etc.

Anticipated: Anticipated payments are all of those payments that you will likely have to make once you move into the house. Although you can often get a pretty close estimate, these may fluctuate, but having at least a somewhat accurate figure will let you use the mortgage affordability calculator to get a good idea of what you can afford. These anticipated payments may include insurance, property taxes, condominium fees, heat and hydro fees, etc., and are usually things that cannot be avoided (unlike things like cable or internet which are not included).

The mortgage affordability calculator then looks at your borrowing details – your down payment on a house, your mortgage interest rate, and your mortgage amortization period – and gives you a calculated result. These results will tell you 3 very important things: your maximum house price, your maximum mortgage (your maximum house price minus your down payment) and your maximum monthly mortgage payment.

As an Ontario first time homebuyer, a mortgage affordability calculator is an important tool to take advantage of. It allows you to get a clear picture of what your monthly payments would total as well as how much you will be able to afford once that house is in your possession. Instead of going to see a Mississauga mortgage broker with no idea of how much you are comfortable spending, or no idea about how to determine this figure, prepare yourself for the process and use a mortgage affordability calculator.

For more information about the benefits of a mortgage affordability calculator or other resources if you are an Ontario first time home buyer, please contact Paul Mangion of The Mortgage Centre at 416-204-0156 or visit www.themortgagecentretoronto.com.

Know Before You Go: What to Do Before Buying a House in Ontario

Since the Canadian Mortgage and Housing Corporation guidelines changed in July, Ontario housing sales have dipped. If you are in the market and looking at buying a house in Ontario in the near future, this is good news for you. Since housing sales have dropped, so too will house prices. But what do you need to do before buying a house in Ontario or obtaining mortgage approval?

Firstly, before buying a home in Ontario, you need to figure out how much you are willing to pay and how much you can afford (sometimes these two numbers will not match)! Working with a Mississauga mortgage broker will help you calculate your monthly bills and using a mortgage affordability calculator will help you determine how much you can actually afford to spend on a monthly mortgage payment. Sometimes buying a house in Ontario at the top of your affordability price range may feel snug, so make sure you also figure out how much you are comfortable spending on a monthly basis. A Mississauga mortgage broker will also help you calculate your monthly carrying costs and all of those other monthly fees that come with buying a house in Ontario.

Securing a down payment on a house is also an important necessity. There is no point in going to seek approval for a mortgage if you do not have a down payment (or access to secure one). Your down payment, which needs to be at least 5% of the total value of the house, can come from various different sources, not just savings. Saving up the cash, receiving a gift from a family member, using investments, or obtaining a zero down payment mortgage are all options. First time home buyers can even use part of their RRSP’s. It is important to discuss these with your Mississauga mortgage broker prior to buying a house in Ontario.

Another important thing that your Mississauga mortgage broker will teach you before buying a house in Ontario is what to expect as far as closing costs. Closing costs are those costs that you are presented with on your closing date – and you need to be prepared for them. These costs typically include lawyer’s fees, home inspection costs, land transfer tax, insurance, and property tax adjustments. Many of these closing costs associated with buying a house in Ontario are mandatory, and so your Mississauga mortgage broker can tell you which ones you will need and how much to have on hand.

There are many things to think about before you actually go out and find that perfect house. Putting in an offer only to find out that you can’t really afford it is disappointing, and entering into a contract that makes you feel uncomfortable or ill prepared can have devastating impacts. Before buying a house in Ontario, speak to a Mississauga mortgage broker to find out all you need to know to make the best decision possible.

For more information about what to know before buying a house in Ontario, please contact Paul Mangion of The Mortgage Centre at 416-204-0156 or visit www.themortgagecentretoronto.com

How Working With a Mississauga Mortgage Broker Can Get You The Best Canadian Mortgage Interest Rates

One of the first things that many people think about when they are applying for a mortgage is the current interest rate and how it will affect their monthly payment, as well as how much money they will end up spending over time. Although interest is avoidable if you are able to buy your house outright, most of us are unable to do this and interest becomes a necessary evil, one that can’t be avoided. However, by working with a Mississauga mortgage broker, you have a chance to save yourself on interest by obtaining the best Canadian mortgage interest rates possible – all while maintaining a good credit score.

Since a credit check is unavoidable when going for mortgage approval – indeed it is often the first thing a mortgage broker will ask to see – making sure that these checks don’t harm your credit is very important. Rather than going from bank to bank to find out the best Canadian mortgage interest rates and applying to see if you qualify, which will result in numerous credit checks thereby negatively impacting your credit score, working with a Mississauga mortgage broker allows you to research various different lenders for the best Canadian mortgage interest rates all using the same credit check.

So how does a Mississauga mortgage broker help you save on interest? There are a few important things to keep in mind.

As mentioned, a Mississauga mortgage broker has the ability to check with a number of different lenders to find the best Canadian mortgage interest rates for you. Instead of going from bank to bank, which will often only give you access to one or two interest rates, a Mississauga mortgage broker with access to multiple lenders can do the research for you and go to the different banks and private lenders to find you the best Canadian mortgage interest rates out there.

Another way to save on mortgage interest is by having your Mississauga mortgage broker search out a mortgage with adjustable rate mortgage interest. If you are willing to take a bit of risk, you can reap great rewards. What is a mortgage with adjustable rate mortgage interest? An adjustable rate mortgage is a type of mortgage in which the interest rate changes to reflect changing interest rates. Typically the rate is set for a specific period of time for the beginning of the mortgage, and then changes (either increasing or decreasing) as Canadian mortgage interest rates change. This can end up saving you thousands on interest because if the interest rates go down, you are not stuck with a rate that is higher – as would be the case with a fixed rate mortgage. Additionally, the interest rate on an adjustable rate mortgage is already lower than a fixed rate mortgage because of the risk involved.

Instead of going from bank to bank, which can negatively impact your credit score while only giving you a few different rates, working with a Mississauga mortgage broker can give you the freedom to look at many different Canadian mortgage interest rates while still keeping your credit in check.

For more information about Mississauga mortgage brokers and how they can help you get the best Canadian mortgage interest rates, please contact Paul Mangion of The Mortgage Centre at 416-204-0156 or visit www.themortgagecentretoronto.com

Self-employed or on 100% commission: A Mississauga Mortgage Broker Can Help You Get the Best Mortgage Rates

Buying a home is an exciting time. Whether you are a first time home buyer, are moving up or down-sizing, buying an investment property or looking to refinance your home, getting a mortgage gives you the ability to search within your price range for the perfect property. However, if you are self-employed or on 100% commission, you may be finding it far more difficult to obtain mortgage financing compared to someone with a regular salaried income – unless you work with a Mississauga mortgage broker.

Statistics show that almost 20% of all Canadian income earners secure their primary source of income from either a personal business or from a job that pays based on commission. Even though this represents a substantial portion of the Canadian population, it remains clear that self-employed and 100% commission paid individuals have much more difficulty obtaining mortgage financing. Why is this and how can you get a mortgage if you are self-employed or on 100% commission?

Why is it so tough? Since most big banks provide mortgage approval based on your average monthly income, easily visible through past paystubs, those who run their own business or work on 100% commission know that the process is far more complex. Monthly income often varies from one month to the next, and a yearly income can often be hard to determine as far as how it differs from year to year. Another issue for big banks is that many self-employed business owners minus expenses in lieu of surplus income, which is something that banks often refuse to recognize, whereas a Mississauga mortgage broker may not.

When applying for a mortgage when self-employed or if you are working on 100% commission, lenders often want a great deal more income verification and information compared to those with traditional income sources. An outline of projected profits for the upcoming years is often considered far less guaranteed when compared to salary, regardless of how your business may have been performing over the last few years. Working on 100% commission poses the same problem, as even if your profit margins and sales have been strong, they are not necessarily guaranteed to stay that way.

So what can you do if you find yourself in this position? Working with a Mississauga mortgage broker rather than going through a big bank, often provides you with far more options if you are self-employed or on 100% commission and looking for mortgage approval. A Mississauga mortgage broker, one with access to a wide portfolio of lenders, can ensure that you are able to receive mortgage funding even if you are not a regular salaried employee. Working with both banks and private lenders, the right Mississauga mortgage broker will be able to obtain the best rates for your mortgage regardless of your employment situation.

If you are self-employed or on 100% commission and looking for a mortgage, find out how a Mississauga mortgage broker can help you by contacting Paul Mangion of The Mortgage Centre at 416-204-0156 or visit www.themortgagecentretoronto.com

Ontario First Time Home Buyer? What You Should Know About Your Down Payment on a House in Ontario

As you start out on the road to purchasing your first home, you will quickly realize that there are several different things that need to be considered and done before you make an offer on the perfect house.  As an Ontario first time home buyer, one of the things that you should be thinking beforehand is your down payment on a house.

What is a down payment on a house? A down payment on a house is the total amount of money you are required to pay upfront when you purchase a home. The minimum down payment required in Canada is 5% of the total purchase price. So, for example, if you are purchasing a home for $300 000, the down payment on a house, at the 5% minimum, would be $15 000. However, 5% is just a minimum, and you are able to put down any percentage you would like after that.

What is a down payment on a house for?  The main purpose of a down payment on a house is to protect the lender in case the borrower defaults on the loan. It reduces the lender’s risk as the down payment is used as collateral and if defaulted, the lender is able to recover at least partial funds from the loan.

As an Ontario first time home buyer, the purpose of a down payment on a house for you is to pay some of the mortgage up front. Whatever the amount of your down payment is, that amount is taken off of the total mortgage price, meaning that you are required to pay less over time.

So what are the benefits of a bigger down payment on a house? There are a few. The first, and most obvious, is that a bigger down payment means a lower monthly payment. If you are an Ontario first time home buyer this can be crucial because it decreases your overall monthly carrying costs – which can mean a higher chance of mortgage approval and less financial strain in the future. It also means that, since you are borrowing less, you are not paying as much interest. A further benefit of a bigger down payment on a house is that your CMHC insurance premium, calculated as a percent of your mortgage amount, decreases as your down payment increases.

So where can the money for your down payment on a house come from? As an Ontario first time home buyer you have many different options as far as putting together a down payment on a house. Obviously saving a certain amount from every paycheque is a valid option – but it is not the only one. One of the ones that is quite appealing for Ontario first time home buyers is to take advantage of the RRSP Home Buyers’ Plan, which allows Ontario first time home buyers to use up to $25 000 from their Registered Retirement Savings Plan, tax free. Another source is a gift from a family member – but it has to be a gift, it cannot be a loan.

As an Ontario first time home buyer, getting ready to purchase a house is an exciting time. Being prepared is crucial if you want the process to run smoothly. Knowing how much of a down payment on a house you will need and where it will come from is just one of the many things that you will need to consider.

For more information about a down payment on a house and other things to know as an Ontario first time home buyer, please contact Paul Mangion of The Mortgage Centre at 416-204-0156 or visit www.themortgagecentretoronto.com